EUROPEAN COMMISSION Brussels, 23.11.2016 COM(2016) 850 final 2016/0360(COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements and amending Regulation (EU) No 648/2012 (Text with EEA relevance) {SWD(2016) 377 final}

{SWD(2016) 378 final}



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL •Reasons for and objectives of the proposal The proposed amendment to Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) is part of a legislative package that includes also amendments to Directive 2013/36/EU (the Capital Requirements Directive or CRD), to Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), and to Regulation (EU) No 806/2014 (the Single Resolution Mechanism Regulation or SRMR). Over the past years the EU implemented a substantial reform of the financial services regulatory framework to enhance the resilience of institutions (i.e. credit institutions or investment firms) operating in the EU financial sector, largely based on global standards agreed with the EU’s international partners. In particular, the reform package included Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), on recovery and resolution of institutions and Regulation (EU) No 806/2014 on the Single Resolution Mechanism (SRM). These measures were taken in response to the financial crisis that unfolded in 2007-2008 and reflect internationally agreed standards. While the reforms have rendered the financial system more stable and resilient against many types of possible future shocks and crises, they do not yet comprehensively address all identified problems. The present proposals therefore aim to complete the reform agenda by tackling remaining weaknesses and implementing some outstanding elements of the reform that are essential to ensure the institutions' resilience but have only recently been finalised by global standard setters (i.e. the Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board (FSB)): a binding leverage ratio which will prevent institutions from excessively increasing leverage, e.g. to compensate for low profitability; a binding net stable funding ratio (NSFR) which will build on institutions’ improved funding profiles and establish a harmonised standard for how much stable, long-term sources of funding an institution needs to weather periods of market and funding stress; more risk sensitive own funds (i.e. capital) requirements for institutions that trade to an important extent in securities and derivatives which will prevent too much divergence in those requirements that is not based on the institutions' risk profiles; last but not least, new standards on the total loss-absorbing capacity (TLAC) of global systemically important institutions (G-SIIs) which will require those institutions to have more loss-absorbing and recapitalisation capacity, tackle interconnections in the global financial markets and further strengthen the EU’s ability to resolve failing G-SIIs while minimising risks for taxpayers. The Commission recognised the need for further risk reduction in its Communication of 24 November 2015 and committed to bring forward a legislative proposal that builds on the international agreements listed above. Such risk reduction measures will not only further strengthen the resilience of the European banking system and the markets' confidence in it, but will also provide the basis for further progress in completing the Banking Union. The need for further concrete legislative steps to be taken in terms of reducing risks in the financial sector has been recognised also by the Ecofin Council Conclusions from 17 June 2016. The European Parliament resolution of 10 March 2016 on the Banking Union – Annual Report 2015 also indicates some areas in the current regulatory framework that could be further addressed. At the same time, the Commission needed to take account of the existing regulatory framework and the new regulatory developments at international level and respond to challenges affecting the EU economy, especially the need to promote growth and jobs at times of uncertain economic outlook. Various major policy initiatives, such as the Investment Plan for Europe (EFSI) and the Capital Markets Union have been launched in order to strengthen the economy of the Union. The ability of institutions to finance the economy needs to be enhanced without impinging on the stability of the regulatory framework. In order to ensure that recent reforms in the financial sector interact smoothly with each other and with new policy initiatives, but also with broader recent reforms in the financial sector, the Commission carried out, on the basis of a call for evidence, a thorough holistic assessment of the existing financial services framework (including the CRR, CRD, BRRD and SRMR). The upcoming review of global standards was also assessed from a wider economic impact perspective. Amendments based on international developments represent a faithful implementation of international standards into Union law, subject to targeted adjustments in order to reflect EU specificities and broader policy considerations. For instance, the predominant reliance on bank financing by EU small- and medium-sized enterprises (SMEs) or for infrastructure projects prompts specific regulatory adjustments that ensure institutions remain capable of funding them as they constitute the backbone of the single market. A smooth interaction with existing requirements, such as for central clearing and collateralisation of derivatives exposures, or a gradual transition to some of the new requirements are necessary. Such adjustments, limited in terms of scope or time, do therefore not impinge on the overall soundness of the proposals, which are aligned with the basic level of ambition of the international standards. Moreover, based on the call for evidence, the proposals aim at improving existing rules. The analysis of the Commission showed that the present framework can be applied in a more proportionate way, taking into account in particular the situation of smaller and less complex institutions where some of the current disclosure, reporting and complex trading book-related requirements appear not to be justified by prudential considerations. Furthermore, the Commission has considered the risk attached to loans to SMEs and for funding infrastructure projects and found that for some of those loans, it would be justified to apply lower own funds requirements than are applied at present. Accordingly, the present proposals will bring corrections to these requirements and will enhance the proportionality of the prudential framework for institutions. Thereby, the ability of institutions to finance the economy will be enhanced without impinging on the stability of the regulatory framework. Finally, the Commission, in close cooperation with the Expert Group on Banking, Payments and Insurance has assessed the application of existing options and discretions in the CRD and the CRR. Based on this analysis, the present proposal is intending to eliminate some options and discretions concerning the provisions on the leverage ratio, on large exposures and on own funds. It is proposed to end to the possibility to create new State guaranteed deferred tax assets not relying on future profitability that would be exempted from deduction from regulatory capital. •Consistency with existing policy provisions in the policy area Several elements of the CRD and CRR proposals follows inherent reviews, whilst other adaptations of the financial regulatory framework have become necessary in light of subsequent developments, such as the adoption of the BRRD, the establishment of the Single Supervisory Mechanism and the work undertaken by the European Banking Authority (EBA) and on international level. The proposal introduces amendments to the existing legislation and renders it fully consistent with the existing policy provisions in the field of prudential requirements for institutions, their supervision and recovery and resolution framework. •Consistency with other Union policies Four years after the European Heads of State and Governments agreed to create a Banking Union, two pillars of the Banking Union – single supervision and resolution – are in place, resting on the solid foundation of a single rulebook for all EU institutions. While important progress has been made, further steps are needed to complete the Banking Union, including the creation of a single deposit guarantee scheme.

The review of the CRR and the CRD is part of risk reducing measures that are needed to further strengthen resilience of the banking sector and that are parallel to the staged introduction of the European Deposit Insurance Scheme (EDIS). The review aims at the same time to ensure a continued single rulebook for all EU institutions, whether inside or outside the Banking Union. The overall objectives of this initiative, as described above, are fully consistent and coherent with the EU's fundamental goals of promoting financial stability, reducing the likelihood and the extent of taxpayers' support in case an institution is resolved as well as contributing to a harmonious and sustainable financing of economic activity, which is conducive to a high level of competitiveness and consumer protection. These overall objectives are also in line with the objectives set by other major EU initiatives, as described above. 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •Legal basis The proposed amendments are built on the same legal basis as the legislative acts that are being amended, i.e. Article 114 TFEU for the proposal for a regulation amending CRR and Article 53(1) TFEU for the proposal for a directive amending CRD IV. •Subsidiarity (for non-exclusive competence) The objectives pursued by the proposed measures aim at supplementing already existing EU legislation and can therefore best be achieved at EU level rather than by different national initiatives. National measures aimed at, for example, reducing institutions’ leverage, strengthening their stable funding and trading book capital requirements would not be as effective in ensuring financial stability as EU rules, given the freedom of institutions to establish and provide services in other Member States and the resulting degree of cross-border service provision, capital flows and market integration. On the contrary, national measures could distort competition and affect capital flows. Moreover, adopting national measures would be legally challenging, given that the CRR already regulates banking matters, including leverage requirements (reporting), liquidity (specifically the liquidity coverage ratio or LCR) and trading book requirements. The amendment of the CRR and CRD is thus considered to be the best option. It strikes the right balance between harmonising rules and maintaining national flexibility where essential, without hampering the single rulebook. The amendments would further promote a uniform application of prudential requirements, the convergence of supervisory practices and ensure a level playing field throughout the single market for banking services. These objectives cannot be sufficiently achieved by Member States alone. This is particularly important in the banking sector where many credit institutions operate across the EU single market. Full cooperation and trust within the single supervisory mechanism (SSM) and within the colleges of supervisors and competent authorities outside the SSM is essential for credit institutions to be effectively supervised on a consolidated basis. National rules would not achieve these objectives. •Proportionality Proportionality has been an integral part of the impact assessment accompanying the proposal. Not only have all the proposed options in different regulatory fields been individually assessed against the proportionality objective, but also the lack of proportionality of the existing rules has been presented as a separate problem and specific options have been analysed aiming at reducing administrative and compliance costs for smaller institutions (see sections 2.9 and 4.9 of the impact assessment). •Choice of the instrument The measures are proposed to be implemented by amending the CRR and the CRD through a Regulation and a Directive, respectively. The proposed measures indeed refer to or develop further already existing provisions inbuilt in those legal instruments (liquidity, leverage, remuneration, proportionality). As regards the new FSB agreed standard on TLAC, it is suggested to incorporate the bulk of the standard into the CRR, as only a regulation can achieve the necessary uniform application, much in the same way as the existing risk-based own funds requirements. Shaping prudential requirements in the form of an amendment to the CRR would ensure that those requirements will in fact be directly applicable to G-SIIs. This would prevent Member States from implementing diverging national requirements in an area where full harmonisation is desirable in order to prevent an un-level playing field. Fine-tuning of the current legal provisions within the BRRD will however be necessary to make sure that the TLAC requirement and the minimum requirement on own funds and eligible liabilities (MREL) are fully coherent and consistent with each other. Some of the proposed CRD amendments affecting proportionality would leave Member States with a certain degree of flexibility to maintain different rules at the stage of their transposition into national law. It would give Member States the option of imposing stricter rules on certain matters. 3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS •Stakeholder consultations The Commission carried out various initiatives in order to assess whether the existing prudential framework and the upcoming reviews of global standards were the most adequate instruments to ensure prudential objectives for EU institutions and also whether they would continue to provide the necessary funding to the EU economy. In July 2015 the Commission launched a public consultation on the possible impact of the CRR and the CRD on bank financing of the EU economy with a particular focus on the financing of SMEs and of infrastructure and in September 2015 a Call for Evidence (CfE) covering EU financial legislation as a whole. The two initiatives sought empirical evidence and concrete feedback on i) rules affecting the ability of the economy to finance itself and growth, ii) unnecessary regulatory burdens, iii) interactions, inconsistencies and gaps in the rules, and iv) rules giving rise to unintended consequences. In addition, the Commission gathered stakeholders' views in the framework of specific analyses carried out on provisions regulating remuneration and on the proportionality of the rules contained in the CRR and the CRD. Finally, a public consultation was launched in the context of the study contracted out by the Commission to assess the impact of the CRR on the bank financing of the economy. All the initiatives mentioned above have provided clear evidence of the need to update and complete the current rules in order i) to reduce further the risks in the banking sector and thereby reduce the reliance on State aid and taxpayers' money in case of a crisis, and ii) to enhance the ability of institutions to channel adequate funding to the economy. Annexes 1 and 2 of the impact assessment provide a summary of the consultations, reviews and reports.

•Impact assessment The impact assessment was discussed with the Regulatory Scrutiny Board and rejected on 7 September 2016. Following the rejection, the impact assessment was strengthened by adding i) a better explanation on the policy context of the proposal (i.e. it relation to both international and EU policy developments), ii) more details on stakeholders' views and iii) further evidence on the impacts (both in terms of benefits and costs) of the various policy options that are explored in the impact assessment. The Regulatory Scrutiny Board issued a positive opinion on 27 September 2016 on the resubmitted impact assessment. The proposal is accompanied by the impact assessment. The proposal remains consistent with the impact assessment. As shown by the simulation analysis and macroeconomic modelling developed in the impact assessment, there are limited costs to be expected from the introduction of the new requirements, in particular the new Basel standards such as the leverage ratio and the trading book. The estimated long-term impact on gross domestic product (GDP) ranges between -0.03% and -0.06% while the increase in funding costs for the banking sector is estimated to be under 3 basis points in the most extreme scenario. On the benefits side, the simulation exercise has shown that public resources required to support the banking system in case of a financial crisis of the size similar to 2007 – 2008 would decrease by 32% – a decline from EUR 51 billion to EUR 34 billion. •Regulatory fitness and simplification The retention of simplified approaches to calculate own funds requirements are expected to ensure continued proportionality of the rules for smaller institutions. Furthermore, the additional measures to increase proportionality of some of the requirements (related to reporting, disclosure and remuneration) should decrease the administrative and compliance burden for those institutions. As far as SMEs are concerned, the proposed recalibration of the own funds requirements for bank exposures to SMEs is expected to have a positive effect on bank financing of SMEs. This would primarily affect SMEs which currently have exposures beyond EUR 1,5 million as these exposures do not benefit from the SME Supporting Factor under the existing rules. Other elements of the proposal, particularly those aimed at improving resilience of institutions to future crises, are expected to increase sustainability of lending to SMEs. Finally, measures aimed at reducing compliance costs for institutions, in particular the smaller and less complex institutions, are expected to reduce borrowing costs for SMEs. On the third country dimension, the proposal will enhance the stability of EU financial markets thereby reducing the likelihood and costs of potential negative spillovers for global financial markets. Moreover, the proposed amendments will further harmonise the regulatory framework throughout the Union thereby reducing substantially administrative costs for third country institutions operating in the EU. In view of the ongoing review of the investment firms under the CRR and in light of the initial report delivered by EBA, it is considered reasonable that the newly introduced requirements apply only to systemically relevant investment firms, whilst other investment firms are grandfathered until the completion of the review. The proposal is consistent with the Commission's priority for the Digital Single Market. •Fundamental rights The EU is committed to high standards of protection of fundamental rights and is signatory to a broad set of conventions on human rights. In this context, the proposal is not likely to have a direct impact on these rights, as listed in the main UN conventions on human rights, the Charter of Fundamental Rights of the European Union, which is an integral part of the EU Treaties and the European Convention on Human Rights (ECHR). 4. BUDGETARY IMPLICATIONS The proposal does not have implications for the Union budget. 5. OTHER ELEMENTS •Implementation plans and monitoring, evaluation and reporting arrangements It is expected that the proposed amendments will start entering into force in 2019 at the earliest. The amendments are tightly inter-linked with other provisions of the CRR and the CRD that are already in force and have been monitored since 2014. The BCBS and the EBA will continue to collect the necessary data for the monitoring of the leverage ratio and the new liquidity measures in order to allow for the future impact evaluation of the new policy tools. Regular Supervisory Review and Evaluation Process (SREPs) and stress testing exercises will also help monitoring the impact of the new proposed measures upon affected institutions and assessing the adequacy of the flexibility and proportionality provided for to cater for the specificities of smaller institutions. Additionally, the Commission services will continue to participate in the working groups of the BCBS and the joint task force established by the European Central Bank (ECB) and by EBA, that monitor the dynamics of institutions' own funds and liquidity positions, globally and in the EU, respectively. The set of indicators to monitor the progress of the results stemming from the implementation of the preferred options consists of the following:

On Net Stable Funding Ratio (NSFR): Indicator NSFR for EU institutions Target As of the date of application, 99% of institutions taking part to the EBA Basel III monitoring exercise meet the NSFR at 100% (65% of group 1 and 89% of group 2 credit institutions meet the NSFR as of end-December 2015) Source of data Semi-annual EBA Basel III monitoring reports On leverage ratio: Indicator Leverage ratio for EU institutions Target As of the date of application, 99% of group 1 and group 2 credit institutions have a leverage ratio of at least 3% (93,4% of group 1 institutions met the target as of June 2015) Source of data Semi-annual EBA Basel III monitoring reports On SMEs Indicator Financing gap to SMEs in the EU, i.e. difference between the need for external funds and the availability of funds Target As of two years after the date of application, < 13% (last known figure – 13% as of end 2014) Source of data European Commission / European Central Bank SAFE Survey (data coverage limited to the euro area) On TLAC: Indicator TLAC in G-SIIs Target All EU Global Systemically Important Banks (G-SIBs) meet the target (>16% of risk weighted assets (RWA)/6% of the Leverage Ratio Exposure Measure (LREM) as of 2019, > 18% Risk Weighted Assets (RWA)/6.75% LREM as of 2022) Source of data Semi-annual EBA Basel III monitoring reports On trading book: Indicator RWA for market risks for EU institutions Observed variability of risk-weighted assets of aggregated portfolios applying the internal models approach. Target - As of 2023, all EU institutions meet the own funds requirements for market risks under the final calibration adopted in the EU. - As of 2021, unjustifiable variability (i.e. variability not driven by differences in underlying risks) of the outcomes of the internal models across EU institutions is lower than the current variability* of the internal models across EU institutions. _______________ *Reference values for the "current variability" of value-at-risk (VaR) and incremental risk charge (IRC) requirements should be those estimated by the latest EBA "Report on variability of Risk Weighted Assets for Market Risk Portfolios", calculated for aggregated portfolios, published before the entry into force of the new market risk framework. Source of data Semi-annual EBA Basel III monitoring reports EBA Report on variability of Risk Weighted Assets for Market Risk Portfolios. New values should be calculated according to the same methodology. On remuneration: Indicator Use of deferral and pay-out in instruments by institutions Target 99% of institutions that are not small and non-complex, in line with the CRD requirements, defer at least 40% of variable remuneration over 3 to 5 years and pay out at least 50% of variable remuneration in instruments with respect to their identified staff with material levels of variable remuneration. Source of data EBA remuneration benchmarking reports On proportionality: Indicator Reduced burden from supervisory reporting and disclosure Target 80% of smaller and less complex institutions report reduced burden Source of data Survey to be developed and conducted by EBA by 2022 - 2023 The evaluation of the impacts of this proposal will be done five years after the date of application of the proposed measures on the basis of the methodology that will be agreed with EBA soon after adoption. EBA will be mandated to define and gather the data needed for monitoring the above mentioned indicators as well as other indicators needed for the evaluation of the amended CRR and CRD. The methodology could be developed for individual options or a set of interlinked options depending on the circumstances present before launching the evaluation and depending on the output of monitoring indicators. Compliance and enforcement will be ensured on an ongoing basis where needed through the Commission launching infringement proceedings for lack of transposition or for incorrect transposition or application of the legislative measures. Reporting of breaches of EU law can be channelled through the European System of Financial Supervision (ESFS), including the national competent authorities and EBA, as well as through the ECB. EBA will also continue publishing its regular reports of the Basel III monitoring exercise on the EU banking system. This exercise monitors the impact of the Basel III requirements (as implemented through the CRR and the CRD) on EU institutions in particular as regards institutions' capital ratios (risk-based and non-risk-based) and liquidity ratios (LCR, NSFR). It is run in parallel with the one conducted by the BCBS. •Detailed explanation of the specific provisions of the proposal Waivers from capital and liquidity requirements (CRR) Requiring subsidiaries to comply with own funds and liquidity requirements on an individual basis may prevent institutions from managing those resources efficiently at the level of the group. This is particularly relevant in the current context where technological developments increasingly facilitate centralisation of capital and liquidity management in a group.

Under existing legislation competent authorities have been endowed with the possibility to waive the application of requirements on an individual level for subsidiaries or parents within a single Member State or part of a liquidity sub-group spread across several Member States, subject to safeguards ensuring that capital and liquidity are distributed adequately between the parent undertaking and the subsidiaries. With the establishment of the Single Supervisory Mechanism (SSM), group supervision has been substantially reinforced especially where group entities are situated in the Member States participating in the SSM, with the SSM having a better knowledge and direct powers over group entities situated in different Member States. However, pending the completion of the Banking Union, concerns in Member States where the subsidiaries are located still persist that insufficient liquidity or capital at the level of subsidiaries in trouble might have fiscal consequences for such ("host") Member States. These concerns have been addressed in the current proposal through the following safeguards: the conditions already existing in the CRR are supplemented by a clearly framed obligation for the parent to support the subsidiaries. Such commitment of the parent is required to be guaranteed for the whole amount of the waived requirement and the guarantee needs to be collateralised for at least half of the guaranteed amount. The Commission will carefully monitor the implementation of the relevant provisions. It is considered that, at this stage of the Banking Union, it should be possible for the competent authority supervising parents and subsidiaries established in different Member States within the Banking Union to waive the application of own funds and liquidity requirements for subsidiaries located in other Member States than the parent, but only provided the commitment of the parent to support such subsidiaries is guaranteed for the whole amount of the waived requirement and the guarantee is collateralised for at least half of the guaranteed amount. Articles 7 and 8 of the CRR are amended accordingly. The same waivers are made available, as an option, for competent authorities of Member States outside the Banking Union, subject to their explicit agreement. Implementation of the FSB total loss absorption capacity standard (CRR, BRRD, SRM) The FSB published on 9 November 2015 the Total Loss-absorbing Capacity Term Sheet ('the TLAC standard') that was adopted a week later at the G20 summit in Turkey. The TLAC standard requires Global Systemically Important Banks (G-SIBs), referred as G-SIIs in Union legislation, to have a sufficient amount of highly loss absorbing ("bailinable") liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. The interaction of the TLAC standard with existing Union legislation pursuing the same regulatory objectives is described in more detail in the explanatory memorandum accompanying the proposals for amendments to the BRRD and the SRMR. Consistency with the BRRD The TLAC standard is implemented in the Union via amendments to the CRR, building on the existing framework of the BRRD. In order to integrate the two frameworks which pursue the same policy purposes, new definitions have to be introduced, such as resolution entities, resolution group etc. (Article 4 of the CRR), and cooperation has to be warranted between competent authorities and resolution authorities (Article 2 of the CRR). Based on the review required in Article 518 of the CRR and in accordance with the requirements in Article 59 of the BRRD, the criteria for Additional Tier 1 instruments (Article 52 of the CRR) and Tier 2 instruments (Article 63 of the CRR) are amended to require that those instruments be written down or converted to Common Equity Tier 1 instruments at the point of non-viability. This will not change the status of capital instruments issued by EU institutions, while ensuring at the same time that only instruments issued by third-country subsidiaries of EU institutions that meet this additional requirement can be considered as Additional Tier 1 or as Tier 2 instruments by their EU parent entities when they calculate consolidated own funds requirements. The requirement for own funds and eligible liabilities The TLAC standard is implemented in the EU by introducing a requirement for own funds and eligible liabilities composed of a risk-based ratio and on a non-risk-based ratio (new Article 92a of the CRR). Such requirement applies only in the case of G-SIIs, which may be a group of institutions or stand-alone institutions (Article 131(1) of the CRD). Article 6 of the CRR is amended to require stand-alone G-SIIs that are resolution entities to comply with the requirement for own funds and eligible liabilities on a solo basis, whilst Article 11 is amended to require resolution entities part of groups designated as G-SIIs to comply with the requirement for own funds and eligible liabilities on a consolidated basis. The TLAC standard also contains a requirement for internal TLAC (i.e. a requirement to pre-position loss absorbing and recapitalisation capacity at the level of subsidiaries within a resolution group), which is transposed in the EU by introducing a requirement for own funds and eligible liabilities (new Article 92b of the CRR) that applies to non-EU G-SIIs (the BRRD contains already a similar rule for G-SIIs). Such requirement represents 90% of the requirement applicable to G-SIIs in accordance with the new Article 92a. The non-EU G-SII requirement for own funds and eligible liabilities applies to material subsidiaries of non-EU G-SIIs on a solo basis if they are neither resolution entities nor EU parent institutions, and on a consolidated basis if they are EU parent undertakings but not resolution entities. Eligible liabilities A new Chapter 5a (new Articles 72a to 72l) on eligible liabilities is introduced in the CRR after the chapters governing own funds. New Article 72a lists excluded liabilities that cannot count towards fulfilling the requirement for own funds and eligible liabilities. Article 72b contains the eligibility criteria for eligible liabilities instruments, paragraph 2 reflecting the eligibility criteria for subordinated liabilities, whilst paragraphs 3 and 4 reflect eligibility criteria for liabilities that rank pari passu with excluded liabilities. Article 72c specifies that instruments may count towards eligible liabilities only where they have a residual maturity of at least one year. The eligibility criteria exclude liabilities issued through special purpose entities in line with the TLAC term-sheet. Section 2 of the new Chapter 5a (Articles 72e to 72j) provides for the deduction rules applicable to determine the net amount of liabilities that may count for the requirement for own funds and eligible liabilities. Institutions are obliged to deduct holdings of own eligible liabilities instruments (Article 72f), and holdings of eligible liabilities of other G-SIIs (Articles 72h and 72i). Article 72e(3) specifies a proportionate deduction for holdings of liabilities that rank pari passu with excluded liabilities and may count only up to a limited amount as eligible liabilities. Deductions are made from eligible liabilities, and from own funds – on the basis of a corresponding deduction approach (Article 66(e) of the CRR). Article 72j contains the exception from deductions for trading book items. Section 3 of the new Chapter 5a defines the concepts of eligible liabilities (Article 72k) and own funds and eligible liabilities (Article 72l). The Commission will ask EBA for advice on alternative options for treating holdings of TLAC instruments issued by G-SIIs and on the impact of those options. One of the options that the Commission will seek advice on will be to implement the recently published by the BCBS approach to the treatment of TLAC holdings. Based on the advice, the Commission will consider whether changes to the solution put forward in this proposal are warranted. Adjustments to general requirements for own funds and eligible liabilities Chapter 6 of Title I of Part II of the CRR (Articles 73 to 80) is adjusted to reflect the introduction of the category of eligible liabilities. Articles 77 and 78 are extended to cover prior supervisory permission for the early redemption of capital instruments and eligible liabilities. Article 78 introduces the possibility to give a general prior permission to institutions to effect early redemptions, subject to criteria that ensure compliance with the conditions for granting such supervisory permission. Under Article 80, EBA is entrusted with monitoring issuances of own funds and eligible liabilities. To align own funds eligibility criteria with criteria for eligible liabilities, Additional Tier 1 and Tier 2 instruments issued by a special purpose entity will be able to count for own funds purposes only until 31 December 2021. Equity investments in funds (CRR) In December 2013, the BCBS published a new standard on the treatment of equity investments in funds. The new standard was aimed at clarifying the existing treatment and at achieving a more internationally consistent and risk-sensitive treatment of such exposures (i.e. one reflecting both the risk of the fund’s underlying investments and its leverage). In order to implement the new standard in Union law, several changes were made to the CRR. Article 128 is amended to ensure the definition of items associated with particularly high risk does not capture exposures in the form of units or shares in CIUs. Article 132 is amended to reflect the new general principles and requirements underlying the calculation of own funds requirements for exposures in the form of units or shares in CIUs for institutions applying the Standardised Approach for credit risk.

A new Article 132a is introduced to detail the calculations under two of the approaches foreseen under Article 132, namely the look-through approach and the mandate-based approach. Article 152 is amended to reflect the revised requirements and approaches to calculate own funds requirements for exposures in the form of units or shares in CIUs for institutions applying the Internal Rating Based Approach for credit risk. Standardised Approach for Counterparty Credit Risk (SA-CCR) (CRR) In March 2014, the BCBS published a standard on a new standardised method to compute the exposure value of derivatives exposures, the so-called Standardised Approach for Counterparty Credit Risk (SA-CCR), to address the shortcomings of the existing standardised methods. In order to introduce the new method into Union law, while ensuring that the new rules remain proportionate, several changes to the CRR were made. In Article 273, some definitions were modified and some new definitions were added to reflect the new methods introduced. The Mark-to-Market Method was replaced by the SA-CCR (Articles 274 to 280f). The rules related to the Standardised Method were removed. New rules on a simplified SA-CCR were introduced (Article 281). The current rules on the Original Exposure Method were modified (Article 282). The eligibility criteria for using the OEM were modified and eligibility criteria for using the simplified SA-CCR were introduced (Article 273a and 273b). Articles 298 and 299 were modified to reflect the introduction of the SA-CCR. Exposures to CCPs (CRR and EMIR) In April 2014, the BCBS published a final standard on the treatment of exposures to central counterparties (CCPs). The final standard addressed the shortcomings of the interim standard published two years earlier. In order to implement the final standard in Union legislation, several changes were made to the CRR and to Regulation (EU) 648/2012 (the European Market Infrastructure Regulation or EMIR). Amendments to Articles 300 to 310 and 497 of the CRR Several new definitions were added to Article 300 covering terms used in the amended rules on own funds requirements for exposures to CCPs. Article 301 was modified in order to introduce a specific treatment of institutions' exposures to a CCP due to cash transactions, to specify further the treatment of initial margin and to reflect the fact that a single method would be applicable to the calculation of own funds requirements for exposures to qualifying CCPs (QCCPs). Article 304 was modified in order to reflect change to the methods for calculating exposure values of derivatives, and to clarify the treatment of securities financing transactions (SFTs) and of collateral provided by clients to their clearing members. Articles 305 was modified to clarify the treatment of SFTs and to adjust the eligibility criteria for the preferential treatment of clients' exposures. A clarification of the treatment of clearing members' guarantees to their clients as well as of the treatment of SFTs was inserted in Article 306. A new method for calculating own funds requirements for prefunded default fund contributions to a QCCP was introduced in Article 308. The formula for calculating the own funds requirements for exposures to a non-qualifying CCP in Article 309 was modified. In Article 310, the alternative method for calculating the own funds requirements for exposures to CCPs was removed and replaced by a new treatment for unfunded default fund contributions. Finally, the transitional provisions in Article 497 were modified. Amendments to Articles 50a to 50d and 89 of EMIR Articles 50a to 50d were modified to incorporate a new method for calculating the hypothetical capital of a CCP that is needed by institutions to calculate their own funds requirements for default fund contributions to that CCP. Article 89(5a) was modified to update the transitional provisions related to that calculation. Trading book/Market risk (CRR) In January 2016, the BCBS concluded its work on the fundamental review of the trading book and published a new standard on the treatment of market risk. The standard addressed the design flaws present in existing market risk framework, including the insufficient capture of the full range of risks to which institutions were exposed to and uncertainty about the boundary between the trading and non-trading (i.e. banking) book which created opportunities for regulatory arbitrage. The new standard contains revised rules for the use of internal models for calculating own funds for market risk, as well as a new standardised approach which replaces the existing one. In order to implement the new standard in Union law, while ensuring that the rules remain proportionate, several modifications were made to the CRR. In Title I -General requirements, valuation and reporting Article 94 sets out the revised conditions for an institution to benefit from the derogation for institutions with small trading book business, under which the own funds requirements for the credit risk of banking book positions may replace the own funds requirements for the market risk. Articles 102 and 103 clarify the general requirements for trading book positions. Article 104 and 104a clarify the criteria to assign positions in the trading book and the conditions for reclassifying a trading book position as a banking book position and vice versa. Article 104b defines the new concept of trading desk. Article 105 sets out the rules that must be respected to prudently value trading book positions. Article 106 describes the recognition and treatment of trading book positions which are considered as internal hedges of positions in the banking books. In Title IV Chapter 1 – General provisions Article 325 describes the different approaches that can be used by institutions to compute own funds requirements for market risk as well as the conditions for their use and how their use may be combined. Article 325a specifies in more detail the eligibility criteria for using the simplified standard approach for institutions with medium-sized trading book business. Article 325b lays out the conditions under which market risk exposures can be netted between different legal entities within a group for the purposes of calculating consolidated own funds requirements for market risk. Article 325c specifies the conditions under which the positions entered into by an institution in order to hedge against the adverse effect of changes in exchange rates on the institution's own funds ratios can be exempted from the market risk requirements. Chapter 1a – The standardised approach Section 1 (Article 325d) describes the different components of the standardised approach. Section 2 (Articles 325e to 325l) describes the functioning of the first component, the sensitivities-based method. It sets out the general principles for the calculation and aggregation of delta, vega and curvature risks. Subsection 1 of Section 3 (Articles 325m to 325r) specifies the risk factors that have to be considered to calculate the sensitivities of trading book positions to different classes of risk. Subsection 2 of Section 3 (Articles 325s to 325u) explains how these sensitivities must be computed. Section 4 (Article 325v) describes the functioning of the second component of the standardised approach, the residual risk add-on. Section 5 describes the functioning of the third component of the standardised approach, the default risk charge. Article 325w gives the main definitions. Subsection 1 (Articles 325x to 325z) describes how the default risk charge must be computed for non-securitisation positions, while subsections 2 (Articles 325aa and 325ab) and 3 (Articles 325ac to 325ae) describe the same calculation for securitisations. Section 6 (Articles 325af to 325az) provides the risk weights and correlations that must be used for each risk class in combination with the sensitivities to determine own funds requirements for market risks under the standardised approach. Exposures to EU sovereigns are included in the first risk bucket, which is assigned the lowest risk weight (Articles 325ai and 325al). This treatment is in line with the non-rating dependent treatment currently provided for those types of exposures included in the non-trading book. The risk weights applicable to covered bonds issued by EU institutions were reduced (Articles 325ai and 325al). This treatment would prevent a potential significant increase in the capital requirements for exposures to covered bonds issued by EU institutions, thus maintaining lower funding costs for mortgage loans for housing and non-residential property. Chapter 1b – The internal model approach

Section 1 (Articles 325ba and 325bb) specifies the conditions under which institutions are allowed to use internal models and how own funds requirements for market risk must be calculated for trading desks that benefit from this permission. Section 2 (Articles 325bc to 325bl) describes how expected shortfalls and liquidity horizons must be used in the calculation of own funds requirements for market risk, the requirements that internal models must meet in terms of back testing, profit-and-loss (P&L) attribution, internal validation as well as more general qualitative and risk measurement requirements, and the stress scenario risk measure that must be calculated for the non-modellable risk factors. Like for the standardised approach, a beneficial treatment was introduced under the internal models approach via shorter liquidity horizons for exposures to EU sovereigns and covered bonds issued by EU institutions (Article 325be). Section 3 (Articles 325bm to 325bq) describes how the default risk charge must be calculated for trading desks subject to default risk using an internal model approach. Chapters 2, 3 and 4 – The simplified standardised approach Chapters 2, 3 and 4 – respectively own funds requirements for position risk, foreign exchange risks and commodity risks – reflect the simplified standardised approach under the revised market risk framework. These rules already existed in the current market risk framework and remain unchanged. Institutions will be able to use this approach until [date of application of this Regulation]. After this date, only institutions that fulfil the eligibility criteria set out in Article 325a will be able to use the simplified standardised approach. Chapter 5 – The simplified internal approach Chapter 5 constitutes the simplified internal models approach under the revised market risk framework. These rules already existed in the current market risk framework and remain unchanged. Institutions will be able to use this approach until [date of application of this Regulation]. After this date, institutions will no longer be able to use the simplified internal models approach for calculating the own fund requirements for market risks. However, Chapter 5 shall remain in force for calculating the own fund requirements for CVA risks under the Advanced method as set out in Article 383. Part Ten – Transitional provisions, reports, reviews and amendments, Article 501b describes how own funds requirements for market risk, as calculated under Chapters 1a and 1b, will be phased-in. Article 519a specifies a number of technical elements of the revised market risk framework that may appear to be problematic once implemented. The EBA is mandated to review those technical elements no later than 3 years after the entry into force of this Regulation and the Commission may make proposals to change the related rules in light of the EBA conclusions. Large exposures (CRR) The current capital base (the 'eligible capital') only captures a small part of the overall large exposures that institutions have and is thus not sufficiently prudent to avoid that the maximum possible loss by an institution in case of the sudden failure of a single counterparty or a group of counterparties endangers the institution’s survival as a going concern. Moreover, the current limit does not take into account the higher risks carried by the exposures that G-SIIs have to single counterparties or groups of connected clients and, in particular, as regards exposures to other G-SIIs. The financial crisis has, in fact, demonstrated that material losses in one G-SII can trigger concerns about the solvency of other G-SIIs with potentially serious consequences on financial stability. Finally, the current large exposures framework relies on less accurate methods than the new methodology (i.e. Standardised Approach for Counterparty Credit Risk, SA-CCR) that the BCBS has developed for computing banks’ derivatives exposures (i.e. OTCs). The large exposures framework is amended to address the loopholes identified. In particular, the capital that can be taken into account to calculate the large exposures limit is limited to Tier 1 capital (no more Tier 2 capital); Article 395(1) is amended to introduce the lower limit of 15% for G-SIBs exposures to other G-SIBs and the amended Article 390 imposes the use of the SA-CCR methods for determining exposures to OTC derivative transactions, even for banks that have been authorised to use internal models. The modifications introduced in the current framework will overall increase the risk-sensitivity of the large exposures regime and better align the European system to the BCBS standard on large exposures issued in 2014. Article 507 of the CRR required the Commission to review and report on the application of Article 400(1)(j) and Article 400(2). Since it was not possible to gather sufficient quantitative data to assess the potential impact of removing or rendering mandatory the exemptions listed in those provision, Article 507 provides for a new mandate to the EBA to report to the Commission on the use of the exemptions set out in Article 400 (1) and (2) and Article 390 (6). Leverage ratio (CRR) New provisions are introduced and adjustments are made to several articles in the CRR in order to introduce a binding leverage ratio requirement for all institutions subject to the CRD. The leverage ratio requirement complements the current requirements on supervisory monitoring of the risk of excessive leverage in the CRD and the CRR requirements to calculate the leverage ratio, to report it to supervisors and, since January 2015, to disclose it publicly. The leverage ratio requirement A leverage ratio requirement of 3% of Tier 1 capital – as agreed at international level - is added to the own funds requirements in Article 92 of the CRR which institutions must meet in addition to their risk-based requirements. Thereby a harmonised binding requirement is introduced throughout the Union, setting a backstop for institutions. In addition, competent authorities remain responsible for monitoring leverage policies and processes of individual institutions and may impose additional measures to address risks of excessive leverage, if warranted. Adjustments to the leverage ratio exposure measure The adjustments to the leverage ratio exposure measure that were already included in the current CRR have been carried over. Since a 3% leverage ratio would constrain certain business models and lines of business more than others, further adjustments are warranted. Institutions may reduce the leverage ratio exposure measure for public lending by public development banks (Article 429a(1)(d)), pass-through loans (Article 429(1)(e)) and officially guaranteed export credits (Article 429a(1)(f)). In order not to dis-incentivise client clearing by institutions, institutions are allowed to reduce the exposure measure by the initial margin received from clients for derivatives cleared through QCCPs (Article 429c(4)). A leverage ratio buffer for G-SIBs International discussions are ongoing on a possible leverage ratio buffer for G-SIBs. Once a final international agreement on the leverage ratio buffer will be reached it should be considered for inclusion in the CRR. Regulatory reporting (CRR) Various provisions have been added to or amended in the CRR and the CRD to enhance proportionality and reduce costs on institutions in the overall regulatory reporting framework.

Article 99(5) is amended to include a mandate to EBA to deliver a report to the Commission on the cost of regulatory reporting by 31 December 2019. The mandate sets out a very precise methodology for EBA to quantify reporting costs on institutions and provides for an obligation to make recommendations on ways to simplify reporting for small institutions through amendments to existing EBA reporting templates. Small institutions as defined in Article 430a will only be required to submit regulatory reports on an annual basis as opposed to semi-annually or more frequently for all other institutions (Articles 99(4), 100, 101, 394 and 430). Reporting on large exposures will be simplified by removing one item and clarifying another item currently required to be reported under Article 394. Disclosure (CRR) Enhanced proportionality in disclosure requirements New provisions are added in Part Eight to provide for a more proportionate disclosure regime that takes into account the relative size and complexity of institutions. These are classified into three categories as either significant (Article 433a), small (Article 433b) and other (Article 433c), with a further distinction between listed and non-listed institutions. Disclosure requirements will apply to each category of institutions on a sliding scale basis, with a differentiation in the substance and frequency of disclosures. At the upper end of the sliding scale, large institutions with listed securities will be required to provide annual disclosures of all the information required under Part Eight, plus disclosures of selected information on a semi-annual and quarterly basis, including in the latter case a key prudential metrics table (Article 447). On the lower end, small non-listed institutions will only be required to make selected disclosures of governance, remuneration and risk management information and the key metrics table on an annual basis. Targeted amendments for consistency purposes with international standards and new or amended Pillar 1 requirements A number of amendments have been made to Titles II and III of Part Eight (Articles 435 to 455) to align better disclosure requirements with international standards on disclosures. In particular, a new requirement has been added to disclose information about significant investments in insurance undertakings that a competent authority has authorised not to be deducted from supplementary own fund requirements of financial conglomerates (Article 438(e) and (f)). Other amendments to these Titles are intended to reflect new or amended Pillar 1 requirements to be introduced as part of this legislative proposal. This will include disclosures on TLAC (Article 437a), counterparty credit risk (Article 439), market risk (Article 445) and liquidity requirements (Article 451a). Finally, some clarifications are made to the remuneration disclosures and a disclosure requirement is introduced concerning the use of derogations from the remuneration rules of Directive 2013/36/EU (Article 450). Empowerments to the EBA and the Commission The proposal comprises an empowerment to EBA to develop uniform disclosure formats, which should be as aligned as possible with international disclosure formats to facilitate comparability (Article 434a). To the same end, the proposal includes an empowerment to the Commission to amend the disclosure requirements in Part Eight to reflect developments or amendments of international standards on disclosures (Article 456(k)). NSFR (CRR) A new Title is added to Part Six, and adjustments to existing provisions have been made to introduce a binding net stable funding ratio (NSFR) for credit institutions and systemic investment firms. General provisions Adjustments have been made to the general provisions in Part One. Amendments have been made to Article 8 to adjust the conditions under which institutions can benefit from waivers from liquidity requirements at individual level, and to Articles 11 and 18 regarding consolidation rules. Existing liquidity provisions Amendments are introduced in Titles I and II of Part Six to adjust definitions and reporting requirements. Definitions are adjusted in Article 411, while reporting requirements are further specified in Articles 412, 413, 415, 416 and 422 to 425. Article 414 is modified to integrate the new NSFR requirement and specify the applicable consequences should it be breached. The new Title IV of Part Six: The net stable funding ratio

Chapter 1 The net stable funding ratio (Articles 428a and 428b) Article 428a specifies rules for subsidiaries in third countries for the calculation of the NSFR on a consolidated basis. Article 428b defines the general design of the NSFR which is calculated as the ratio of an institution's amount of available stable funding (ASF) to its amount of required stable funding (RSF). Chapter 2 General rules of calculation of the net stable funding ratio (Articles 428c to 428h) Article 428c clarifies the general rules that apply to calculate the NSFR. Article 428d specifies the way derivatives contracts shall be taken into account for the calculation of the NSFR, while Article 428e specifies the netting of secured lending transactions and capital market-driven transactions. Article 428f defines the conditions under which some assets and liabilities can be considered as interdependent and draws a list of products whose assets and liabilities shall be considered as such: centralised regulated savings, promotional loans, covered bonds issuance without funding risk on a one-year horizon and derivatives client clearing activities. The Commission is empowered to adopt a delegated act to review this list (new paragraph 3 of Article 460). Article 428g specifies the treatment of deposits in cooperative networks or institutional protection schemes and Article 428h introduces a discretion for competent authorities to grant a preferential treatment to intragroup transactions under some conditions. Chapter 3 Available stable funding (Articles 428i to 428o) Section 1 (Articles 428i and 428j) of this Chapter defines the general rules that apply to calculate the amount of ASF that constitutes the numerator of the NSFR. Section 2 (Articles 428k to 428o) defines the ASF factors that apply to the regulatory capital and to different liabilities depending on their characteristics, in particular their maturity and the nature of the counterparty. Chapter 4 Required stable funding (Articles 428p to 428ag) Section 1 (Articles 428p and 428q) of this Chapter defines the general rules that apply to calculate the amount of RSF that constitutes the denominator of the NSFR. Section 2 (Articles 428r to 428o) defines the RSF factors that apply to different assets and off-balance sheets exposures depending on their characteristics, in particular their maturity, their liquidity and the nature of the counterparty. The definitions and RSF factors applied for the calculation of the NSFR reflect the definitions and haircuts applied for the calculation of the EU LCR. In particular, assets eligible as high quality liquid assets (HQLA) Level 1, excluding extremely high quality covered bonds, are subject to a 0% RSF factor to avoid negative impacts on the liquidity of sovereign bond markets. Assets resulting from transactions with financial customers having a residual maturity of less than six months and secured by HQLA Level 1, excluding extremely high quality covered bonds, are subject to a 5% RSF factor (Article 428s). If they are unsecured or secured by other assets, these transactions are subject to a 10% RSF factor (Article 428u). These adjustments to the Basel RSF factors (that are of 10% and 15% respectively) are meant to mitigate the immediate impact on the liquidity of interbank funding markets, on the liquidity of the securities and on market making activities. The Commission is empowered to adopt a delegated act to review this treatment and the treatment of secured transactions more broadly, taking into account the conclusions of a report prepared by the EBA. If no decision is taken by 3 years after the date of application of the NSFR, these RSF factors will be raised to respectively 10% and 15% (new paragraph 7 of Article 510 in Part Ten). For derivatives contracts, if derivatives assets (offset by variation margins received in the form of cash and HQLA Level 1, excluding extremely high quality covered bonds) are greater than derivatives liabilities (offset by all variation margins posted), the difference is subject to a 100% RSF factor (Article 428ag). In addition, assets posted as initial margin or as contribution to the default fund of a CCP are subject to a 85% RSF factor (Article 428af). Furthermore, a risk-sensitive approach adjusted compared to the Basel NSFR is introduced to capture the future funding risk of derivatives. For unmargined derivatives contracts, a 10% RSF factor applies to their gross derivatives liabilities (Article 428u) and, for margined derivatives contracts, an option is introduced to either apply a 20% RSF factor to gross derivatives liabilities or to use the potential future exposure (PFE) as calculated under the standardised approach for counterparty credit risk - SA-CCR (Article 428x). The Commission is empowered to adopt a delegated act to review this treatment, taking into account the conclusions of a report prepared by the EBA. If no decision is taken by 3 years after the date of application of the NSFR, a 20% RSF factor on gross derivatives liabilities will apply for all derivatives contracts and all institutions (new paragraph 5 of Article 510). IFRS 9 (CRR) Article 473a is added to phase in the new incremental provisioning requirements for credit risk under IFRS over a period starting on 1 January 2019 and ending on 31 December 2023 to mitigate the financial impact on institutions. SME supporting factor (CRR)

The proposal includes changes to capital requirements for exposures to SMEs (Article 501). The current capital reduction of 23,81% for an exposure to an SME, if it does not exceed EUR 1,5 million, is maintained. In relation to an SME exposure exceeding EUR 1,5 million, 23,81% capital reduction is proposed for the first EUR 1,5 million share of the exposure and a 15% reduction for the remaining part of the exposure above the threshold of EUR 1,5 million. Institutions will be able to continue implementing the reduction by adjusting the risk-weighted exposure amount for a given SME. Treatment of infrastructure exposures (CRR) Promoting viable infrastructure projects in domains like transport, energy, innovation, education, research is of vital importance for the economic growth of the Union. In conjunction with other Commission initiatives, like the Capital Market Union and the Investment Plan for Europe, the proposal aims at mobilising private finance for high quality infrastructure projects. Building on the recent developments in the regulatory framework for insurance undertakings and on the on-going work carried out in the context of the upcoming reform of the Standardised Approach by the BCBS, it is proposed to grant, under both the Standardised Approach and the Internal Based Approach for credit risk, a preferential treatment to specialised lending exposures aiming at funding safe and sound infrastructure projects. These are defined through a set of criteria able to reduce the risk profile of the exposure and enhance the capacity of institutions to manage that risk. The criteria are consistent with those identifying qualifying infrastructure projects that receive a preferential treatment in the Solvency II framework. The proposed treatment is subject to a review clause in order to possibly fine-tune the provision in light of its impact on infrastructure investments in the EU and to take into account any relevant development at global level. It will also allow, if appropriate, to amend the provision in view of more flexibility with regard to the financing structure of infrastructure projects, i.e. to extend the treatment to infrastructure corporates. The Commission, after consulting the EBA, will report on the trends in the market for infrastructure investments and the effective risk profile of those investments and shall submit this report to the European Parliament and the Council together with any appropriate proposal. Investment firms review (CRR) The review under Article 508(3) on investment firms is now in its second phase. In a first report published in December 2015, EBA found that the bank-like rules under the CRR were not fit for purpose for the majority of investment firms with the exception of the more systemic ones that pose risks similar to those faced by credit institutions. At the request of the Commission, the EBA is conducting additional analytical work and a data-gathering exercise in order to articulate a more appropriate and proportionate capital treatment for investment firms which will cover all parameters of a possible new regime. EBA is expected to deliver their final input to the Commission in June 2017. The Commission intends to present legislative proposals setting-up a specific prudential framework for non-systemic investment firms by the end of 2017. Pending the adoption of these proposals, it is considered appropriate to allow investment firms that are not systemic to apply the CRR in the version as it stood before the amendments come into force. Systemic investment firms will, for their part, be subject to the amended version of the CRR. This will ensure that systemic firms are treated appropriately while alleviating the regulatory burden for non-systemic firms who would otherwise have to temporarily apply a new set of rules designed for credit institutions and systemic investment firms during the period preceding the final adoption of the dedicated investment firms' prudential framework that will be proposed in 2017. Introducing a modified framework for interest rate risk (CRR and CRD) Following developments at the BCBS level on the measurement of interest rate risks, Articles 84 and 98 of the CRD and Article 448 of the CRR are amended in order to introduce a revised framework for capturing interest rate risks for banking book positions. The amendments include the introduction of a common standardised approach that institutions might use to capture these risks or that competent authorities may require the institution to use when the systems developed by the institution to capture these risks are not satisfactory, improved outlier test and disclosure requirements. In addition, EBA is mandated, in Article 84 of the CRD, to elaborate the details of the standardised methodology the criteria and conditions that institutions should follow to identify, evaluate, manage and mitigate interest rate risks and, in Article 98 of the CRD, to define the six supervisory shock scenarios applied to interest rates and the common assumption that institutions have to implement for the outlier test. 2016/0360 (COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements and amending Regulation (EU) No 648/2012 (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Central Bank, Having regard to the opinion of the European Economic and Social Committee,

Acting in accordance with the ordinary legislative procedure, Whereas: (1)In the aftermath of the financial crisis that unfolded in 2007-2008 the Union implemented a substantial reform of the financial services regulatory framework to enhance the resilience of its financial institutions. That reform was largely based on internationally agreed standards. Among its many measures, the reform package included the adoption of Regulation (EU) No 575/2013 of the European Parliament and of the Council and Directive 2013/36/EU of the European Parliament and of the Council , which strengthened the prudential requirements for credit institutions and investment firms. (2)While the reform has rendered the financial system more stable and resilient against many types of possible future shocks and crises, it did not address all identified problems. An important reason for that was that international standard setters, such as the Basel Committee on Banking Supervision (Basel Committee) and the Financial Stability Board (FSB), had not finished their work on internationally agreed solutions to tackle those problems at the time. Now that work on important additional reforms has been completed, the outstanding problems should be addressed. (3)In its Communication of 24 November 2015, the Commission recognised the need for further risk reduction and committed bringing forward a legislative proposal that would build on internationally agreed standards. The need to take further concrete legislative steps in terms of reducing risks in the financial sector has also been recognised also by the Council in its Conclusions of 17 June 2016 and by the European Parliament in its resolution of 10 March 2016. (4)Risk reduction measures should not only further strengthen the resilience of the European banking system and the markets' confidence in it, but also provide the basis for further progress in completing the Banking Union. Those measures should also be considered against the background of broader challenges affecting the Union economy, especially the need to promote growth and jobs at times of uncertain economic outlook. In that context, various major policy initiatives, such as the Investment Plan for Europe and the Capital Markets Union, have been launched in order to strengthen the economy of the Union. It is therefore important that all risk reduction measures interact smoothly with those policy initiatives as well as with broader recent reforms in the financial sector. (5)The provisions of this amending Regulation should be equivalent to internationally agreed standards and ensure the continued equivalence of Directive 2013/36/EC and this Regulation with the Basel III framework. The targeted adjustments in order to reflect Union specificities and broader policy considerations should be limited in terms of scope or time in order not to impinge on the overall soundness of the prudential framework. (6)Existing risk reduction measures should also be improved to ensure that they can be applied in a more proportionate way and that they do not create an excessive compliance burden, especially for smaller and less complex institutions. (7)Leverage ratios contribute to preserving financial stability by acting as a backstop to risk based capital requirements and by constraining the building up of excessive leverage during economic upturns. Therefore, a leverage ratio requirement should be introduced to complement the current system of reporting and disclosure of the leverage ratio. (8)In order not to unnecessarily constrain lending by institutions to corporates and private households and to prevent unwarranted adverse impacts on market liquidity, the leverage ratio requirement should be set at a level where it acts as a credible backstop to the risk of excessive leverage without hampering economic growth. (9)The European Banking Authority (EBA) concluded in its report to the Commission that a Tier 1 capital leverage ratio calibrated at 3% for any type of credit institution would constitute a credible backstop function. A 3% leverage ratio requirement was also agreed upon at international level by the Basel Committee. The leverage ratio requirement should therefore be calibrated at 3%. (10)A 3% leverage ratio requirement would however constrain certain business models and lines of business more than others. In particular, public lending by public development banks and officially guaranteed export credits would be impacted disproportionally. The leverage ratio should therefore be adjusted for these types of exposures. (11)A leverage ratio should also not undermine the provision of central clearing services by institutions to clients. Therefore, the initial margins on centrally cleared derivative transactions received by institutions in cash from their clients and that they pass on to central counterparties (CCP), should be excluded from the leverage ratio exposure measure. (12)The Basel Committee has revised the international standard on the leverage ratio in order to specify further certain aspects of the design of that ratio. Regulation (EU) No- 575/2013 should be aligned with the revised standard so as to enhance the international level playing field for EU institutions operating outside the Union, and to ensure the leverage ratio remains an effective complement to risk-based own funds requirements. (13)The Basel Committee is currently considering the introduction of a leverage ratio surcharge for globally systemically important banks (G-SIBs). The final outcome of the Basel Committee's calibration work should give rise to a discussion on the appropriate calibration of the leverage ratio for systemically important EU institutions. (14)On 9 November 2015, the FSB has published the Total Loss-Absorbing Capacity (TLAC) Term Sheet (TLAC standard') which was endorsed by the G-20 at the November 2015 summit in Turkey. The TLAC standard requires global systemically important banks (G-SIBs), to hold a sufficient amount of highly loss absorbing (bail-in-able) liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. In its Communication of 24 November 2015, the Commission committed to bringing forward a legislative proposal by the end of 2016 that would enable the TLAC standard to be implemented by the internationally agreed deadline of 2019. (15)The implementation of the TLAC standard in the Union needs to take into account the existing minimum requirement for own funds and eligible liabilities (MREL), set out in Directive 2014/59/EU of the European Parliament and of the Council. As TLAC and MREL pursue the same objective of ensuring that institutions have sufficient loss absorbing capacity, the two requirements are complementary elements of a common framework. Operationally, the harmonised minimum level of the TLAC standard should be introduced into Regulation (EU) No 575/2013 through a new requirement for own funds and eligible liabilities, while the firm-specific add-on for global systemically important institutions (G-SIIs) and the firm-specific requirement for non-G-SIIs should be introduced through targeted amendments to Directive 2014/59/EU and Regulation (EU) No 806/2014 of the European Parliament and of the Council. The relevant provisions introducing the TLAC standard in this Regulation (EU) should be read together with those in the aforementioned legislation and with Directive 2013/36/EU. (16)In accordance with the TLAC standard that only covers G-SIBs, the minimum requirement for a sufficient amount of own funds and highly loss absorbing liabilities introduced in this Regulation should only apply in the case of G-SIIs. However, the rules concerning eligible liabilities introduced in this Regulation should apply to all institutions, in line with the complementary adjustments and requirements in Directive 2014/59/EU. (17)In line with the TLAC standard, the requirement on own funds and eligible liabilities should apply to resolution entities which are either themselves G-SIIs or are part of a group identified as a G-SII. The requirement on own funds and eligible liabilities should apply on either an individual basis or a consolidated basis, depending on whether such resolution entities are stand-alone institutions with no subsidiaries, or parent undertakings. (18)Directive 2014/59/EU allows for resolution tools to be used not only for institutions but also for financial holding companies and mixed financial holding companies. Parent financial holding companies and parent mixed financial holding companies should therefore have sufficient loss absorption capacity in the same way as parent institutions.

(19)To ensure the effectiveness of the requirement on own funds and eligible liabilities, it is essential that the instruments held for meeting that requirement have a high capacity of loss absorption. Liabilities that are excluded from the bail-in tool referred to in Directive 2014/59/EU do not have that capacity, and neither do other liabilities that, although bail-in-able in principle might raise difficulties for being bailed in in practice. Those liabilities should therefore not be considered eligible for the requirement on own funds and eligible liabilities. On the other hand, capital instruments, as well as subordinated liabilities have a high loss absorption capacity. Also, the loss absorption potential of liabilities that rank pari passu with certain excluded liabilities should be recognised up to a certain extent, in line with the TLAC standard. (20)To avoid double counting of liabilities for the purposes of the requirement on own funds and eligible liabilities, rules should be introduced for the deduction of holdings of eligible liabilities items that mirror the corresponding deduction approach already developed in Regulation (EU) No 575/2013 for capital instruments. Under that approach, holdings of eligible liabilities instruments should first be deducted from eligible liabilities and, to the extent there are no sufficient liabilities, they should be deducted from Tier 2 capital instruments. (21)The TLAC standard contains some eligibility criteria for liabilities that are stricter than the current eligibility criteria for capital instruments. To ensure consistency, eligibility criteria for capital instruments should be aligned as regards the non-eligibility of instruments issued through special purpose entities as of 1 January 2022. (22)Since the adoption of Regulation (EU) No 575/2013, the international standard on the prudential treatment of institutions' exposures to CCPs has been amended in order to improve the treatment of institutions' exposures to qualifying CCPs (QCCPs). Notable revisions of that standard included the use of a single method for determining the own funds requirement for exposures due to default fund contributions, an explicit cap on the overall own funds requirements applied to exposures to QCCPs, and a more risk-sensitive approach for capturing the value of derivatives in the calculation of the hypothetical resources of a QCCP. At the same time, the treatment of exposures to non-qualifying CCPs was left unchanged. Given that the revised international standards introduced a treatment that is better suited to the central clearing environment, Union law should be amended to incorporate those standards. (23)In order to ensure that institutions adequately manage their exposures in the form of units or shares in collective investment undertakings (CIUs), the rules spelling out the treatment of those exposures should be risk sensitive and should promote transparency with respect to the underlying exposures of CIUs,. The Basel Committee has therefore adopted a revised standard that sets a clear hierarchy of approaches to calculate risk-weighted exposure amounts for those exposures. That hierarchy reflects the degree of transparency over the underlying exposures. Regulation (EU) No 575/2013 should be aligned with those internationally agreed rules. (24)For calculating the exposure value of derivative transactions under the counterparty credit risk framework, Regulation (EU) No 575/2013 currently gives institutions the choice between three different standardised approaches: the Standardised Method ('SM'), the Mark-to-Market Method ('MtMM') and the Original Exposure Method ('OEM'). (25)Those standardised approaches however do not recognise appropriately the risk-reducing nature of collateral in the exposures. Their calibrations are outdated and they do not reflect the high level of volatility observed during the financial crisis. Neither do they recognise appropriately netting benefits. To address those shortcomings, the Basel Committee decided to replace the SM and the MtMM with a new standardised approach for computing the exposure value of derivatives exposures, the so-called Standardised Approach for Counterparty Credit Risk ('SA-CCR'). Given that the revised international standards introduced a new standardised approach that is better suited to the central clearing environment, Union law should be amended to incorporate those standards. (26)The SA-CCR is more risk-sensitive than the SM and the MtM and should therefore lead to own funds requirements that better reflect the risks related to institutions' derivatives transactions. At the same time, the SA-CCR is more complex for institutions to implement. For some of the institutions which currently use the MtM method the SA-CCR may prove to be too complex and burdensome to implement. For those institutions, a simplified version of the SA-CCR should be introduced. Since such a simplified version will be less risk sensitive than the SA-CCR, it should be appropriately calibrated in order to ensure that it does not underestimate the exposure value of derivatives transactions. (27)For institutions which have very limited derivatives exposures and which currently use the OEM, both the SA-CCR and the simplified SA-CCR could be too complex to implement. The OEM should therefore be reserved for those institutions, but should be revised in order to address its major shortcomings. (28)To guide an institution in its choice of permitted approaches clear criteria should be introduced. Those criteria should be based on the size of the derivative activities of an institution which indicates the degree of sophistication an institution should be able to comply with to compute the exposure value. (29)During the financial crisis, trading book losses for some institutions established in the Union were substantial. For some of them, the level of capital required against those losses proved insufficient, leading them to seek extraordinary public financial support. Those observations led the Basel Committee to remove a number of weaknesses in the prudential treatment for trading book positions which are the own fund requirements for market risks. (30)In 2009, a first set of reforms were finalised at international level and transposed in the Union law with Directive 2010/76/EU of the European Parliament and of the Council. (31)The 2009 reform did however not address the structural weaknesses of the own fund requirements for market risk standards. The lack of clarity about the boundary between the trading and banking books gave opportunities for regulatory arbitrage while the lack of risk sensitivity of the own fund requirements for market risks did not allow to capture the full range of risks to which institutions were exposed. (32)The Basel Committee therefore initiated the Fundamental review of the trading book (FRTB) to address those weaknesses. This work was concluded in January 2016. The FRTB standards enhance the risk-sensitivity of the market risk framework by setting an amount of own fund requirements that is more proportionate to the risks of trading book positions and they clarify the definition of the boundary between banking and trading books. (33)The implementation of the FRTB standards in the Union needs to preserve the good functioning of financial markets in the Union. Recent impact studies about the FRTB standards show that the implementation of the FRTB standards is expected to lead to a steep increase in the overall own fund requirement for market risks. To avoid a sudden contraction of trading businesses in the Union, a phase-in period should therefore be introduced so that institutions can recognise the overall level of own fund requirements for market risks generated by the transposition of the FRTB standards in the Union. Particular attention should also be paid to European trading specificities and adjustments to the own funds requirements for sovereign and covered bonds, and simple, transparent and standardised securitisations. (34)A proportional treatment for market risks should also apply to institutions with limited trading book activities, allowing more institutions with small trading activities to apply the credit risk framework for banking book positions as set out under a revised version of the derogation for small trading book business. In addition, institutions with medium-sized trading book should be allowed to use a simplified standardised approach for calculating the own fund requirements for market risks in line with the approach currently in use under Regulation (EU) 575/2013. (35)The large exposures framework should be strengthened to improve the ability of institutions to absorb losses and to better comply with international standards. To that end, a higher quality of capital should be used as a capital base for the calculation of the large exposures limit and exposures to credit derivatives should be calculated with the SA-CCR. Moreover, the limit on the exposures that G-SIBs may have towards other G-SIBs should be lowered to reduce systemic risks related to interlinks among large institutions and the probability that the default of G-SIBs counterparty may have on financial stability. (36)While the liquidity coverage ratio (LCR) ensures that credit institutions and systemic investment firms will be able to withstand severe stress on a short-term basis, it does not ensure that those credit institutions and investment firms will have a stable funding structure on a longer-term horizon. It became thus apparent that a detailed binding stable funding requirement should be developed at EU level which should be met at all times with the aim of preventing excessive maturity mismatches between assets and liabilities and overreliance on short-term wholesale funding. (37)Consistent with the Basel Committee's stable funding standards, rules should therefore be adopted to define the stable funding requirement as a ratio of an institution's amount of available stable funding to its amount of required stable funding over a one-year horizon. This is the binding net stable funding ratio ('NSFR'). The amount of available stable funding should be calculated by multiplying the institution's liabilities and regulatory capital by appropriate factors that reflect their degree of reliability over the one-year horizon of the NSFR. The amount of required stable funding should be calculated by multiplying the institution's assets and off-balance sheet exposures by appropriate factors that reflect their liquidity characteristics and residual maturities over the one-year horizon of the NSFR. (38)The NSFR should be expressed as a percentage and set at a minimum level of 100%, which indicates that an institution holds sufficient stable funding to meet its funding needs during a one-year period under both normal and stressed conditions. Should its NSFR falls below the 100% level, the institution should comply with the specific requirements laid down in Article 414 of Regulation (EU) No 575/2013 for a timely restoration of its NSFR to the minimum level. The supervisory measures in case of non-compliance should not be automatic, competent authorities should instead assess the reasons for non-compliance with the NSFR requirement before defining potential supervisory measures.

(39)In accordance with the recommendations made by EBA in its report of 15 December 2015 prepared pursuant to paragraphs 1 and 2 of Article 510 of Regulation (EU) No 575/2013, the rules for calculating the NSFR should be closely aligned with the Basel Committee's standards, including developments in those standards regarding the treatment of derivatives transactions. The necessity to take into account some European specificities to ensure that the NSFR does not hinder the financing of the European real economy however justifies adopting some adjustments to the Basel NSFR for the definition of the European NSFR. Those adjustments due to the European context are recommended by the NSFR report prepared by EBA and relate mainly to specific treatments for i) pass-through models in general and covered bonds issuance in particular; ii) trade finance activities; iii) centralised regulated savings; iv) residential guaranteed loans; and v) credit unions. These proposed specific treatments broadly reflect the preferential treatment granted to these activities in the European LCR compared to the Basel LCR. Because the NSFR complements the LCR, those two ratios should indeed be consistent in their definition and calibration. This is in particular the case for required stable funding factors applied to LCR high quality liquid assets for the calculation of the NSFR that shall reflect the definitions and haircuts of the European LCR, regardless of compliance with the general and operational requirements set out for the LCR calculation that are not appropriate in the one-year frame of the NSFR calculation. (40)Beyond European specificities, the stringent treatment of derivative transactions in the Basel NSFR could have an important impact on institutions’ derivatives activities and, consequently, on European financial markets and on the access to some operations for end-users. Derivative transactions and some interlinked transactions, including clearing activities, could be unduly and disproportionately impacted by the introduction of the Basel NSFR without having been subject to extensive quantitative impact studies and public consultation. The additional requirement to hold 20 % of stable funding against gross derivatives liabilities is very widely seen as a rough measure that overestimates additional funding risks related to the potential increase of derivative liabilities over a one year horizon. It therefore seems reasonable to adopt an alternative more risk-sensitive measure not to hinder the good functioning of the European financial markets and the provision of risk hedging tools to institutions and end-users, including corporates, to ensure their financing as an objective of the Capital Market Union. For unmargined derivatives transactions, the future funding risks of which are contingent on some unpredictable events, such as rating triggers requiring to post collateral, and which are best approximated by their market value that would be the amount of funding required should such an event occur, a 10 % required stable funding ('RSF') factor should apply to their gross derivatives liabilities. The 20 % RSF factor seems indeed to be very conservative. For margined derivatives transactions, an option is introduced for institutions using SA-CCR to either apply the 20 % RSF factor as indicated in the Basel standard or to use their potential future exposure ('PFE') as calculated under SA-CCR. Institutions not using SA-CCR have very small derivatives portfolios and should be exempted from this requirement. That approach is more risk-sensitive and, since it is intended for counterparty credit risk and for the leverage ratio calculation, it should not constitute an additional burden for institutions to compute. (41)The Basel asymmetric treatment between short term funding, such as repos (stable funding not recognised) and short term lending, such as reverse repos (some stable funding required – 10% if collateralised by Level 1 high quality liquid assets - HQLA - as defined in the LCR and 15% for other transactions) with financial customers aims at discouraging extensive short term funding links between financial customers which are a source of interconnection and make it more difficult to resolve a particular institution without a contagion of risk to the rest of the financial system in case of failure. However, the calibration of the asymmetry is overly conservative and may affect the liquidity of securities usually used as collateral in short term transactions, in particular sovereign bonds, as institutions will probably reduce the volume of their operations on repo markets. It could also undermine market-making activities, as repo markets facilitate the management of the necessary inventory, thereby contradicting the objectives of the capital market union. Furthermore, this would make it more difficult to transform these securities into cash rapidly at a good price, which could endanger the effectiveness of the LCR whose logic is to have a buffer of liquid assets that can be easily transformed into cash in case of liquidity stress. Eventually, the calibration of this asymmetry may affect the liquidity of interbank funding markets, in particular for liquidity management purposes, as it will become more expensive for banks to lend to each other on a short term basis. The asymmetrical treatment should be maintained but RSF factors be reduced to 5% and 10% respectively (instead of 10% and 15%). (42)In addition to the recalibration of the Basel RSF factor that applies to short term reverse repo transactions with financial customers secured by sovereign bonds (5% RSF factor instead of 10%), some other adjustments have proven to be necessary to ensure that the introduction of the NSFR does not hinder the liquidity of sovereign bonds markets. The Basel 5% RSF factor that applies to Level 1 HQLA, including sovereign bonds, implies that institutions would need to hold ready available long-term unsecured funding in such percentage regardless of the time during which they expect to hold such sovereign bonds. This could potentially further incentivise institutions to deposit cash at central banks rather than to act as primary dealers and provide liquidity in sovereign bond markets. Moreover, it is not consistent with the LCR that recognises the full liquidity of these assets even in time of severe liquidity stress (0% haircut). The RSF factor of HQLA Level 1 as defined in the EU LCR, excluding extremely high quality covered bonds, should therefore be reduced from 5% to 0%. (43)Furthermore, all HQLA Level 1 as defined in the EU LCR, excluding extremely high quality covered bonds, received as variation margins in derivatives contracts should offset derivatives assets while the Basel standard only accepts cash respecting the conditions of the leverage framework to offset derivatives assets. This broader recognition of assets received as variation margins will contribute to the liquidity of sovereign bonds markets, avoid penalizing end-users that hold high amounts of sovereign bonds but few cash (like pension funds) and avoid adding additional tensions on the demand for cash on repo markets. (44)The NSFR should apply to institutions both on an individual and a consolidated basis, unless competent authorities waive the application of the NSFR on an individual basis. This duplicates the scope of application of the LCR that the NSFR complements. Where the application of the NSFR at individual level has not been waived, transactions between two institutions belonging to the same group or to the same institutional protection scheme should in principle receive symmetrical available and required stable funding factors to avoid a loss of funding in the internal market and to not impede the effective liquidity management in European groups where liquidity is centrally managed. Such preferential symmetrical treatments should only be granted to intragroup transactions where all the necessary safeguards are in place, on the basis of additional criteria for cross-border transactions, and only with the prior approval of the competent authorities involved as it may not be assumed that institutions experiencing difficulties in meeting their payment obligations will always receive funding support from other undertakings belonging to the same group or to the same institutional protection scheme. (45)The consolidation of subsidiaries in third countries should take due account of the stable funding requirements applicable in those countries. Accordingly, consolidation rules in the Union should not introduce a more favourable treatment for available and required stable funding in third country subsidiaries than the treatment which is available under the national law of those third countries. (46)In accordance with Article 508(3) of Regulation (EU) No 575/2013, the Commission is to report on an appropriate regime for the prudential supervision of investment firms and submit, where appropriate, a legislative proposal. Until that provision starts applying, investment firms other than systemic investment firms should remain subject to the national law of Member States on the net stable funding requirement. However, investment firms other than systemic investment firms should be subject to the NSFR laid down in Regulation (EU) No 575/2013 on a consolidated basis, where they form part of banking groups, to allow an appropriate calculation of the NSFR at consolidated level. (47)Institutions should be required to report to their competent authorities in the reporting currency the binding detailed NSFR for all items and separately for items denominated in each significant currency to ensure an appropriate monitoring of possible currencies mismatches. The NSFR should not subject institutions to any double reporting requirements or to reporting requirements not in line with the rules in force and institutions should be granted sufficient time to get prepared to the entry into force of new reporting requirements. (48)As the provision of meaningful and comparable information to the market on institutions' common key risk metrics is a fundamental tenet of a sound banking system, it is essential to reduce information asymmetry as much as possible and facilitate comparability of credit institutions’ risk profiles within and across jurisdictions, The Basel Committee on Banking Supervision (BCBS) published the revised Pillar 3 disclosure standards in January 2015 to enhance the comparability, quality and consistency of institutions' regulatory disclosures to the market. It is, therefore, appropriate to amend the existing disclosure requirements to implement those new international standards. (49)Respondents to the Commission's Call for Evidence on the EU regulatory framework for financial services regarded current disclosure requirements as disproportionate and burdensome for smaller institutions. Without prejudice to aligning disclosures more closely with international standards, smaller and less complex institutions should be required to produce less frequent and detailed disclosures than their larger peers, thus reducing the administrative burden to which they are subject. (50)Some clarifications should be made to the remuneration disclosures. Furthermore, institutions benefitting from a derogation from certain remuneration rules should be required t