Text proposed by the Commission Amendments proposed by the ECB (1)

Amendment 1

Recital 10

‘(10) Consistent with the goals of contributing to the functioning of the internal market, it should be possible to grant a derogation for a credit institution from the provisions on separation of certain trading activities where a Member State has adopted national primary legislation prior to 29 January 2014 (including secondary legislation subsequently adopted) prohibiting credit institutions, which take deposits from individuals and Small and Medium sized Enterprises (SMEs) from dealing in investments as a principal and holding trading assets. The Member State should therefore be entitled to make a request to the Commission to grant a derogation from the provisions on separation of certain trading activities for a credit institution that is subject to the national legislation compatible with those provisions. This would allow Member States that already have primary legislation in place, the effects of which are equivalent to and consistent with this Regulation, to avoid alignment of existing, effective provisions. To ensure that the impact of that national legislation, as well as of subsequent implementing measures, does not jeopardise the aim or functioning of the internal market, the aim of that national legislation and related supervisory and enforcement arrangements must be able to ensure that credit institutions that take eligible deposits from individuals and from SMEs comply with legally binding requirements that are equivalent and compatible with the provisions provided in this Regulation. The competent authority supervising the credit institution subject to the national legislation in question should be responsible for providing an opinion that should accompany the request for the derogation.’ ‘(10) Consistent with the goals of contributing to the functioning of the internal market, it should be possible to grant a derogation for a credit institution from the provisions on separation of certain trading activities where a Member State has adopted national primary legislation prior to 29 January 2014 (including secondary legislation subsequently adopted) prohibiting credit institutions, which take deposits from individuals and Small and Medium sized Enterprises (SMEs) from dealing in investments as a principal and holding trading assets. The Member State should therefore be entitled to make a request to the Commission to grant a derogation from the provisions on separation of certain trading activities for a credit institution that is subject to the national legislation compatible with those provisions. This would allow Member States that already have primary legislation in place, the effects of which are equivalent to and consistent with this Regulation, to avoid alignment of existing, effective provisions. To ensure that the impact of that national legislation, as well as of subsequent implementing measures, does not jeopardise the aim or functioning of the internal market, the aim of that national legislation and related supervisory and enforcement arrangements must be able to ensure that credit institutions that take eligible deposits from individuals and from SMEs comply with legally binding requirements that are equivalent and compatible with the provisions provided in this Regulation. The competent authority supervising the credit institution subject to the national legislation in question should be responsible for providing an opinion that should accompany the request for the derogation.’

Explanation Such a derogation is incompatible with the goal of creating a level playing field. Furthermore, such a provision may create a precedent for future derogation clauses in other legislative areas, thus impairing single market integration in general.

Amendment 2

Recital 23

‘(23) If, when assessing the trading activities, the competent authority concludes that they exceed certain metrics in terms of relative size, leverage, complexity, profitability, associated market risk, as well as interconnectedness, it should require their separation from the core credit institution unless the core credit institution can demonstrate to the satisfaction of the competent authority that those trading activities do not pose a threat to the financial stability of the core credit institution or to the Union financial system as a whole, taking into account the objectives set out in this Regulation.’ ‘(23) If, when assessing the trading activities, the competent authority concludes that they exceed certain metrics in terms of relative size, leverage, complexity, profitability, associated market risk, as well as interconnectedness, and further deems that there is a threat to the financial stability of the core credit institution or to the whole or part of the Union financial system, taking into account the objectives of this Regulation, it should require their separation from the core credit institution unless the core credit institution can demonstrate to the satisfaction of the competent authority that those trading activities do not pose a threat to the financial stability of the core credit institution or to the Union financial system as a whole, taking into account the objectives set out in this Regulation.’

Explanation The suggested wording aims to ensure consistency between recital 23 and Article 10, which provides the competent authority with discretion when reviewing trading activities and deciding whether to commence a procedure for separation.

Amendment 3

Recital 29

‘Irrespective of separation, the core credit institution should still be able to manage its own risk. Certain trading activities should therefore be allowed to the extent that they are aimed at the prudent management of the core credit institution's capital, liquidity and funding and do not pose concerns to its financial stability. Similarly, the core credit institutions needs to be able to provide certain necessary risk management services to its clients. However, that should be done without exposing the core credit institution to unnecessary risk and without posing concerns to its financial stability. Hedging activities eligible for the purpose of prudently managing own risk and for the provision of risk management services to clients can, but does not have to, qualify as hedge accounting under the International Financial Reporting Standards.’ ‘Irrespective of separation, the core credit institution should still be able to manage its own risk. Certain trading activities should therefore be allowed to the extent that they are aimed at the prudent management of the core credit institution's capital, liquidity and funding and do not pose concerns to its financial stability. Similarly, the core credit institutions needs to be able to provide certain necessary risk management services to its clients. However, that should be done without exposing the core credit institution to unnecessary risk and without posing concerns to its financial stability. Hedging activities eligible for the purpose of prudently managing own risk and for the provision of risk management services to clients can, but does not have to, qualify as hedge accounting under the International Financial Reporting Standards. Irrespective of a decision to separate, the competent authority shall have the power conferred by Article 104(1)(a) of Directive 2013/36/EU to impose an own funds requirement when the volume of risks and trading activities exceeds certain levels in order to incentivise an institution not to take unnecessary risks for its financial stability or the financial stability of the Union in whole or in part.’

Explanation In order to ensure that financial stability risks due to trading activities are limited, the competent authority should have the power to impose a capital surcharge when the volume of risk and activities exceeds certain levels. Such a surcharge would help to dissuade banks from engaging in excessive trading activities.

Amendment 4

Recital 37a (new)

No text ‘(37a) For the purpose of carrying out its exclusive tasks, including the duties specified in this Regulation, the ECB has the sanctioning powers specified in Article 18 of Regulation (EU) No 1024/2013.’

Explanation It should be clarified that, following the implementation of Article 28 of the proposed regulation by Member States, the ECB will have, for the purpose of carrying out its tasks, the sanctioning powers as specified in particular in Article 18 of Regulation (EU) No 1024/2013. See also paragraph 6 of the opinion.

Amendment 5

Article 5 Definitions

‘4. “proprietary trading” means using own capital or borrowed money to take positions in any type of transaction to purchase, sell or otherwise acquire or dispose of any financial instrument or commodities for the sole purpose of making a profit for own account, and without any connection to actual or anticipated client activity or for the purpose of hedging the entity's risk as result of actual or anticipated client activity, through the use of desks, units, divisions or individual traders specifically dedicated to such position taking and profit making, including through dedicated web-based proprietary trading platforms;’ ‘4. “proprietary trading” means using own capital or borrowed money to take positions, in reaction to and with the motivation of exploiting actual or expected movements in market valuations, in any type of transaction to purchase, sell or otherwise acquire or dispose of any financial instrument or commodities for the sole purpose of making a profit for own account, and without any connection to actual or anticipated client activity or for the purpose of hedging the entity's risk as a result of actual or anticipated client activity, through the use of desks, units, divisions or individual traders specifically dedicated to such position taking and profit making, including through dedicated web-based proprietary trading platforms. This definition includes any such transaction undertaken with the aim of making profit, irrespective of whether such profit would be realised in the short term or in the longer term, or is in fact realised;’

Explanation Proprietary trading is — in contrast to other trading activities such as for example market making activities — undertaken with the purpose of making profits on the basis of actual or expected movements in market value variations to which the proprietary traders react and upon which they speculate. The proposed change will allow the exclusion from the definition of long-term non-speculative investments in share capital (including shareholdings in other financial institutions, such as banks and insurance companies).

Amendment 6

Article 5 Definitions

‘12. “market making” means a financial institution's commitment to provide market liquidity on a regular and on-going basis, by posting two-way quotes with regard to a certain financial instrument, or as part of its usual business, by fulfilling orders initiated by clients or in response to clients' requests to trade, but in both cases without being exposed to material market risk;’ ‘12. “market making” means a financial institution's commitment to provide market liquidity on a regular and on-going basis, by posting two-way quotes with regard to a certain financial instrument, or as part of its usual business, by fulfilling orders initiated by clients' or in response to clients requests to trade, or in reasonable anticipation of potential client activity, and by hedging positions arising from the fulfilment of these tasks but in both cases without being exposed to material market risk;’

The ECB understands that, in contrast to proprietary trading, market making is a client-driven activity and therefore related to standard bank activities. Market making is sometimes also carried out in anticipation of client business. Therefore, it is suggested to include the words ‘reasonable anticipation of potential client activity’ within the definition of market making. This also provides a degree of symmetry with regard to the proposed definition of proprietary trading. Furthermore, in contrast to brokers, a market maker absorbs supply and demand imbalances at any point in time through its own inventory, thereby placing its own capital at risk. It should therefore be possible for the market maker to hedge its positions arising from the fulfilment of its tasks as market maker. Given that the concept of ‘material’ market risk is not defined, and moreover in order to align as much as possible the definitions used in related Union regulations, it is suggested that the concept of ‘hedging positions arising from the fulfilment of these tasks’ is used, in line with Regulation (EU) No 236/2012.

Amendment 7

Article 5 Definitions

No text ‘23. “concentration” means a concentration as determined in accordance with Council Regulation (EC) No 139/2004.’

Explanation See paragraph 1.2 of this Opinion.

Amendment 8

Article 9(2) Duty to review activities

‘2. When performing the assessment referred to in paragraph 1, the competent authority shall use the following metrics: (a) the relative size of trading assets, as measured by trading assets divided by total assets; (b) the leverage of trading assets as measured by trading assets divided by core Tier 1 capital; (c) the relative importance of counterparty credit risk, as measured by the fair value of derivatives divided by total trading assets; (d) the relative complexity of trading derivatives, as measured by level 2 and 3 trading derivatives assets divided by trading derivatives and by trading assets; (e) the relative profitability of trading income, as measured by trading income divided by total net income; (f) the relative importance of market risk, as measured by computing the difference between trading assets and liabilities in absolute value and dividing it by the simple average between trading assets and trading liabilities; (g) the interconnectedness, as measured by the methodology referred to in Article 131(18) of Directive 2013/36/EU; (h) credit and liquidity risk arising from commitments and guarantees provided by the core credit institution.’ ‘2. When performing the assessment referred to in paragraph 1, the competent authority shall use the following metrics: (a) the relative size of trading assets, as measured by trading assets divided by total assets; (b) the leverage of trading assets as measured by trading assets divided by core Tier 1 capital; (c) the relative importance of counterparty credit risk, as measured by the fair value of derivatives divided by total trading assets; (d) the relative complexity of trading derivatives, as measured by level 2 and 3 trading derivatives assets divided by trading derivatives and by trading assets; (e) the relative profitability of trading income, as measured by trading income divided by total net income; (f) the relative importance of market risk, as measured by computing the difference between trading assets and liabilities in absolute value and dividing it by the simple average between trading assets and trading liabilities; (g) the interconnectedness, as measured by the methodology referred to in Article 131(18) of Directive 2013/36/EU; (h) credit and liquidity risk arising from commitments and guarantees provided by the core credit institution.; (i) the cartography of trading activities, including methods for assessing the need to build up inventories in order to meet anticipated client demand; (j) the compliance framework implementing this regulation; (k) the compensation schemes for traders; (l) additional quantitative data such as inventory turnover, value-at-risk variations, “day 1 profit and loss”, limits on trading desks and geographic diversification of the trading activities.’

Explanation See paragraph 3.2 of this Opinion.

Amendment 9

Article 9(2a) (new) Duty to review activities

No text ‘2a. The competent authority may require all quantitative and qualitative information it deems relevant for the assessment of trading activities under paragraph 1.’

Explanation See paragraph 3.2 of this Opinion.

Amendment 10

Article 10(1) Power of competent authority to require that a core credit institution does not carry out certain activities

‘1. Where the competent authority concludes that, following the assessment referred to in Article 9(1), the limits and conditions linked to the metrics referred to in points (a) to (h) of Article 9(2) and specified in the delegated act referred to in paragraph 5 are met, and it therefore deems that there is a threat to the financial stability of the core credit institution or to the Union financial system as a whole, taking into account the objectives referred to in Article 1, it shall, no later than two months after the finalisation of that assessment, start the procedure leading to a decision as referred to in the second subparagraph of paragraph 3.’ ‘1. Where the competent authority concludes that, following the assessment referred to in Article 9(1), the limits and conditions linked to the metrics referred to in points (a) to (h) of Article 9(2) and specified in the delegated act referred to in paragraph 5 are met, and it therefore deems that there is a threat to the financial stability of the core credit institution or to the whole or part of the Union financial system as a whole, taking into account the objectives referred to in Article 1, it shall, no later than two months after the finalisation of that assessment, start the procedure leading to a decision as referred to in the second subparagraph of paragraph 3.’

Explanation The proposed technical amendment aims to eliminate any residual ambiguity resulting from the use of the word ‘therefore’, given the fact that competent authorities shall in any case assess the threat to financial stability even when the metric thresholds are met. In addition, the evidence from the additional indicators should also inform the decision of the competent authority (see further paragraph 3.2. of this Opinion).

Amendment 11

Article 10(2) Power of competent authority to require that a core credit institution does not carry out certain activities

‘2. Where the limits and conditions referred to in paragraph 1 are not met, the competent authority may still start the procedure leading to a decision as referred to in the third subparagraph of paragraph 3 where it concludes, following the assessment referred to in Article 9(1), that any trading activity, with the exception of trading in derivatives other than those permitted under Article 11 and 12, carried out by the core credit institution, poses a threat to the financial stability of the core credit institution or to the Union financial system as a whole taking into account the objectives referred to in Article 1.’ ‘2. Where the limits and conditions referred to in paragraph 1 are not met, the competent authority may still start the procedure leading to a decision as referred to in the third subparagraph of paragraph 3 where it concludes, following the assessment referred to in Article 9(1), that any trading activity, with the exception of trading in derivatives other than those permitted under Article 11 and 12, carried out by the core credit institution, poses a threat to the financial stability of the core credit institution or to the whole or to part of the Union financial system as a whole taking into account the objectives referred to in Article 1.’

Explanation It is proposed that the competent authority's judgement is based on a threat to the financial stability of the whole or part of the Union.

Amendment 12

Article 10(3) Power of competent authority to require that a core credit institution does not carry out certain activities

‘3. The competent authority shall notify its conclusions referred to in paragraphs 1 or 2 to the core credit institution and provide the core credit institution with the opportunity to submit written comments within two months from the date of the notification. Unless the core credit institution demonstrates, within the time limit referred to in the first subparagraph, to the satisfaction of the competent authority, that the reasons leading to the conclusions are not justified, the competent authority shall adopt a decision addressing the core credit institution and requiring it not to carry out the trading activities specified in those conclusions. The competent authority shall state the reasons for its decision and publicly disclose it. For purpose of paragraph 1, where the competent authority decides to allow the core credit institution to carry out those trading activities it shall also state the reasons for that decision and publicly disclose it. For purpose of paragraph 2, where the competent authority decides to allow the core credit institution to carry out trading activities the competent authority shall adopt a decision addressed to the core credit institution to that effect. Prior to adopting any decision referred to in this paragraph the competent authority shall consult the EBA on the reasons underlying its envisaged decision and on the potential impact of such a decision on the financial stability of the Union and the functioning of the internal market. The competent authority shall also notify the EBA of its final decision. The competent authority shall adopt its final decision within two months from having received the written comments referred to in the first subparagraph.’ ‘3. The competent authority shall notify its conclusions referred to in paragraphs 1 or 2 to the core credit institution and provide the core credit institution with the opportunity to submit written comments within two months from the date of the notification. Unless the core credit institution demonstrates, within the time limit referred to in the first subparagraph, to the satisfaction of the competent authority, that the relevant trading activities do not pose a threat to the financial stability of the core credit institution or to the whole or part of the Union financial system reasons leading to the conclusions are not justified, the competent authority shall adopt a decision addressing the core credit institution and requiring it not to carry out the trading activities specified in those conclusions. The competent authority shall state the reasons for its decision and publicly disclose it. For the purpose of paragraph 1, where the competent authority decides to allow the core credit institution to carry out those trading activities it shall also state the reasons for that decision and publicly disclose it. For the purpose of paragraph 2, where the competent authority decides to allow the core credit institution to carry out trading activities the competent authority shall adopt a decision addressed to the core credit institution to that effect. The competent authority may in particular authorise the core credit institution to carry out those market making activities which do not pose a threat to the financial stability of the core credit institution or to the whole or part of the Union financial system. Prior to adopting any decision referred to in this paragraph the competent authority shall consult the EBA on the reasons underlying its envisaged decision and on the potential impact of such a decision on the financial stability of the Union and the functioning of the internal market. The competent authority shall also notify the EBA of its final decision. The competent authority shall adopt its final decision within two months from having received the written comments referred to in the first subparagraph.’

For reasons of legal certainty and consistency, it is suggested that the wording of this provision should reflect the wording of recital 23 of the proposed regulation. Market making activities that will continue to be carried out in the core credit institution should be consistent with the purposes of the proposed regulation. In particular, such activities should not lead to the creation of a bank that is too-big-to-fail or too-interconnected-to-fail and should not include a proprietary trading activity, under the guise of market-making, which could ultimately threaten financial stability. Therefore, it would be helpful to clarify that the competent authority may authorise the core credit institution to carry out those market making activities that do not pose a threat to the financial stability of the institution or to the whole or part of the Union financial system (see further paragraph 3.3 of this Opinion).

Amendment 13

Article 10(5) Power of competent authority to require that a core credit institution does not carry out certain activities

‘The Commission shall, [OP insert the correct date by 6 months of publication of this Regulation] adopt delegated acts in accordance with Article 35 to: […] (b) specify which type of securitisation is not considered to pose a threat to the financial stability of the core credit institution or to the Union financial system as a whole with regard to each of the following aspects: […]’ ‘The Commission shall, [OP insert the correct date by 6 months of publication of this Regulation] adopt delegated acts in accordance with Article 35 to: […] (b) specify which type of securitisation is not considered to pose a threat to the financial stability of the core credit institution or to the whole or part of the Union financial system as a whole with regard to each of the following aspects: […]’

Explanation It is proposed that the Commission's delegated act is based on the consideration that there is no threat to the financial stability of the whole or part of the Union.

Amendment 14

Article 11 Prudent management of own risk

‘1. A core credit institution that has been subject to a decision referred to in Article 10(3) may carry out trading activities to the extent that the purpose is limited to only prudently managing its capital, liquidity and funding. As part of the prudent management of its capital, liquidity and funding, a core credit institution may only use interest rate derivatives, foreign exchange derivatives and credit derivatives eligible for central counterparty clearing to hedge its overall balance sheet risk. The core credit institution shall demonstrate to the competent supervisor that the hedging activity is designed to reduce, and demonstrably reduces or significantly mitigates, specific, identifiable risks of individual or aggregated positions of the core credit institution. […]’ ‘1. Without prejudice to the decision of the competent authority referred to in Article 10(3), a core credit institution that has been subject to a decision referred to in Article 10(3) may also carry out trading activities to the extent that the purpose is limited to only prudently managing its capital, liquidity and funding. As part of the prudent management of its capital, liquidity and funding, a core credit institution may only use interest rate derivatives, foreign exchange derivatives and credit derivatives eligible for central counterparty clearing to hedge its overall balance sheet risk. The core credit institution shall demonstrate to the competent supervisor that the hedging activity is designed to reduce, and demonstrably reduces or significantly mitigates, specific, identifiable risks of individual or aggregated positions of the core credit institution. […]’

Explanation The suggested change aims to clarify that the separation decision will identify all the activities which the core credit institution may continue to perform.

Amendment 15

Article 12 Provisions of risk management services to customers

‘1. A core credit institution that has been subject to a decision referred to in Article 10(3) may sell interest rate derivatives, foreign exchange derivatives, credit derivatives, emission allowances derivatives and commodity derivatives eligible for central counterparty clearing and emission allowances to its non-financial clients, to financial entities referred to in the second and third indents of point (19) of Article 5, to insurance undertakings and to institutions providing for occupational retirement benefits when the following conditions have been satisfied: (a) the sole purpose of the sale is to hedge interest rate risk, foreign exchange risk, credit risk, commodity risk or emissions allowance risk; (b) the core credit institution's own funds requirements for position risk arising from the derivatives and emission allowances does not exceed a proportion of its total risk capital requirement to be specified in a Commission delegated act in accordance with paragraph 2. When the requirement in point (b) is not fulfilled, the derivatives and emission allowances may neither be sold by the core credit institution nor be recorded on its balance sheet. […]’ ‘1. Without prejudice to the decision of the competent authority referred to in Article 10(3), Aa core credit institution that has been subject to a decision referred to in Article 10(3) may also sell interest rate derivatives, foreign exchange derivatives, credit derivatives, emission allowances derivatives and commodity derivatives eligible for central counterparty clearing and emission allowances to its non-financial clients, to financial entities referred to in the second and third indents of point (19) of Article 5, to insurance undertakings and to institutions providing for occupational retirement benefits when the following conditions have been satisfied: (a) the sole purpose of the sale is to hedge interest rate risk, foreign exchange risk, credit risk, commodity risk or emissions allowance risk; (b) the core credit institution's own funds requirements for position risk arising from the derivatives and emission allowances does not exceed a proportion of its total risk capital requirement to be specified in a Commission delegated act in accordance with paragraph 2. When the requirement in point (b) is not fulfilled, the derivatives and emission allowances may neither be sold by the core credit institution nor be recorded on its balance sheet. […]’

Explanation The suggested change aims to clarify that the separation decision will identify all the activities which the core credit institution may continue to perform.

Amendment 16

Article 19 Cooperation between competent authorities and relevant resolution authorities

‘2. When carrying out the assessment in accordance with Article 9 and when requiring the core credit institution not to carry out certain activities in accordance with Article 10, the competent authority shall take into account any ongoing or pre-existing resolvability assessments carried out by any relevant resolution authority pursuant to Article 13 and 13(a) of Directive [BRRD]. 3. The competent authority shall cooperate with the relevant resolution authority and exchange relevant information that is deemed necessary in carrying out its duties. 4. The competent authority shall ensure that measures imposed pursuant to this Chapter, are consistent with the measures imposed pursuant to Article 13(b) of Regulation (EU) No 1024/2013, Article 8(9) of Regulation (EU) No [SRM], Article 13 and 13(a), Articles 14 and 15 of Directive [BRRD] and Article 104 of Directive 2013/36/EU.’ ‘2. When carrying out the assessment in accordance with Article 9 and when requiring the core credit institution not to carry out certain activities in accordance with Article 10, the competent authority shall take into account any ongoing or pre-existing resolvability assessments carried out by any relevant resolution authority pursuant to Articles 13 and 13(a) of Directive [BRRD]. A finding by the relevant resolution authority that there are no substantive impediments to resolvability shall not in itself be deemed sufficient indication that the conclusions referred to in Article 10(3) are not justified. 3. The competent authority shall cooperate with the relevant resolution authority and exchange relevant information that is deemed necessary in carrying out its duties, including the list of institutions that fall within the scope of this regulation. 4. The competent authority shall ensure measures imposed pursuant to this Chapter, are compatible consistent with the measures imposed pursuant to Article 13(b) of Regulation (EU) No 1024/2013, Article 8(9) of Regulation (EU) No [SRM], Articles 13 and 13(a), Articles 14 and 15 of Directive [BRRD] and Article 104 of Directive 2013/36/EU.’

Explanation See paragraph 5 of this Opinion. The cooperation between competent authorities and relevant resolution authorities should ensure that relevant resolution authorities are informed of the list of institutions that might be subject to a decision to separate under the proposed regulation.

Amendment 17

Article 21 Derogation from the requirements of Chapter III

‘1. At the request of a Member State, the Commission may grant a derogation from the requirements of this Chapter to a credit institution taking deposits from individuals and SMEs that are subject to national primary legislation adopted before 29 January 2014 when the national legislation complies with the following requirements: (a) it aims at preventing financial stress or failure and systemic risk referred to in Article 1; (b) it prevents credit institutions taking eligible deposits from individuals and SMEs from engaging in the regulated activity of dealing in investments as principal and holding trading assets; however, the national legislation may provide for limited exceptions to allow the credit institution taking deposits from individuals and SMEs to undertake risk-mitigating activities for the purpose of prudently managing its capital, liquidity and funding and to provide limited risk management services to customers; (c) if the credit institution taking eligible deposits from individuals and SMEs belongs to a group, it ensures that the credit institution is legally separated from group entities that engage in the regulated activity of dealing in investments as a principal or hold trading assets, and the national legislation specifies the following: (i) the credit institution taking eligible deposits from individuals and SMEs is able to make decisions independently of other group entities; (ii) the credit institution taking eligible deposits from individuals and SMEs has a management body that is independent of other group entities and independent of the credit institution itself; (iii) the credit institution taking eligible deposits from individuals and SMEs is subject to capital and liquidity requirements in its own right; (iv) the credit institution taking eligible deposits from individuals and SMEs may not enter into contracts or transactions with other group entities other than on terms similar to those referred to in Article 13(7). 2. A Member State wishing to obtain a derogation for a credit institution subject to the national legislation in question, shall send a request for derogation, accompanied by a positive opinion issued by the competent authority supervising the credit institution that is subject to the request for derogation, to the Commission. That request shall provide all the necessary information for the appraisal of the national legislation and specify the credit institutions the derogation is applied for. Where the Commission considers that it does not have all the necessary information, it shall contact the Member State concerned within two months of receipt of the request and specify what additional information is required. Once the Commission has all the information it considers necessary for appraisal of the request for derogation, it shall within one month notify the requesting Member State that it is satisfied with the information. Within five months of issuing the notification referred to in the second subparagraph, the Commission shall, after having consulted the EBA on the reasons underlying its envisaged decision and on the potential impact of such a decision on the financial stability of the Union and the functioning of the internal market, adopt an implementing decision declaring the national legislation not incompatible with this Chapter and granting the derogation to the credit institutions specified in the request referred to in paragraph 1. Where the Commission intends to declare the national legislation incompatible and to not grant the derogation it shall set out its objections in detail and provide the requesting Member State with the opportunity to submit written comments within one month from the date of notification of the Commission objections. The Commission shall within three months from the end of the time limit for submission adopt an implementing decision granting or rejecting the derogation. Where the national legislation is amended, the Member State shall notify the amendments to the Commission. The Commission may review the implementing decision referred to in the third subparagraph. Where the national legislation not declared incompatible with this Chapter no longer applies to a credit institution that has been granted derogation from the requirements of this Chapter, that derogation shall be withdrawn with regard to that credit institution. The Commission shall notify its decisions to the EBA. The EBA shall publish a list of the credit institutions that have been granted a derogation in accordance with this Article. The list shall be continuously kept up-to-date.’ ‘1. At the request of a Member State, the Commission may grant a derogation from the requirements of this Chapter to a credit institution taking deposits from individuals and SMEs that are subject to national primary legislation adopted before 29 January 2014 when the national legislation complies with the following requirements: (a) it aims at preventing financial stress or failure and systemic risk referred to in Article 1; (b) it prevents credit institutions taking eligible deposits from individuals and SMEs from engaging in the regulated activity of dealing in investments as principal and holding trading assets; however, the national legislation may provide for limited exceptions to allow the credit institution taking deposits from individuals and SMEs to undertake risk-mitigating activities for the purpose of prudently managing its capital, liquidity and funding and to provide limited risk management services to customers; (c) if the credit institution taking eligible deposits from individuals and SMEs belongs to a group, it ensures that the credit institution is legally separated from group entities that engage in the regulated activity of dealing in investments as a principal or hold trading assets, and the national legislation specifies the following: (i) the credit institution taking eligible deposits from individuals and SMEs is able to make decisions independently of other group entities; (ii) the credit institution taking eligible deposits from individuals and SMEs has a management body that is independent of other group entities and independent of the credit institution itself; (iii) the credit institution taking eligible deposits from individuals and SMEs is subject to capital and liquidity requirements in its own right; (iv) the credit institution taking eligible deposits from individuals and SMEs may not enter into contracts or transactions with other group entities other than on terms similar to those referred to in Article 13(7). 2. A Member State wishing to obtain a derogation for a credit institution subject to the national legislation in question, shall send a request for derogation, accompanied by a positive opinion issued by the competent authority supervising the credit institution that is subject to the request for derogation, to the Commission. That request shall provide all the necessary information for the appraisal of the national legislation and specify the credit institutions the derogation is applied for. Where the Commission considers that it does not have all the necessary information, it shall contact the Member State concerned within two months of receipt of the request and specify what additional information is required. Once the Commission has all the information it considers necessary for appraisal of the request for derogation, it shall within one month notify the requesting Member State that it is satisfied with the information. Within five months of issuing the notification referred to in the second subparagraph, the Commission shall, after having consulted the EBA on the reasons underlying its envisaged decision and on the potential impact of such a decision on the financial stability of the Union and the functioning of the internal market, adopt an implementing decision declaring the national legislation not incompatible with this Chapter and granting the derogation to the credit institutions specified in the request referred to in paragraph 1. Where the Commission intends to declare the national legislation incompatible and to not grant the derogation it shall set out its objections in detail and provide the requesting Member State with the opportunity to submit written comments within one month from the date of notification of the Commission objections. The Commission shall within three months from the end of the time limit for submission adopt an implementing decision granting or rejecting the derogation. Where the national legislation is amended, the Member State shall notify the amendments to the Commission. The Commission may review the implementing decision referred to in the third subparagraph. Where the national legislation not declared incompatible with this Chapter no longer applies to a credit institution that has been granted derogation from the requirements of this Chapter, that derogation shall be withdrawn with regard to that credit institution. The Commission shall notify its decisions to the EBA. The EBA shall publish a list of the credit institutions that have been granted a derogation in accordance with this Article. The list shall be continuously kept up-to-date.’

Explanation See paragraph 4 of this Opinion and the explanation of Amendment 1.

Amendment 18

Article 22(3a) (new) Rules governing the calculation of thresholds

No text ‘3a. For the purpose of Article 3(1)(b), the calculation of thresholds for entities that have effected a concentration during the previous year shall for the two years prior to the concentration be based on the combined accounts of the merged entities.’

Explanation In the case of a concentration of credit institutions, for example a merger, which would immediately create a single credit institution falling within the scope of the proposed regulation, the combined figures for the credit institutions forming the concentration for the two years prior to the formation of the concentration should be assessed in determining whether the thresholds are met by the new single credit institution. See also Amendment 7.

Amendment 19

Article 22(4) Rules governing the calculation of thresholds

‘4. By [OP insert the correct date by 12 months of publication of this Regulation], the competent authority shall identify credit institutions and groups that are subject to this Regulation in accordance with Article 3 and notify them immediately to the EBA. After having been notified by the competent authority, the EBA shall immediately publish the list referred to in the first subparagraph. The list shall be continuously kept up-to-date.’ ‘4. By [OP insert the correct date by 12 months of publication of this Regulation], the competent authority shall annually identify credit institutions and groups that are subject to this Regulation in accordance with Article 3 and notify them immediately to the EBA. After having been notified by the competent authority, the EBA shall immediately publish the list referred to in the first subparagraph. The list shall be continuously kept up-to-date.’

Explanation This amendment is intended to ensure that the list of credit institutions within the scope of the proposed regulation is kept up to date as an institution's data or structure changes over time.

Amendment 20

Article 28(4) Administrative sanctions and measures

‘4. Member States shall, in conformity with national law, confer on competent authorities the power to apply at least the following administrative sanctions and other measures in the event of the breaches referred to in paragraph 1: (a) an order requiring the person responsible for the breach to cease the unlawful conduct and to desist from a repetition of that conduct; (b) the disgorgement of the profits gained or losses avoided due to the breach in so far as they can be determined; (c) a public warning which indicates the person responsible and the nature of the breach; (d) withdrawal or suspension of the authorisation; (e) a temporary ban of any natural person, who is deemed responsible, from exercising management functions of an entity referred to in Article 3; (f) in the event of repeated breaches, permanent ban of any natural person who is deemed responsible, from exercising management functions in an entity referred to in Article 3; (g) maximum administrative pecuniary sanctions of at least three times the amount of the profits gained or losses avoided because of the breach where those can be determined; (h) in respect of a natural person, a maximum administrative pecuniary sanction of at least EUR 5 000 000 or in the Member States whose currency is not the euro, the corresponding value in the national currency on the date of entry to force of this Regulation; (i) in respect of legal persons, maximum administrative pecuniary sanctions of at least 10 per cent of the total annual turnover of the legal person according to the last available accounts approved by the management body; where the legal person is a parent undertaking or a subsidiary of the parent undertaking which has to prepare consolidated financial accounts according to Directive 2013/34/EU, the relevant total annual turnover shall be the total annual turnover or the corresponding type of income according to the relevant accounting regime according to the last available consolidated accounts approved by the management body of the ultimate parent undertaking. Member States may provide that competent authorities may have powers in addition to those referred to in this paragraph and may provide for a wider scope of sanctions and higher levels of sanctions than those established in this paragraph.’ ‘4. Member States shall, in conformity with national law, confer on competent authorities the power to apply at least the following administrative sanctions and other measures in the event of the breaches referred to in paragraph 1: (a) an order requiring the person responsible for the breach to cease the unlawful conduct and to desist from a repetition of that conduct; (b) the disgorgement of the profits gained or losses avoided which the competent authority estimates to have been gained or avoided due to the breach in so far as they can be determined; (c) a public warning which indicates the person responsible and the nature of the breach; (d) withdrawal or suspension of the authorisation; (e) a temporary ban of any natural person, who is deemed responsible, from exercising management functions of an entity referred to in Article 3; (f) in the event of repeated breaches, permanent ban of any natural person who is deemed responsible, from exercising management functions in an entity referred to in Article 3; (g) administrative pecuniary penalties of up to twice the amount of the benefit derived from the breach where that benefit can be determined; (h) in the case of a natural person, administrative pecuniary penalties of up to EUR 5 000 000 or, in the Member States whose currency is not the euro, the corresponding value in the national currency on the date of entry into force of this Regulation; (i) in the case of a legal person, administrative pecuniary penalties of up to 10 per cent of the total annual net turnover including the gross income consisting of interest receivable and similar income, income from shares and other variable or fixed-yield securities, and commissions or fees receivable in accordance with Article 316 of Regulation (EU) No 575/2013 of the undertaking in the preceding business year. (g) maximum administrative pecuniary sanctions of at least three times the amount of the profits gained or losses avoided because of the breach where those can be determined; (h) in respect of a natural person, a maximum administrative pecuniary sanction of at least EUR 5 000 000 or in the Member States whose currency is not the euro, the corresponding value in the national currency on the date of entry to force of this Regulation; (i) in respect of legal persons, maximum administrative pecuniary sanctions of at least 10 per cent of the total annual turnover of the legal person according to the last available accounts approved by the management body; where the legal person is a parent undertaking or a subsidiary of the parent undertaking which has to prepare consolidated financial accounts according to Directive 2013/34/EU, the relevant total annual turnover shall be the total annual turnover or the corresponding type of income according to the relevant accounting regime according to the last available consolidated accounts approved by the management body of the ultimate parent undertaking. Member States may provide that competent authorities may have powers in addition to those referred to in this paragraph and may provide for a wider scope of sanctions and higher levels of sanctions than those established in this paragraph.’

Explanation The amendment is proposed in order to align the level of pecuniary sanctions in the proposed regulation with that in Directive 2013/36/EU. See paragraph 6 of this Opinion.

Amendment 21

Article 28(6) (new) Administrative sanctions and measures

No text ‘6. In the event of a breach referred to in paragraph 1, the ECB, as a competent authority, may impose the sanctions laid down in Article 18 of Regulation (EU) No 1024/2013.’

Explanation See paragraph 6 of this Opinion.

Amendment 22

Article 29 Exercise of supervisory powers and sanctions

‘1. Member States shall ensure that when determining the type and level of administrative sanctions and other measures, competent authorities shall take into account all relevant circumstances, including, where appropriate: (a) the gravity and duration of the breach; (b) the degree of responsibility of the person responsible for the breach; (c) the financial strength of the person responsible for the breach, by considering factors such as the total turnover in the case of a legal person, or the annual income in the case of a natural person; (d) the importance of the profits gained or losses avoided by the person responsible for the breach, insofar as they can be determined; (e) the level of cooperation of the person responsible for the breach with the competent authority, without prejudice to the need to ensure disgorgement of profits gained or losses avoided by that person; (f) previous breaches by the person responsible for the breach; (g) measures taken by the person responsible for the breach to prevent its repetition; (h) any potential systemic consequences of the breach.’ ‘1. Member States shall ensure that when determining the type and level of administrative sanctions and other measures, competent authorities shall take into account all relevant circumstances, including, where appropriate: (a) the gravity and duration of the breach; (b) the degree of responsibility of the person responsible for the breach; (c) the financial strength of the person responsible for the breach, by considering factors such as the total turnover in the case of a legal person, or the annual income in the case of a natural person; (d) the importance of the profits gained or losses avoided which the competent authority estimates to have been gained or avoided by the person responsible for the breach, insofar as they can be determined; (e) the level of cooperation of the person responsible for the breach with the competent authority, without prejudice to the need to ensure disgorgement of profits gained or losses avoided by that person; (f) previous breaches by the person responsible for the breach; (g) measures taken by the person responsible for the breach to prevent its repetition; (h) any potential systemic consequences of the breach.’

Explanation See paragraph 6 of this Opinion.

Amendment 23

Article 34 Review

‘The Commission shall, on a regular basis, monitor the effect of rules laid down in this Regulation in respect of the achievement of the objectives referred to in Article 1 and on the stability of the Union financial system as a whole, taking into account market structure developments as well as the development and activities of the entities regulated by this Regulation, and make any appropriate proposals. The review shall in particular focus on the application of the thresholds referred to in Article 3, the application and effectiveness of the prohibition foreseen in Article 6, the scope of activities referred to in Article 8 and the suitability of the metrics set out in Article 9. By 1 January 2020 and on a regular basis thereafter, the Commission shall, after taking into account the views of the competent authorities, submit to the European Parliament and to the Council a report, including the issues mentioned above, if appropriate accompanied by a legislative proposal.’ ‘The Commission shall, on a regular basis, monitor the effect of rules laid down in this Regulation in respect of the achievement of the objectives referred to in Article 1 and on the stability of the Union financial system as a whole, taking into account market structure developments as well as the development and activities of the entities regulated by this Regulation, and make any appropriate proposals. The review shall in particular focus on the appropriateness and application of the thresholds referred to in Article 3, the application and effectiveness of the prohibition foreseen in Article 6, including the exemptions to the prohibition provided in the same Article, the scope of activities referred to in Article 8 and the suitability of the metrics set out in Article 9. By 1 January 2020 and on a regular basis thereafter, the Commission shall, after taking into account the views of the competent authorities, submit to the European Parliament and to the Council a report, including the issues mentioned above, if appropriate accompanied by a legislative proposal.’