Proposal for a Directive of the European Parliament and of the Council relating to the taking up and pursuit of the business of credit institutions (recast) {SEC(2004) 921}
Date: 2004-07-14
Institutions: European Commission
Subjects: credit institution, economic analysis, provision of services

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 14.7.2004 
COM(2004) 486 final 

2004/0155 (COD) 
2004/0159 (COD) 

Volume I 

Proposal for 

DIRECTIVES OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

Re-casting Directive 2000/12/EC of the European Parliament and of the Council of 20 
March 2000 relating to the taking up and pursuit of the business of credit institutions 
and Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment 
firms and credit institutions. 

(presented by the Commission) 

{SEC(2004) 921} 

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EXPLANATORY MEMORANDUM 

1. 

GENERAL COMMENTS 

A single financial market in the EU will be a key factor in promoting the competitiveness of 
the European economy and the lowering the capital cost to companies. The Financial Services 
Action  Plan  announces  a  directive  on  new  capital  adequacy  rules  for  credit  institutions  and 
investment  firms  in  2004,  in  step  with  progress  at  G-10  level  in  the  Basel  Committee  on 
Banking Supervision1. 

The agreement by the G-10 Basel Committee on Banking Supervision of the so-called Basel 
Accord in 1988 (Basel I) led to the adoption of minimum capital requirements across over 100 
countries2.  It  was  broadly  contemporaneous  to the  adoption  of  key  EU  directives  (Directive 
89/299/EEC of 17.4.1989 on own funds, Directive 89/647/EEC of 18.12.1989 on a solvency 
ratio, consolidated in Directive 2000/12/EC of the European Parliament and of the Council of 
20.3.2000 relating to the taking up and pursuit of the business of credit institutions). 

These  directives  addressed  credit  institutions’  risks  arising  from  credit-granting  activities. 
Directive  93/6/EEC  of  15.3.1993  on  the  capital  adequacy  of  investment  firms  and  credit 
institutions extended both the credit risk and market risk rules to investment firms.  

1) The need for improved European requirements. 

The  existing  rules  have  made  a  significant  contribution  to  the  single  market  and  high 
prudential standards. However, various important shortcomings have been identified. 

1. Crude estimates of credit risks result in an extremely crude measure of risk and is in danger 
of falling into disrepute. 

2.  Scope  for  capital  arbitrage:  innovations  in  markets  have  enabled  financial  institutions  to 
effectively arbitrage the mismatch between institutions’ own allocation of capital to risks and 
minimum capital requirements.  

3.  Lack  of  recognition  of  effective  risk  mitigation:  the  present  Directives  do  not  provide 
appropriate levels of recognition for risk mitigation techniques. 

4. Incompleteness of the risks covered under the existing directives, including operational risk, 
which are not subject to any capital charges. 

5.  Absence  of  requirement  for  supervisors  to  evaluate  the  actual  risk  profile  of  credit 
institutions  to  satisfy  themselves  that  adequate  capital  is  held  having  regard  to  that  risk 
profile. 

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The  Basel  Committee  on  Banking  Supervision  was  established  by  the  central  bank  Governors  of  the 
Group of Ten (G-10) countries. It consists of representatives of the authority responsible for prudential 
supervision  of  banks  from  the  following  countries:  Belgium,  Canada,  France,  Germany,  Italy,  Japan, 
Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. 
The European Commission, along with the European Central Bank, participates as an observer. 
While formally agreed by the authorities of the G-10 group of industrialised countries for application to 
internationally  active  banks,  the  1988  Accord  has  been  applied  throughout  the  world  to  banks  of  all 
sizes and levels of complexity. 

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6.  Absence  of  requirement  for  supervisory  cooperation:  in  an  increasingly  cross-border 
market  authorities  must  cooperate  effectively  with  each  other  in  the  supervision  of  cross-
border groups to reduce regulatory burdens. 

7.  Absence  of  proper  market  disclosures:  the  present  Directives  do  not  facilitate  effective 
market  discipline  for  reliable  information  for  market  participants  to  make  well-founded 
assessments. 

8.  Lack  of  flexibility  in  the  regulatory  framework:  the  current  EU  system  the  lacks  the 
flexibility  to  keep  pace  with  rapid  developments  in  financial  markets  and  risk  management 
practices, and with improvements in regulatory and supervisory tools. 

What would happen under a “no policy change” scenario? 

There is strong consensus that the present situation is unsustainable. Capital requirements and 
risks would continue to be misaligned resulting in limited effectiveness of the prudential rules 
and increased risks to consumers and financial stability. The full extent of the risks that some 
financial institutions are undertaking would still not be captured. In addition, the newest and 
most effective risk management techniques would not be actively encouraged or recognised 
and financial services groups operating in more than one Member State would continue to be 
subject  to  disproportionate  burdens  resulting  from  multiple  layers  of  regulation  and 
supervision.  Finally,  the  EU  would  be  unable  to  benefit  appropriately  from  future 
developments, given the difficulty in speedily updating the current EU regulatory framework. 
In  view  of  the  proposed  global  implementation  of  the  new  Basel  Accord  the  EU  financial 
services sector would be significantly disadvantaged compared with its overseas competitors. 

2) The approach of the Directive 

The Commission’s 1998 Financial Services Action Plan stated that the EU needed accurate, 
internationally consistent, up to date prudential standards. They should also be proportionate 
recognising  the  reduction  in  risks arising  from  the  context  in  which  exposures  are  incurred, 
and in particular lending to consumers and to small- or medium-sized entities. Rules should 
apply to both credit institutions and investment firms (level playing field) but also need to be 
proportionate and take fully into account the ‘biodiversity’ of EU financial institutions.  

2. 

CONSULTATION AND IMPACT ASSESSMENT  

a) Consultation of stakeholders and interested parties 

The  Commission  has  been  engaged  in  consultation  with  stakeholders  and  interested  parties 
since  November  1999.  Three  full  consultation  papers  have  been  issued  on  22.11.1999, 
5.2.2001  and  1.7.2003.  A  full  and  structured  dialogue  with  stakeholders  was  organised  on 
18.11.2002. Consultation papers on specific technical issues have been published (real estate 
and  covered  bonds  on  7.4.  2003;  ‘expected  losses  and  unexpected  losses´  on  26.11.2003; 
collective investment undertakings on 3.2.2004). 

Commentators  have  generally  been  very  supportive  of  the  major  objectives  of  the  project. 
Enhanced risk-sensitivity leading to greater financial stability is supported and there is now a 
pressing need for the rules to be updated, to respond to the significant advances in techniques 
for  risk  measurement  and  management  in  financial  services,  and  to  reflect  increased 
regulatory  and  supervisory  sophistication.  There  is  strong  support  for  the  Commission’s 

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approach  that  the  EU  capital  framework  should  be  revised  consistent  with  the  new 
international framework but differentiated where necessary for EU specificities. 

Less complex institutions 

There is broad and significant support for the application of the new rules in Europe – to all 
credit institutions and investment services providers whatever the legal nature and complexity 
of the institution, also to avoid ‘second class’ institutions that would be likely to result if some 
were excluded. This reflects the perception that the proposed new framework has been well 
designed for the purposes of broad application.  

Flexibility of the new directive 

There is continued wide and strong support for the approach proposed to ensure that the new 
framework  is  responsive  to  market  and  supervisory  innovation  to  maintain  an  optimally 
efficient  and  competitive  EU  financial  services  sector.  Stakeholders  support  the  approach 
where enduring principles and objectives are set out in the articles and provide the mandate 
for  the  more  detailed  and  technical  provisions  contained  in  the  annexes.  The  procedure  for 
amending the annexes must ensure full and effective consultation with interested parties. 

Investment firms 

Significant modifications have been introduced to address concerns expressed by some from 
the investment firm sector about being subject to capital requirements which they perceive to 
be more appropriate for credit institutions. 

Complexity 

Some  respondents  asked  for  simplification  and  less  prescription.  The  Commission  has 
increased  the  clarity  and  user-friendliness  of  the  text.  The  design  will  be  attractive  to  those 
institutions seeking simple rules to apply or wishing to progress gradually to more complex 
capital  rules.  The  proposed  new  framework  contains  a  range  of  options  and  approaches  of 
different degrees of sophistication.  

Since  1999  there  have  also  been  several  consultations  on  detailed  issues.  The  proposal  has 
been taken account of very detailed and useful comments from interested parties, in particular 
the banking and investment firm industry.  

b) Impact assessment 

An extended  impact assessment has been carried out to identify whether there is a need for 
action at EU level and, if so, the action required. 

The  Basel  Committee  published  a  quantitative  impact  study  (QIS3)  involving  credit 
institutions  across  40  countries  to  assess  the  impact  of  the  new  Basel  proposals  on  banks' 
minimum  capital  requirements.  The  Commission  assisted  in  extending  this  study  to  EU 
countries  not  represented  in  Basel.  The  key  conclusions  were  that  the  new  rules  will  in 
general  reduce  capital  requirements  for  EU  credit  institutions  by  around  5%  compared  to 
present  levels.  Furthermore,  the  outcomes  for  the  different  approaches  are  in  line  with 
objectives  –  particularly  combining  capital  neutrality  with  appropriate  incentives  for 
institutions to move towards more sophisticated approaches. Finally, smaller domestic credit 
institutions  adopting  the  simple  approach  will  face  slightly  reduced  capital  charges;  larger 
internationally  active  credit  institutions  adopting  the  more  advanced  approach  will  face 
substantially  unchanged  capital  charges;  smaller  but  specialised  and  sophisticated  EU  credit 
institutions  adopting  the  advanced  approach  might  face  substantially  lower  capital 

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requirements  than  at  present.  Importantly,  the  main  source  of  reduction  in  capital 
requirements  is  the  ‘retail’  portfolio,  which  is  mostly  composed  of  loans  to  Small  and 
Medium Enterprises (SMEs) below EUR 1 million and residential mortgage loans. The new 
operational  risk  capital  charge  is  the  main  source  of  offset  of  this  decrease  in  capital 
requirements for credit institutions. 

in 

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firms 

investment 

the  EU3.  The 

In addition, at the request of the Barcelona European Council the Commission commissioned 
a  study  on  the  consequences  of  the  draft  proposed  new  capital  requirements  for  credit 
institutions  and 
report,  prepared  by 
PricewaterhouseCoopers,  is  positive  about  the  impact  (with  only  two  areas  of  criticism  – 
investment  firms  and  venture  capital  -  both  of  which  have  been  addressed  in  the 
Commission’s  proposals).4  The  key  conclusions  are  that  the  new  capital  requirements 
framework should be positive for the EU, and for prudential regulation in the EU. EU credit 
institutions’ capital requirements should decrease by ± 5% (€ 90 billion) and translate into an 
annual  increase  in  profits  of  ±  €  10-12  billion.  There  is  no  disadvantage  for  smaller  credit 
institutions  and  no  indication  that  the  new  regime  will  force  mergers  or  consolidation.  The 
decision to cover all credit institutions in the directive will not put EU firms at a competitive 
disadvantage, nor is the US decision to apply only advanced approaches to some 20 big credit 
institutions  a  significant  competitive  factor.  Implementation  costs  for  EU  credit  institutions 
are  not  solely  driven  by  Basel  II  and  many  of  these  investments  (perhaps  as  high  as  80%) 
would  have  happened  anyway,  although  over  a  longer  period.  Importantly,  there  will  be  no 
negative impact on the availability and cost of finance for SMEs in most EU Member States 
(‘procyclicality’ effects are less - and less damaging - than the present rules). SME fears stem 
from insufficient information understanding of Basel II. The macro-economic effects of Basel 
II on the EU-economy are small - there could be a benign supply-side shock to the economy 
reducing  the  cost  of  capital  to  firms  and  generating  an  increase  of  0.07%  in  EU  GDP.  In 
general  the  new  capital  framework  will  reduce  the  banking  system’s  vulnerability  through 
greater  awareness  of  risk,  improved  risk  management,  and  a  more  efficient  allocation  of 
capital should have beneficial long-run consequences for the EU economy.  

3. 

LEGAL BASIS  

The  proposals  are  based  on  Article  47(2)  of  the  Treaty,  which  is  the  legal  basis  to  adopt 
Community  measures  aimed  at  achieving  the  Internal  Market  in  financial  services.  The 
chosen  instrument  is  a  Directive  as  the  most  appropriate  to  achieve  the  objectives  and  it 
amends existing directives covering the same technical issues. Its provisions do not go beyond 
what it is necessary to achieve the objectives pursued. 

4. 

COMMENTS ON THE ARTICLES 

The  proposals  apply  the  ‘re-casting  technique’  (Interinstitutional  Agreement  2002/C  77/01) 
enabling  substantive  amendments  to  existing  legislation  without  a  self-standing  amending 
directive.  This  reduces  complexity  and  makes  EU  legislation  more  accessible  and 
comprehensible. 

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OJ S167 of 29/08/2002, 
Available on Commission website - http://europa.eu.int/comm/internal_market/regcapital/index_en.htm 

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Amendments  of  a  non-substantive  nature  are  made  to  many  provisions  to  improve  the 
structure, drafting and readability of the directives. 

A. 

DIRECTIVE 2000/12/EC 

Article 4: Definitions 

Article  4  contains  certain  new  definitions  concerning  essential  concepts  to  clarify  their 
meaning and contribute to a better understanding. 

Article 22: 

The  existing  wording  has  been  amended  to  clarify  and  develop  the  obligation  for  credit 
institutions to have in place effective internal risk management systems. Given the diversity 
of credit institutions covered, these requirements will have to be met on a proportionate basis. 
Relevant technical provisions are in Annex V. 

Articles 56-67: 

A  small  number  of  amendments  have  been  made.  Although  it  is  not  intended  to  review  the 
definition of ‘own funds’, as a consequence of the modified approach to expected loss in the 
Basel Committee (‘Madrid decision’), some limited amendments are necessary.  

Articles 68-75: 

Credit institutions must hold adequate own funds on an ongoing basis and state the minimum 
level of those own funds. The provisions specify how the requirements should be met if the 
credit  institution  is  part  of  a  group  (the  existing  option  for  Member  States’  authorities  to 
waive certain requirements has been retained but with more precision). The calculation of the 
requirements  has  been  clarified  in  the  light  of  the  introduction  of  Regulation  (EC) 
no.1606/2002 on international accounting standards. 

Articles 76-101: 

These provisions replace the existing solvency ratio requirements for credit risk and introduce 
two methods to calculate risk weighted exposure amounts. 

The  Standardised  Approach  (Art.  78-83)  is  based  on  the  existing  framework,  with  risk 
weights determined by the allocation of assets and off-balance sheet items to a limited number 
of risk buckets. Risk sensitivity has been increased by the number of exposure classes and risk 
buckets  (Art.  79).  There  are  lower  risk  weights  for  non-mortgage  retail  items  (75%)  and 
residential  mortgages  (35%).  A  150%  risk  weight  for  assets  which  are  90  days  past  due 
(100% for residential mortgages) is introduced. The use of credit rating agencies’ ratings to 
assign  risk  weights  where  these  are  available  (‘external  ratings’)  is  permitted  (Art  81-83). 
Relevant technical provisions are in Annex VI. 

The Internal Ratings Based (IRB) approach (Art 84-89), permits credit institutions to use their 
own  estimates  of  the  risk  parameters  inherent  in  their  different  credit  risk  exposures.  These 
parameters form  the  inputs  into  a  prescribed calculation designed to provide soundness to a 
99.9%  confidence  level.  The  ‘Foundation’  Approach  allows  credit  institutions  to  use  their 
own estimates of probability of default, while using regulatory prescribed values for other risk 

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components. Under the ‘Advanced’ Approach, credit institutions may use their own estimates 
for  losses  given  default  and  their  exposure  at  default.  Credit  institutions  are  allowed  to  use 
pooled data in the estimation of risk parameter values. This allows smaller credit institutions 
to apply a more risk sensitive approach to calculating capital requirements. 

The  proposed  ‘roll-out’  rules  (Art.  85)  for  the  IRB  approach  provide  flexibility  for  credit 
institutions  to  move  different  business  lines  and  exposure  classes  to  the  Foundation  or  the 
Advanced  IRB  Approach  during  a  reasonable  timeframe.  ‘Partial’  use  is  allowed  for  non-
material exposure classes and business lines (capital requirements can be calculated under the 
Standardised Approach even if a credit institution uses the IRB Approach for other exposure 
classes).  The  proposed  EU  framework  recognises  that,  for  small  credit  institutions  the 
requirement  to  develop  a  rating  system  for  certain  counterparties  is  potentially  very 
burdensome. Permanent partial use for these exposure classes is proposed even in cases where 
credit institutions’ exposures to such counterparts are material (Art. 89). 

Relevant technical provisions for the IRB approach are in Annex VI. 

Articles 90-93: 

The  rules  identify  common  issues  for  mitigation  techniques  and  treat  common  underlying 
risks  or  economic  effects  consistently.  These  include  the  recognition  of  a  wider  range  of 
collateral  and  guarantee/credit  derivative  providers  than  at  present.  The  IRB  Foundation 
Approach  gives  a  prudentially  appropriate  level  of  recognition  to  financial  receivables  and 
physical  collateral.  Alternative  methodologies  are  available  for  credit  institutions  to  choose 
between methods of different levels of complexity (a Simple Method – based on an easy-to-
use  ‘risk  weight  substitution’  approach;  or  a  Comprehensive  Method  –  involving  the 
application  of  volatility  adjustments  to  the  value  of  the  collateral  received).  To  calculate 
volatility  adjustments  more  and  less  complex  approaches  are  made  available  (a  simple 
‘Supervisory’ approach where the amounts of the benchmark volatility adjustments are set out 
in a table; or a more risk-sensitive ‘Own Estimates’ approach). Relevant technical provisions 
are in Annex VIII. 

Articles 94-101: 

These articles introduce for the first time a harmonised set of rules for capital requirements for 
securitisation  activities  and  investments.  This  provides  a  significantly  improved  capital 
requirements  framework  –  allowing  credit  institutions  to  take  advantage  of  the  funding, 
balance-sheet management and other advantages that such transactions can deliver. It will also 
reduce the extent to which securitisation has been seen as an instrument of capital arbitrage. 
Relevant technical provisions are in Annex IX. 

Articles 102-105: 

These  provisions  introduce  requirements  to  meet  the  operational  risk  faced  by  credit 
institutions. Three different methodologies are available. A simple approach (Art. 103) based 
on  a  single  income  indicator  (Basic  Indicator  Approach  -  BIA).  This  approach  provides  a 
capital  buffer  against  operational  risk,  without  requiring  credit  institutions  to  develop 
sophisticated  and  costly  information  systems  about  their  risk  exposure.  A  more  precise 
approach  based  on  business  lines  (Standardised  Approach  -  STA)  (Art.  104)  is  more  risk-
sensitive as the capital requirement for operational risk is differentiated to reflect the relative 
risks of different business lines. This approach is likely to be attractive to a large number of 
smaller  /  less  complex  credit  institutions.  More  sophisticated  methodologies  (Advanced 

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Measurement  Approaches  -  AMAs)  (Art.  105)  generate  their  own  measures  of  operational 
risk,  subject  to  more  demanding  risk  management  standards.  AMAs  are  expected  to  be 
gradually  adopted  mainly  by  large  internationally  active  credit  institutions  and  smaller 
specialised  credit  institutions  which  have  developed  advanced  risk  monitoring  systems  for 
their main activities. Relevant technical provisions are in Annex X. 

Articles 106-119: 

A small number of amendments bring consistency between capital requirements and the large 
exposures  rules,  in  particular  to  reflect  the  expanded  recognition  of  credit  risk  mitigation 
techniques. 

Article 123-124: 

These  Articles  reflect  the  second  ‘pillar’  of  the  Basel  Committee’s  capital  accord.  Art.  51A 
requires  credit  institutions  to  have  in  place  internal  processes  to  measure  and  manage  their 
risk and the amount of ‘internal’ capital they themselves deem adequate to support those risks. 
Competent authorities are required (Art. 124) to review compliance by credit institutions with 
the various legal obligations for organisation and risk control, and to evaluate the risks taken 
by  credit  institutions.  This  assessment  will  be  used  by  supervisors  to  determine  whether 
weaknesses  exist  in  controls  and  capital  held.  Relevant  technical  provisions  are  in  Annex 
XIII. 

Articles 125-143: 

There is an increasing degree of EU cross-border business and a trend towards centralisation 
of  risk  management  within  cross-border  groups.  This  requires  improved  coordination  and 
cooperation  amongst  national  supervisory  authorities  in  the  EU.  The  existing  and  well 
established role of the consolidating supervisor has thus been developed further. Under Art. 
136  supervisors  will  be  provided  with  a  minimum  harmonised  range  of  powers  to  require 
credit institutions to address any inadequacies in the requirements of the Directive.  

Article 144: 

A minimum set of disclosure requirements exists for Member States’ authorities to enhance 
convergence of implementation and introduce transparency. 

Articles 145-149: 

These provisions reflect the ‘third’ pillar of the Basel  Committee’s new capital accord. The 
disclosure  of  information  by  credit  institutions  to  market  participants  contributes  to  greater 
financial soundness and stability, maintains a level playing field and respects the sensitivity of 
certain information. Art. 147 requires disclosure on a minimum annual basis for most credit 
institutions  -  more  frequent  disclosure  may  be  necessary  in  the  light  of  specific  criteria. 
Relevant technical provisions are in Annex XII. 

Article 150: 

The  Directive  needs  to  keep  pace  with  market  developments.  The  necessary  degree  of 
flexibility is provided by making a distinction between core and technical rules (particularly 
in the annexes to the directive) that may need adaptations in the short to medium term. Art. 
150  adds  new  technical  areas  to  those  in  Directive  2000/12/EC  (introduced  in  1989)  and 

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proposes  that  the  new  technical  Annexes  should  be  able  to  be  modified  following  the  same 
rapid procedure. 

B. 

DIRECTIVE  93/6/EEC  ON  THE  CAPITAL  ADEQUACY  OF  INVESTMENTS  FIRMS  AND 
CREDIT INSTITUTIONS 

Article 2: Scope 

Article  2  specifies  how  the  requirements  apply  to  individual  investment  firms,  groups  of 
investment firms, and mixed groups. 

Article 3: Definitions 

There are certain new and amended definitions on essential concepts to clarify their meaning 
and contribute to a better understanding. 

Article 11: Trading book capital treatment 

There  is  an  enhanced  definition  of  the  ‘trading  book’  to  increase  certainty  as  to  the  capital 
requirements  that  apply  and  to  restrict  possible  arbitrage  between  the  ‘banking  book’  / 
‘trading book’ boundary. Relevant technical provisions are set out in Annex VII. 

Articles 18 and 20: 

Article  18  prescribes,  for  credit  institutions  and  investment  firms,  the  minimum  capital 
requirements for market risk. The treatment of positions in collective investment undertakings 
and  credit  derivatives  and  a  number  of  other  modifications  for  increased  risk-sensitivity  are 
new.  Relevant  technical  provisions  are  in  Annexes  I  to  VII.  Article  20  extends  the  rules  on 
capital  requirements  for  credit  risk  and  operational  risk  in  Directive  2000/12  to  investment 
firms, as at present. New credit risk elements include the provision of a treatment for credit 
derivatives  and  an  amended  measure  of  exposure  for  repurchase  transactions  and 
securities/commodities  financing  transactions.  For  operational  risk  there  are  significant 
modifications to take account of the specific features of the investment firm sector, with an 
option to continue the ‘Expenditure Based Requirement’ for investment firms falling into the 
low-, medium- and medium/high-risk categories. 

Article 28: Large exposures 

The current situation is continued where credit institutions and investment firms are subject to 
the  same  rules,  subject  to  modifications  to  large  exposures  for  trading  book  transactions.  A 
new  element  is  an  amended  measure  of  exposure  for  repurchase  transactions  and 
securities/commodities financing transactions. Relevant technical provisions are in Annex VI. 

Article 33: Valuation of positions for reporting  

Enhanced  requirements  for  the  valuation  of  trading  book  positions  are  prescribed  for 
prudential soundness in the context of rules designed for trading book positions to be priced 
on a daily basis. Relevant technical provisions are in Annex VII. 

Article 22: Consolidated requirements 

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The  existing  option  for  competent  authorities  to  waive  the  application  of  consolidated 
requirements  for  groups  consisting  of  investment  firms  is  continued  subject  to  more 
prudentially sound conditions. 

Article 34: Risk management and capital assessment 

Article 34 incorporates the obligation for credit institutions (Article 17 of Directive 2000/12), 
for investment firms to have in place effective internal risk management systems. Given the 
diversity of the institutions covered, these requirements will have to be met on a proportionate 
basis. It also applies the requirement in Article 51A of Directive 2000/12 to investment firms 
to have internal processes to measure and manage the risk they are exposed to and the amount 
of capital (‘internal’ capital) they deem adequate to support those risks. It adds to the existing 
risk management requirements for investment firms in Directive 2004/39/EC. 

Article 37: Supervision 

This Article applies the rules in Directive 2000/12 mutatis mutandis to investment firms.  

Article 42 

As for Directive 2000/12, Directive 93/6 need to keep pace with market developments. The 
necessary  flexibility  is  brought  by  distinguishing  between  core  and  technical  rules 
(particularly  in  the  annexes)  that  will  need  adaptations  in  the  short  to  medium  run.  The 
technical  Annexes  should  be  able  to  be  modified  following  a  rapid  procedure.  To  reflect 
expected further important developments in regulatory practice in the coming years, a review 
clause is included for the treatment of counterparty risk. 

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(cid:208) 2000/12/EC 

2004/0155 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  

relating to the taking up and pursuit of the business of credit institutions (recast) 

(Text with EEA relevance) 

(cid:216) new 

(cid:208) 2000/12/EC (adapted) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular the first 
and third sentences of Article 47(2) thereof, 

Having regard to the proposal from the Commission, 

Having regard to the opinion of the Economic and Social Committee5, 

Acting in accordance with the procedure laid down in Article 251 of the Treaty6, 

Whereas: 

(cid:208) 2000/12/EC Recital 1 (adapted) 

(1) 

Council  Directive  73/183/EEC  of  28  June  1973  on  the  abolition  of  restrictions  on 
freedom of establishment and freedom to provide services in respect of self-employed 
institutions7,  first  Council  Directive 
activities  of  banks  and  other  financial 
(77/780/EEC)  of  12  December  1977  on  the  coordination  of  laws,  regulations  and 
administrative provisions relating to the taking up and pursuit of the business of credit 
institutions8,  Council  Directive  89/299/EEC  of  17  April  1989  on  the  own  funds  of 
credit institutions9, second Council Directive 89/646/EEC of 15 December 1989 on the 
coordination  of  laws,  regulations  and  administrative  provisions  relating  to  the  taking 

5 
6 

7 
8 
9 

OJ C 157, 25.5.1998, p. 13 ⌦ […] ⌫ . 
Opinion  of  the  European  Parliament  of  18  January  2000  (not  yet  published  in  the  Official  Journal) 
⌦ […] ⌫  and  Council  Decision  of  13  March  2000  (not  yet  published  in  the  Official  Journal) 
⌦ […] ⌫ . 
OJ L 126, 26.5.2000, p.1, as last amended by the Act of Accession 2003 
OJ L 126, 26.5.2000, p.1, as last amended by the Act of Accession 2003 
OJ L 126, 26.5.2000, p.1, as last amended by the Act of Accession 2003 

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11 

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up and pursuit of the business of credit institutions10, Council Directive 89/647/EEC of 
18  December  1989  on  a  solvency  ratio  for  credit  institutions11,  Council  Directive 
92/30/EEC of 6 April 1992 on the supervision of credit institutions on a consolidated 
basis12,  and  Council  Directive  92/121/EEC  of  21  December  1992  on  the  monitoring 
and  control  of  large  exposures  of  credit  institutions13  have  been  frequently  and 
substantially  amended.  For  reasons  of  clarity  and  rationality,  the  said  Directives 
therefore, should be codified and combined in a single text. ⌦ Directive 2000/12/EC 
of the European Parliament and of the Council of 20 March 2000 relating to the taking 
up and pursuit of the business of credit institutions14 has been substantially amended 
several  times.  Since  further  amendments  are  to  be  made,  it  should  be  recast  in  the 
interest of clarity. ⌫  

Pursuant to the Treaty, any discriminatory treatment with regard to establishment and to the 
provision  of  services,  based  either  on  nationality  or  on  the  fact  that  an  undertaking  is  not 
established in the Member State where the services are provided, is prohibited. 

(cid:208) 2000/12/EC Recital 2 (adapted) 

(2) 

In order to make it easier to take up and pursue the business of credit institutions, it is 
necessary  to  eliminate  the  most  obstructive  differences  between  the  laws  of  the 
Member States as regards the rules to which these institutions are subject. 

(cid:208) 2000/12/EC Recital 3 

(cid:208) 2000/12/EC Recital 4 (adapted) 

(3) 

This Directive constitutes the essential instrument for the achievement of the internal 
market, a course determined by the Single European Act and set out in timetable form 
in  the  Commission's  White  Paper,  from  the  point  of  view  of  both  the  freedom  of 
establishment  and  the  freedom  to  provide  financial  services,  in  the  field  of  credit 
institutions. 

(4)  Measures to coordinate credit institutions must, both in order to protect savings and to 
create equal conditions of competition between these institutions, apply to all of them. 
Due  regard  must  ⌦ should  however ⌫  be  had,  where  applicable,  to  the  objective 
differences in their statutes and their proper aims as laid down by national laws. 

(cid:208) 2000/12/EC Recital 5 (adapted) 

(5) 

The  scope  of  those  measures  should  therefore  be  as  broad  as  possible,  covering  all 
institutions whose business is to receive repayable funds from the public, whether in 

(cid:208) 2000/12/EC Recital 6 (adapted) 

10 
11 
12 
13 
14 

OJ L 126, 26.5.2000, p.1, as last amended by the Act of Accession 2003 
OJ L 126, 26.5.2000, p.1, as last amended by the Act of Accession 2003 
OJ L 126, 26.5.2000, p.1, as last amended by the Act of Accession 2003 
OJ L 126, 26.5.2000, p.1, as last amended by the Act of Accession 2003 
OJ L 126, 26.5.2000, p.1 as last amended by Directive 2004/xx/EC (OJ L, […]) 

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the form of deposits or in other forms such as the continuing issue of bonds and other 
comparable  securities  and  to  grant  credits  for  their  own  account.  Exceptions  must 
⌦ should ⌫  be  provided  for  in  the  case  of  certain  credit  institutions  to  which  this 
Directive  cannot  apply.  The  provisions  of  this  Directive  shall  ⌦ should ⌫  not 
prejudice  the  application  of  national  laws  which  provide  for  special  supplementary 
authorisations permitting credit institutions to carry on specific activities or undertake 
specific kinds of operations. 

(cid:208) 2000/12/EC Recital 7 (adapted) 

The  approach  which  has  been  adopted  is  ⌦ It  is  appropriate ⌫  to  achieve 
⌦ effect ⌫  only  the  essential  harmonisation  necessary  and  sufficient  to  secure  the 
mutual  recognition  of  authorisation  and  of  prudential  supervision  systems,  making 
possible the granting of a single licence recognised throughout the Community and the 
application of the principle of home Member State prudential supervision. Therefore, 
the  requirement  that  a  programme  of  operations  must  be  produced  should  be  seen 
merely as a  factor enabling  the competent authorities  to  decide  on  the  basis  of  more 
information  using  objective  criteria.  A  measure  of  flexibility  may 
precise 
⌦ should ⌫ none-the-less be possible as regards the requirements on the legal form 
of credit institutions of ⌦ concerning ⌫ the protection of banking names. 

(cid:216) new 

Since  the  objective  of  the  proposed  action  cannot  be  sufficiently  achieved  by  the 
Member States and can therefore, by reason of the scale and the effects of the action, 
be  better  achieved  at  Community  level,  the  Community  may  adopt  measures,  in 
accordance  with  the principle of subsidiarity as set out in Article 5 of  the Treaty. In 
accordance  with  the  principle  of  proportionality,  as  set  out  in  that  Article,  this 
Directive confines itself to the minimum required in order to achieve those objectives 
and does not go beyond what is necessary for that purpose.  

(cid:208) 2000/12/EC Recital 8 (adapted) 

Equivalent financial requirements for credit institutions are necessary to ensure similar 
safeguards for savers and fair conditions of competition between comparable groups of 
credit institutions. Pending further coordination, appropriate structural ratios should be 
formulated  that  will  make  ⌦ making ⌫  it  possible  within  the  framework  of 
cooperation  between  national  authorities  to  observe,  in  accordance  with  standard 
methods, the position of comparable types of credit institutions. This procedure should 
help  to  bring  about  the  gradual  approximation  of  the  systems  of  coefficients 
established  and  applied  by  the  Member  States.  It  is  necessary,  however  to  make  a 
distinction  between  coefficients  intended  to  ensure  the  sound  management  of  credit 
institutions and those established for the purposes of economic and monetary policy. 

(6) 

(7) 

(8) 

(9) 

The principles of mutual recognition and home Member State supervision require that 
Member States' competent authorities should not grant or should withdraw ⌦ an ⌫ 

(cid:208) 2000/12/EC Recital 9 (adapted) 
(cid:214) new 

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authorisation  where  factors  such  as ⌦ the ⌫  content  of  the  activities  programmes, 
the  geographical  distribution  ⌦ of  activities ⌫  or  the  activities  actually  carried  on 
indicate clearly that a credit institution has opted for the legal system of one Member 
State for the purpose of evading the stricter standards in force in another Member State 
within  whose  territory  it  carries  on  or  intends  to  carry  on  the  greater  part  of  its 
activities. A credit institution which is a legal person must ⌦ should ⌫ be authorised 
in the Member State in which it has its registered office. A credit institution which is 
not  a  legal  person  must  ⌦ should ⌫  have  its  head  office  in  the  Member  State  in 
which it has been authorised. In addition, Member States must ⌦ should ⌫ require 
that a credit institution's head office always be situated in its home Member State and 
that it actually operates there. 

(cid:208) 2000/12/EC Recital 10 
(adapted) 

(10)  The competent authorities should not authorise or continue the authorisation of a credit 
institution  where  they  are  liable  to  be  prevented  from  effectively  exercising  their 
supervisory  functions  by  the  close  links  between  that  institution  and  other  natural  or 
legal  persons.  Credit  institutions  already  authorised  must  ⌦ should ⌫  also  satisfy 
the  competent  authorities  in  that  respect.  The  definition  of  «close  links»  in  this 
Directive  lays  down  minimum  criteria.  That  does  not  prevent  Member  States  from 
applying it to situations other than those envisaged by the definition. The sole fact of 
having  acquired  a  significant  proportion  of  a  company's  capital  does  not  constitute 
participation,  within  the  meaning  of  «close  links»,  if  that  holding  has  been  acquired 
solely as a temporary investment which does not make it possible to exercise influence 
over the structure or financial policy of the institution. 

(cid:208) 2000/12/EC Recital 11 
(adapted) 

(11)  The  reference  to  the  supervisory  authorities'  effective  exercise  of  their  supervisory 
functions covers supervision on a consolidated basis which must be exercised over a 
credit  institution  where  the  provisions  of  Community  law  so  provide.  In  such  cases, 
the authorities applied to for authorisation must ⌦ should ⌫ be able to identify the 
authorities competent to exercise supervision on a consolidated basis over that credit 
institution. 

(cid:208) 2000/12/EC Recital 12 
(adapted) 

The home Member State may also establish rules stricter than those laid down in Article 5(1), 
first  subparagraph  and  (2),  and  Articles  7,  16,  30,  51  for  institutions  authorised  by  its 
competent authorities. 

The  abolition  of  the  authorisation  requirement  with  respect  to  the  branches  of  Community 
credit institutions necessitates the abolition of endowment capital. 

(cid:208) 2000/12/EC Recital 13 
(adapted) 

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(cid:208) 2000/12/EC Recital 14 
(adapted) 

(12)  By  virtue  of  mutual  recognition,  the  approach  chosen  permits  cCredit  institutions 
authorised  in  their  home  Member  States  ⌦ should  be  allowed ⌫  to  carry  on, 
throughout the Community, any or all of the activities listed in Annex I by establishing 
branches or by providing services. The carrying-on of activities not listed in the said 
Annex enjoys the right of establishment and the freedom to provide services under the 
general provisions of the Treaty. 

(cid:208) 2000/12/EC Recital 15 
(adapted) 

(13) 

It is appropriate, however to extend mutual recognition to the activities listed in Annex 
I  when  they  are  carried  on  by  financial  institutions  which  are  subsidiaries  of  credit 
institutions,  provided  that  such  subsidiaries  are  covered  by  the  consolidated 
supervision of their parent undertakings and meet certain strict conditions. 

(cid:208) 2000/12/EC Recital 16 
(adapted) 

(14)  The host Member State may ⌦ should be able ⌫, in connection with the exercise of 
the  right  of  establishment  and  the  freedom  to  provide  services,  ⌦ to ⌫  require 
compliance with specific provisions of its own national laws or regulations on the part 
of  institutions  not  authorised  as  credit  institutions  in  their  home  Member  States  and 
with  regard  to  activities  not  listed  in  Annex  I  provided  that,  on  the  one  hand,  such 
provisions are compatible with Community law and are intended to protect the general 
good and that, on the other hand, such institutions or such activities are not subject to 
equivalent rules under this legislation or regulations of their home Member States. 

(cid:208) 2000/12/EC Recital 17 
(adapted) 

(15)  The Member States must ⌦ should ⌫ ensure that there are no obstacles to carrying 
on activities receiving mutual recognition in the same manner as in the home Member 
State, as long as the latter do not conflict with legal provisions protecting the general 
good in the host Member State. 

(cid:208) 2000/12/EC Recital 18 
(adapted) 

There  is  a  necessary  link  between  the  objective  of  this  Directive  and  the  liberalisation  of 
capital  movements  being  brought  about  by  other  Community  legislation.  In  any  case  the 
measures  regarding  the  liberalisation  of  banking  services  must  be  in  harmony  with  the 
measures liberalising capital movements. 

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(cid:208) 2000/12/EC Recital 19 
(adapted) 

(16)  The rules governing branches of credit institutions having their head office outside the 
Community  should  be  analogous  in  all  Member  States.  It  is  important  at  the  present 
time to provide that such rules may not be more favourable than those for branches of 
institutions  from  another  Member  State.  It  should  be  specified  that tThe  Community 
may ⌦ should be able to ⌫ conclude agreements with third countries providing for 
the application of rules which accord such branches the same treatment throughout its 
territory,  account  being  taken  of  the  principle  of  reciprocity.  The  branches  of  credit 
institutions  authorised  in  third  countries  do  ⌦ should ⌫  not  enjoy  the  freedom  to 
provide services under the second paragraph of Article 49 of the Treaty or the freedom 
of  establishment  in  Member  States  other  than  those  in  which  they  are  established. 
However,  requests  for  the  authorisation  of  subsidiaries  or  of  the  acquisition  of 
holdings  made  by  undertakings  governed  by  the  laws  of  third  countries  are 
should subject  to  a  procedure  intended  to  ensure  that  Community  credit  institutions 
receive reciprocal treatment in the third countries in question. 

(cid:208) 2000/12/EC Recital 20 
(adapted) 

The authorisations granted to credit institutions by the competent national authorities pursuant 
to  this  Directive  have  Community-wide,  and  no  longer  merely  nationwide,  application. 
Existing reciprocity clauses have therefore no effect. A flexible procedure is therefore needed 
to make it possible to assess reciprocity on a Community basis. The aim of this procedure is 
not to close the Community's financial markets but rather, as the Community intends to keep 
its financial markets open to the rest of the world, to improve the liberalisation of the global 
financial markets in other third countries. To that end, this Directive provides for procedures 
for negotiating with third countries and, as a last resort, for the possibility of taking measures 
involving  the  suspension  of  new  applications  for  authorisation  or  the  restriction  of  new 
authorisations. 

(cid:208) 2000/12/EC Recital 21 
(adapted) 

(17) 

It is desirable that aAgreement should be reached, on the basis of reciprocity, between 
the  Community  and  third  countries  with  a  view  to  allowing  the  practical  exercise  of 
consolidated supervision over the largest possible geographical area. 

(cid:208) 2000/12/EC Recital 22 
(adapted) 

(18)  Responsibility  for  supervising  the  financial  soundness  of  a  credit  institution,  and  in 
particular  its  solvency,  rests  ⌦ should  lay ⌫  with  the  competent  authorities  of  its 
home Member State. The host Member State's competent authorities retain ⌦ should 
be ⌫  responsibility  ⌦ responsible ⌫  for  the  supervision  of  ⌦ the ⌫  liquidity 
⌦ of  the  branches ⌫  and  monetary  policy  ⌦ policies ⌫.  The  supervision  of 
market  risk  must  ⌦ should ⌫  be  the  subject  of  close  cooperation  between  the 
competent authorities of the home and host Member States. 

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(cid:208) 2000/12/EC Recital 23 and 24 
(adapted) 
(cid:214) new 

(19)  The smooth operation of the internal banking market requires not only legal rules but 
also  close  and  regular  cooperation  (cid:214) and  significantly  enhanced  convergence  of 
regulatory  and  supervisory  practices   between  the  competent  authorities  of  the 
Member  States.  For  the ⌦ To  this  end,  in  particular, ⌫  consideration  of  problems 
concerning  individual  credit  institutions  (cid:214) and  the  mutual  exchange  of  information 
should  take  place  in   the  «groupe  de  contact»  (contact  group)  (cid:214) Committee  of 
European Banking Supervisors  set up (cid:214) by Commission Decision 2004/5/EC 15  
between the banking supervisory authorities remains the most appropriate forum. That 
group is a suitable body for the mutual exchange of information provided for in Article 
28. That mutual information procedure does ⌦ should ⌫ not in any case replace the 
bilateral  collaboration  ⌦ co-operation⌫  established  by  Article  28.  The  competent 
host  Member  State  authorities  can,.  wWithout  prejudice  to  their  powers  of  proper 
control,  ⌦ the  competent  authorities  of  the  host  Member  States  should  be  able ⌫ 
continue either, in an emergency, on their own initiative or following the initiative of 
the competent ⌦ authorities of ⌫ home Member State authorities, to verify that the 
activities  of  a  credit  institution  established  within  their  territories  comply  with  the 
relevant  laws  and  with  the  principles  of  sound  administrative  and  accounting 
procedures and adequate internal control. 

(cid:208) 2000/12/EC Recital 25 
(adapted) 

(20) 

It  is  appropriate  to  allow  the  exchange  of  information  between  the  competent 
authorities  and  authorities  or  bodies  which,  by  virtue  of  their  function,  help  to 
strengthen  the  stability  of  the  financial  system.  In  order  to  preserve  the  confidential 
nature of the information forwarded, the list of addressees must ⌦ should ⌫ remain 
within strict limits. 

(cid:208) 2000/12/EC Recital 26 and 27 
(adapted) 

(21)  Certain behaviour, such as fraud and insider offences, is liable to affect the stability, 
including the integrity, of the financial system, even when involving institutions other 
than  credit  institutions.  It  is  necessary  to  specify  the  conditions  under  which  such 
exchanges of information ⌦ in such cases ⌫ are ⌦ is ⌫ authorised. 

(22)  Where  it  is  stipulated  that  information  may  be  disclosed  only  with  the  express 
agreement  of  the  competent  authorities,  these  may  ⌦ should  be  able ⌫,  where 

(cid:208) 2000/12/EC Recital 28 
(adapted) 

15 

OJ L 3, 7.1.2004, p. 28  

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appropriate,  ⌦ to ⌫  make  their  agreement  subject  to  compliance  with  strict 
conditions. 

(23)  Exchanges of information between, on the one hand, the competent authorities and, on 
the  other,  central  banks  and  other  bodies  with  a  similar  function  in  their  capacity  as 
monetary  authorities  and,  where  appropriate,  other  public  authorities  responsible  for 
supervising payment systems should also be authorised. 

(cid:208) 2000/12/EC Recital 29 

(cid:208) 2000/12/EC Recital 30 
(adapted) 

(24)  For  the  purpose  of  strengthening  the  prudential  supervision  of  credit  institutions  and 
⌦ the ⌫  protection  of  clients  of  credit  institutions,  it  should  be  stipulated  that  an 
auditors  must  ⌦ should ⌫  have  a  duty  to  report  promptly  to  the  competent 
authorities, wherever, as provided for by this Directive, he ⌦ during the performance 
of their tasks, ⌫ becomes aware, while carrying out his tasks, of certain facts which 
are liable to have a serious effect on the financial situation or the administrative and 
accounting organisation of a credit institution. Having regard to the aim in view, it is 
desirable  for  the  ⌦ For  the  same  reason ⌫  Member  States  to  ⌦ should  also ⌫ 
provide that such a duty should apply ⌦ applies ⌫ in all circumstances where such 
facts  are  discovered  by  an  auditor  during  the  performance  of  his  tasks  in  an 
undertaking  which  has  close  links  with  a  credit  institution.  The  duty  of  auditors  to 
communicate,  where  appropriate,  to  the  competent  authorities  certain  facts  and 
decisions concerning a credit institution which they discover during the performance 
of  their  tasks  in  a  non-financial  undertaking  does ⌦ should ⌫  not  in  itself  change 
the  nature  of  their  tasks  in  that  undertaking  nor  the  manner  in  which  they  must 
perform those tasks in that undertaking. 

(cid:208) 2000/12/EC Recitals 31 to 35 
(adapted) 

Common  basic  standards  for  the  own  funds  of  credit  institutions  are  a  key  factor  in  the 
creation of an internal banking market since own funds serve to ensure the continuity of credit 
institutions  and  to  protect  savings.  Such  harmonisation  strengthens  the  supervision  of  credit 
institutions and contributes to further coordination in the banking sector. 

Such standards must apply to all credit institutions authorised in the Community. 

The own funds of a credit institutions can serve to absorb losses which are not matched by a 
sufficient  volume  of  profits.  The  own  funds  also  serve  as  an  important  yardstick  for  the 
competent  authorities,  in  particular  for  the  assessment  of  the  solvency  of  credit  institutions 
and for other prudential purposes. 

Credit  institutions,  in  an  internal  banking  market,  engage  in  direct  competition  with  each 
other, and the definitions and standards pertaining to own funds must therefore be equivalent. 
To that end, the criteria for determining the composition of own funds must not be left solely 
to Member States. The adoption of common basic standards will be in the best interests of the 

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Community  in  that  it  will  prevent  distortions  of  competition  and  will  strengthen  the 
Community banking system. 

The definition of own funds laid down in this Directive provides for a maximum of items and 
qualifying  amounts,  leaving  it  to  the  discretion  of  each  Member  State  to  use  all  or  some  of 
such items or to adopt lower ceilings for the qualifying amounts. 

(cid:208) 2000/12/EC Recital 36 
(adapted) 

(25)  This Directive specifies the ⌦ that for certain own funds items ⌫ qualifying criteria 
for  certain  own  funds  items  ⌦ should  be  specified,  without  prejudice  to  the 
possibility  of ⌫  and  the  Member  States  remain  free  to  apply  more  stringent 
provisions. 

(cid:208) 2000/12/EC Recital 37 
(adapted) 

At the initial stage common basic standards are defined in broad terms in order to encompass 
all the items making up own funds in the different Member States. 

(26)  According to the nature of the items making up own funds, this Directive distinguishes 
between  on  the  one  hand,  items  constituting  original  own  funds  and,  on  the  other, 
those constituting additional own funds. 

(cid:208) 2000/12/EC Recital 38 

(cid:208) 2000/12/EC Recital 39 
(adapted) 

(27)  To  reflect  the  fact  that  items  constituting  additional  own  funds  are  not  of  the  same 
nature as those constituting original own funds, the amount of the former included in 
own  funds  must  ⌦ should ⌫  not  exceed  the  original  own  funds.  Moreover,  the 
amount  of  certain  items  of  additional  own  funds  included  must  ⌦ should ⌫  not 
exceed one half of the original own funds. 

(cid:208) 2000/12/EC Recital 39 
(adapted) 

(28) 

In  order  to  avoid  distortions  of  competition,  public  credit  institutions  must 
⌦ should ⌫ not include in their own funds guarantees granted them by the Member 
States or local authorities. 

(29)  Whenever in the course of supervision it is necessary to determine the amount of the 
consolidated  own  funds  of  a  group  of  credit  institutions,  the  calculation  shall 
⌦ should ⌫ be effected in accordance with this Directive. 

(cid:208) 2000/12/EC Recital 40 
(adapted) 

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(cid:208) 2000/12/EC Recital 41 
(adapted) 
(cid:214) new 

(30)  The  precise  accounting  technique  to  be  used  for  the  calculation  of  own  funds,  the 
solvency ratio (cid:214) their adequacy for the risk to which a credit institution is exposed , 
and  for  the  assessment  of  the  concentration  of  exposures  must  ⌦ should ⌫  take 
account  of  the  provisions  of  Council  Directive  86/635/EEC  of  8  December  1986  on 
the  annual  accounts  and  consolidated  accounts  of  banks  and  other  financial 
institutions16,  which  incorporates  certain  adaptations  of  the  provisions  of  Council 
Directive  83/349/EEC  of  13  June  1983  based  on  Article  44(2)(g)  of  the  Treaty  on 
consolidated  accounts  ⌦ 17 ⌫  (cid:214) or  of  Regulation  (EC)  No  1606/2002  of  the 
European Parliament and Council of 19 July 2002 on the application of international 
accounting  standards18  whichever  governs  the  accounting  of  the  credit  institutions 
under national law . 

(cid:208) 2000/12/EC Recital 42 to 47 
(adapted) 

The  provisions  on  own  funds,  form  part  of  the  wider  international  effort  to  bring  about 
approximation of the rules in force in major countries regarding the adequacy of own funds. 

In an internal banking market, institutions are required to enter into direct competition with 
one  another  and  the  common  solvency  ration  in  the  form  of  a  minimum  ratio  prevent 
distortions of competition and strengthen the Community banking system. 

The Commission will draw up a report and periodically examine, with the aim of tightening 
them,  the  provisions  on  own  funds  and  thus  achieving  greater  convergence  on  a  common 
definition  of  own  funds.  Such  convergence  will  allow  the  alignment  of  Community  credit 
institutions' own funds. 

The  provisions  on  solvency  ratios  are  the  outcome  of  work  carried  out  by  the  Banking 
Advisory Committee which is responsible for making suggestions to the Commission with a 
view to coordinating the coefficients applicable in the Member States. 

The establishment of an appropriate solvency ratio plays a central role in the supervision of 
credit institutions. 

A ratio which weights assets and off-balance-sheet items according to the degree of credit risk 
is a particularly useful measure of solvency.  

16 
17 

18 

OJ L 372, 31.12.1986, p. 1. 
OJ  L  193,  18.7.1983,  p.  1.  Directive  as  last  amended  by  Directive  ⌦ 2003/51/EC  (OJ  L  178, 
17.7.2003, p. 16). ⌫ 
OJ L 243, 11.9.2002, p. 1. 

EN 

20 

   EN 

 
 
 
                                                 
(cid:216) new 

(31)  Minimum  capital  requirements  play  a  central  role  in  the  supervision  of  credit 
institutions  and  in  the  mutual  recognition  of  supervisory  techniques.  In  that  respect, 
the provisions on minimum capital requirements should be considered in conjunction 
with  other  specific  instruments  also  harmonising  the  fundamental  techniques  for  the 
supervision of credit institutions. 

(32) 

In order to prevent distortions of competition and to strengthen the banking system in 
the  internal  market,  it  is  appropriate  to  lay  down  common  minimum  capital 
requirements. 

(33)  For the purposes of ensuring adequate solvency it is important to lay down minimum 
capital requirements which weight assets and off-balance-sheet items according to the 
degree of risk. 

(cid:208) 2000/12/EC Recitals 48 to 51 
(adapted) 

The  development  of  common  standards  for  own  funds  in  relation  to  assets  and  off-balance-
sheet  items  exposed  to  credit  risk  is,  accordingly,  an  essential  aspect  of  the  harmonisation 
necessary  for  the  achievement  of  the  mutual  recognition  of  supervision  techniques  and  thus 
the completion of the internal banking market. 

In  that  respect,  the  provisions  on  a  solvency  ratio  must  be  considered  in  conjunction  with 
other specific instruments also harmonising the fundamental techniques of the supervision of 
credit institutions. 

In an internal banking market, institutions are required to enter into  direct competition with 
one  another  and  the  common  solvency  standards  in  the  form  of  a  minimum  ratio  prevent 
distortions of competition and strengthen the Community banking system. 

This Directive provides for different weightings to be given to guarantees issued by different 
financial  institutions.  The  Commission  accordingly  undertakes  to  examine  whether  this 
Directive  taken  as  a  whole  significantly  distorts  competition  between  credit  institutions  and 
insurance undertakings and, in the light of that examination, to consider whether any remedial 
measures are justified. 

(cid:216) new 

(34) 

It is essential to take account of the diversity of credit institutions in the Community 
by  providing  alternative  approaches 
the  calculation  of  minimum  capital 
to 
requirements  for  credit  risk  incorporating  different  levels  of  risk-sensitivity  and 
requiring  different  degrees  of  sophistication.  Use  of  external  ratings  and  credit 
institutions’ own estimates of individual credit risk parameters represents a significant 
enhancement  in  the  risk-sensitivity  and  prudential  soundness  of  the  credit  risk  rules. 
There  should  be  appropriate  incentives  for  credit  institutions  to  move  towards  the 
more risk-sensitive approaches. 

EN 

21 

   EN 

 
 
 
 
(35)  The minimum capital requirements should be proportionate to the risks addressed. In 
particular the reduction in risk levels deriving from having a large number of relatively 
small exposures should be reflected in the requirements. 

(36) 

(37) 

Increased recognition should be given to techniques of credit risk mitigation within a 
framework  of  rules  designed  to  ensure  that  solvency  is  not  undermined  by  undue 
recognition. 

In  order  to  ensure  that  the  risks  and  risk  reductions  arising  from  credit  institutions’ 
securitisation  activities  and  investments  are  appropriately  reflected  in  the  minimum 
capital requirements of credit institutions it is necessary to include rules providing for 
a risk-sensitive and prudentially sound treatment of such activities and investments. 

(cid:208) 2000/12/EC Recital 52 
(adapted) 

Annex III lays down the treatment of off-balance-sheet items in the context of the calculation 
of  credit  institutions'  capital  requirements.  With  a  view  to  the  smooth  functioning  of  the 
internal market and in particular with a view to ensuring a level playing field Member States 
are  obliged  to  strive  for  uniform  assessment  of  contractual  netting  agreements  by  their 
competent  authorities.  Annex  III  takes  account  of  the  work  of  an  international  forum  of 
banking  supervisors  on  the  supervisory  recognition  of  bilateral  netting,  in  particular  the 
possibility of calculating the own-funds requirements for certain transactions on the basis of a 
net  rather  than  a  gross  amount  provided  that  there  are  legally  binding  agreements  which 
ensure  that  the  credit  risk  is  confined  to  the  net  amount.  For  internationally  active  credit 
institutions and groups of credit institutions in a wide range of third countries, which compete 
with  Community  credit  institutions,  the  rules  adopted  on  the  wider  international  level  will 
result  in  a  refined  supervisory  treatment  of  over-the-counter  (OTC)  derivative  instruments. 
This refinement results in a more appropriate compulsory capital cover taking into account the 
risk-reducing effects of supervisorily recognised contractual netting agreements on  potential 
future  credit  risks.  The  clearing  of  OTC  derivative  instruments  provided  by  clearing  houses 
acting  as  a  central  counterparty  plays  an  important  role  in  certain  Member  States.  It  is 
appropriate to recognise the benefits from such a clearing in terms of a reduction of credit risk 
and  related  systemic  risk  in  the  prudential  treatment  of  credit  risk.  It  is  necessary  for  the 
current  and  potential  future  exposures  arising  from  cleared  OTC  derivatives  contracts  to  be 
fully collateralised and for the risk of a build-up of the clearing house's exposures beyond the 
market value of posted collateral to be eliminated in order for cleared OTC derivatives to be 
granted for a transitional period the same prudential treatment as exchange-traded derivatives. 
The competent authorities must be satisfied as to the level of the initial margins and variation 
margins  required  and  the  quality  of  and  the  level  of  protection  provided  by  the  posted 
collateral.  For  credit  institutions  incorporated  in  the  Member  States,  Annex  III  creates  a 
similar  possibility  for  the  recognition  of  bilateral  netting  by  the  competent  authorities  and 
thereby  offers  them  equal  conditions  of  competition.  The  rules  are  both  well  balanced  and 
appropriate for the further reinforcement of the application of prudential supervisory measures 
to credit institutions. The competent authorities in the Member States should ensure that the 
calculation of add-ons is based on effective rather than apparent national amounts. 

EN 

22 

   EN 

 
 
(cid:216) new 

(38)  Operational risk is a significant risk faced by credit institutions requiring coverage by 
own  funds.  It  is  essential  to  take  account  of the  diversity of  credit institutions in  the 
Community by providing alternative approaches to the calculation of operational risk 
requirements  incorporating  different  levels  of  risk-sensitivity  and  requiring  different 
degrees of sophistication. There should be appropriate incentives for credit institutions 
to move towards the more risk-sensitive approaches. In view of the emerging state of 
the  art  for  the  measurement  and  management  of  operational  risk  the  rules  should  be 
kept under review and updated as appropriate including in relation to the charges for 
different business lines and the recognition of risk mitigation techniques. 

(39) 

In order to ensure adequate solvency of credit institutions within a group it is essential 
that the minimum capital requirements apply on the basis of the consolidated financial 
situation of the group. In order to ensure that own funds are appropriately distributed 
within the group and available to protect savings where needed, the minimum capital 
requirements should apply to individual credit institutions within a group, unless this 
objective can be effectively otherwise achieved. 

(cid:208) 2000/12/EC Recital 53 
(adapted) 

The minimum ratio provided for in this Directive reinforces the capital of credit institutions in 
the  Community.  A  level  of  8%  has  been  adopted  following  a  statistical  survey  of  capital 
requirements in force at the beginning of 1988. 

(40)  The  essential  rules  for  monitoring  large  exposures  of  credit  institutions  should  be 
harmonised.  Member  States  should  still  be  able  to  adopt  provisions  more  stringent 
than those provided for by this Directive. 

(cid:208) 2000/12/EC Recital 54 

(cid:208) 2000/12/EC Recital 55 
(adapted) 

(41)  The monitoring and control of a credit institution's exposures is ⌦ should be ⌫ an 
integral  part  of  its  supervision.  ⌦ Therefore ⌫  Eexcessive  concentration  of 
exposures  to  a  single  client  or  group  of  connected  clients  may  result  in  an 
unacceptable risk of loss. Such a situation may ⌦ can ⌫ be considered prejudicial to 
the solvency of a credit institution. 

(cid:208) 2000/12/EC Recital 56 
(adapted) 

(42) 

In  an  internal  banking  market,  ⌦ Since ⌫  credit  institutions  ⌦ in  the  internal 
market ⌫  are  engaged  in  direct  competition,  with  one  another  and  monitoring 
requirements 
therefore  be  equivalent 
⌦ throughout the Community ⌫. To that end, the criteria applied to determining the 
concentration of exposures must be the subject of legally binding rules at Community 

the  Community 

throughout 

should 

EN 

23 

   EN 

 
 
 
 
 
 
level and cannot be left entirely to the discretion of the Member States. The adoption 
of  common  rules  will  therefore  best  serve  the  Community's  interests,  since  it  will 
prevent  differences  in  the  conditions  of  competition,  while  strengthening  the 
Community's banking system. 

(cid:208) 2000/12/EC Recital 57 
(adapted) 
(cid:214) new 

(43)  The provisions on a solvency ratio for credit institutions include a list of credit risks 
which may be incurred by credit institutions. That list should therefore be used also for 
the  definition  of  exposures  for  the  purposes  of  limits  to  large  exposures.  It  is  not, 
however, (cid:214) While it is appropriate to base the definition of exposures for the purposes 
of limits to large exposures on that provided for the purposes of minimum own funds 
requirements  for  credit  risk,  it  is  not   appropriate  to  refer  on  principle  to  the 
weightings or degrees of risk laid down in the said provisions. Those weightings and 
degrees  of  risk  were  devised  for  the  purpose  of  establishing  a  general  solvency 
requirement  to  cover  the  credit  risk  of  credit  institutions.  In  the  context  of  the 
regulation  of  large  exposures,  the  aim  is. ⌦ In  order ⌫  to  limit  the  maximum  loss 
that  a  credit  institution  may  incur  through  any  single  client  or  group  of  connected 
clients. It ⌦ it ⌫ is therefore appropriate to adopt a prudent approach in which, as a 
general rule, account is taken of the nominal value of exposures, but no ⌦ rules for 
the determination of large exposures which take account of the nominal value of the 
exposure without applying ⌫ weightings or degrees of risk are applied. 

(cid:216) new 

(44)  While  it  is  desirable,  pending  further  review  of  the  large  exposures  provisions,  to 
permit  the  recognition  of  the  effects  of  credit  risk  mitigation  in  a  manner  similar  to 
that  permitted  for  minimum  capital  requirement  purposes  in  order  to  limit  the 
calculation  requirements,  the  rules  on  credit  risk  mitigation  were  designed  in  the 
context of the general diversified credit risk arising from exposures to a large number 
of  counterparties.  Accordingly,  recognition  of  the  effects  of  such  techniques  for  the 
purposes of limits to large exposures designed to limit the maximum loss that may be 
incurred through any single client or group of connected clients should be subject to 
prudential safeguards. 

(cid:208) 2000/12/EC Recital 58 
(adapted) 

(45)  When a credit institution incurs an exposure to its own parent undertaking or to other 
subsidiaries  of  its  parent  undertaking,  particular  prudence  is  necessary.  The 
management of exposures incurred by credit institutions must ⌦ should ⌫ be carried 
out in a fully autonomous manner, in accordance with the principles of sound banking 
management,  without  regard  to  any  ⌦ other ⌫  considerations  other  than  those 
principles. The provision of this Directive require that wWhere the influence exercised 
by  persons  directly  or  indirectly  holding  a  qualifying  participation  in  a  credit 
institution is likely to operate to the detriment of the sound and prudent management 
of  that  institution,  the  competent  authorities  shall  ⌦ should ⌫  take  appropriate 
measures  to  put  an  end  to  that  situation.  In  the  field  of  large  exposures,  specific 

EN 

24 

   EN 

 
 
 
 
standards ⌦ , including more stringent restrictions, ⌫ should also be laid down for 
exposures  incurred  by  a  credit  institution  to  its  own  group,  and  in  such  cases  more 
stringent restrictions are justified than for other exposures. More stringent restrictions 
⌦. Such standards ⌫ need not, however be applied where the parent undertaking is a 
financial  holding  company  or  a  credit  institution  or  where  the  other  subsidiaries  are 
either  credit  or  financial  institutions  or  undertakings  offering  ancillary  banking 
services,  provided  that  all  such  undertakings  are  covered  by  the  supervision  of  the 
credit institution on a consolidated basis. In such cases the consolidated monitoring of 
the  group  of  undertakings  allows  for  an  adequate  level  of  supervision,  and  does  not 
require  the  imposition  of  more  stringent  limits  on  exposure.  Under  this  approach 
banking groups will also be encouraged to organise their structures in such a way as to 
allow  consolidated  monitoring,  which  is  desirable  because  a  more  comprehensive 
level of monitoring is possible.  

(cid:216) new 

(46)  Credit institutions should ensure that they have internal capital which, having regard to 
the risks to which they are or might be exposed, is adequate in quantity, quality and 
distribution.  Accordingly,  credit  institutions  should  have  strategies  and  processes  in 
place for assessing and maintaining the adequacy of their internal capital. 

(47)  Competent  authorities  have  responsibility  to  be  satisfied  that  credit  institutions  have 
good  organisation  and  adequate  own  funds,  having  regard  to  the  risks  to  which  the 
credit institutions are or might be exposed to. 

(48) 

In  order  for  the  internal  market  in  banking  to  operate  effectively  the  Committee  of 
European Banking Supervisors should contribute to the consistent application of this 
directive and to the convergence of supervisory practices throughout the Community. 

(49)  For the same reason and to ensure that Community credit institutions which are active 
in  several  Member  States  are  not  disproportionately  burdened  as  a  result  of  the 
continued  responsibilities  of  individual  Member  State  competent  authorities  for 
authorisation and supervision, it is essential to significantly enhance the co-operation 
between competent authorities. In this context the role of the consolidated supervisor 
should  be  strengthened.  The  Committee  of  European  Banking  Supervisors  should 
support and enhance such co-operation. 

(cid:208) 2000/12/EC Recital 65 
(adapted) 

(50)  Supervision of credit institutions on a consolidated basis must be aimed ⌦ aims ⌫ 
at,  in  particular,  protecting  the  interests  of  the  depositors  of  the  said  ⌦ credit ⌫ 
institutions and ⌦ at ⌫ ensuring the stability of the financial system. 

(51) 

In  order  to  be  effective,  supervision  on  a  consolidated  basis  must  ⌦ should 
therefore ⌫ be applied to all banking groups, including those the parent undertakings 

(cid:208) 2000/12/EC Recital 59 
(adapted) 

EN 

25 

   EN 

 
 
 
 
of which are not credit institutions. The competent authorities must ⌦ should ⌫ hold 
the necessary legal instruments to be able to exercise such supervision. 

(cid:208) 2000/12/EC Recital 60 
(adapted) 

(52) 

In the case of groups with diversified activities ⌦ where ⌫ the parent undertakings 
of  which  control  at  least  one  credit  institution  subsidiary,  the  competent  authorities 
must ⌦ should ⌫  be  able  to  assess  the  financial  situation  of  a  credit  institution  in 
such  a  group.  Pending  subsequent  coordination,  the  Member  States  may  lay  down 
appropriate  methods  of  consolidation  for  the  achievement  of  the  objective  of  this 
Directive.  The  competent  authorities  must  ⌦ should ⌫  at  least  have  the  means  of 
obtaining  from  all  undertakings  within  a  group  the  information  necessary  for  the 
performance of their function. Cooperation between the authorities responsible for the 
supervision of different financial sectors must ⌦ should ⌫ be established in the case 
of  groups  of  undertakings  carrying  on  a  range  of  financial  activities  ⌦ .  Pending 
subsequent  coordination,  the  Member  States  should  be  able  to  lay  down  appropriate 
methods of consolidation for the achievement of the objective of this Directive. ⌫ 

(cid:208) 2000/12/EC Recital 61 
(adapted) 

(53)  The  Member  States  can,  furthermore,  ⌦ should  be  able  to ⌫  refuse  or  withdraw 
banking authorisation in the case of certain group structures considered inappropriate 
for  carrying  on  banking  activities,  in  particular  because  such  structures  could  not  be 
supervised effectively. In this respect the competent authorities ⌦ should ⌫ have the 
⌦ necessary ⌫  powers  mentioned  in  the  first  subparagraph  of  Article  7(1),  Article 
7(2), point (c) of Article 14(l), and Article 16 of this Directive, in order to ensure the 
sound and prudent management of credit institutions. 

(cid:208) 2000/12/EC Recitals 62 to 64 
(adapted) 

The  Member  States  can  equally  apply  appropriate  supervision  techniques  to  groups  with 
structures  not  covered  by  this  Directive.  If  such  structures  become  common,  this  Directive 
should be extended to cover them. 

Supervision  on  a  consolidated  basis  must  take  in  all  activities  defined  in  Annex  I.  All 
undertakings principally engaged in such activities must therefore be included in supervision 
on a consolidated basis. As a result, the definition of financial institutions must be widened in 
order to cover such activities. 

Directive  86/635/EEC,  together  with  Directive  83/349/EEC,  established  the  rules  of 
consolidation  applicable  to  consolidated  accounts  published  by  credit  institutions.  It  is 
therefore possible to define more precisely the methods to be used in prudential supervision 
exercised on a consolidated basis. 

EN 

26 

   EN 

 
 
 
 
(cid:216) new 

(54) 

In order for the internal market in banking to operate with increasing effectiveness and 
for  citizens  of  the  Community  to  be  afforded  adequate  levels  of  transparency,  it  is 
necessary that competent authorities disclose publicly and in a way which allows for 
meaningful comparison the manner in which this Directive is implemented. 

(55) 

In  order  to  strengthen  market  discipline  and  stimulate  credit  institutions  to  improve 
their market strategy, risk control and internal management organization, appropriate 
public disclosure by credit institutions should be provided for. 

(cid:208) 2000/12/EC Recital 66 
(adapted) 

(56)  The examination of problems connected with matters covered by this Directive as well 
as  by  other  Directive  on  the  business  of  credit  institutions  requires  cooperation 
between  the  competent  authorities  and  the  Commission  within  a  banking  advisory 
committee,  particularly  when  conducted  with  a  view  to  closer  coordination.  The 
Banking Advisory Committee of the competent authorities of the Member States does 
not rule out other forms of cooperation between authorities which supervise the taking 
up  and  pursuit  of  the  business  of  credit  institutions  and,  in  particular,  cooperation 
within the «groupe de contact» (contact group) set up between the banking supervisory 
authorities. 

(cid:208) 2000/12/EC Recital 67 
(adapted) 

(57)  Technical  modifications  to  the  detailed  rules  laid  down  in  this  Directive  may  from 
time to time be necessary to take account of new developments in the banking sector. 
The  Commission  shall  accordingly  make  such  modifications  as  are  necessary,  after 
consulting  the  Banking  Advisory  Committee,  within  the  limits  of  the  implementing 
powers conferred  on  the  Commission  by the Treaty.  The measures necessary  for the 
implementation  of  this  Directive  should  be  adopted  in  accordance  with  Council 
Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of 
implementing powers conferred on the Commission ⌦ 19 ⌫ . 

(cid:216) new 

(58) 

(59) 

In  order  to  avoid  disruption  to  markets  and  to  ensure  continuity  in  overall  levels  of 
own funds it is appropriate to provide for specific transitional arrangements. 

In view of the risk-sensitivity of the rules relating to minimum capital requirements, it 
is  desirable  to  keep  under  review  whether  these  have  significant  effects  on  the 
economic  cycle.  The  Commission,  taking  into  account  the  contribution  of  the 
European Central Bank should report on these aspects to the European Parliament and 
to the Council. 

19 

⌦ OJ L 184, 17.7.1999, p. 23. ⌫ 

EN 

27 

   EN 

 
 
 
 
 
                                                 
(cid:208) 2000/12/EC Recital 68 
(adapted) 

Article  36  (1)  of  this  Directive  permits  joint  and  several  commitments  of  borrowers  in  the 
case  of  credit  institutions  organised  as  cooperative  societies  or  funds  to  be  treated  as  own 
funds items under Article 34 (2)(7). The Danish Government has expressed a strong interest 
in  having  its  few  mortgage  credit  institutions  organised  as  cooperative  societies  or  funds 
converted  into  public  limited  liability  companies.  In  order  to  facilitate  the  conversion  or  to 
make  it  possible,  a  temporary  derogation  allowing  them  to  include  part  of  their  joint  and 
several  commitments  as  own  funds  is  required.  This  temporary  derogation  should  not 
adversely affect competition between credit institutions. 

(cid:208) 2000/12/EC Recitals 69 to 71 

(69)  The  application  of  a  20%  weighting  to  credit  institutions'  holdings  of  mortgage  bonds 
may unsettle a national financial market on which such instruments play a preponderant role. 
In  this  case,  provisional  measures  are  taken  to  apply  a  10%  risk  weighting.  The  market  for 
securitisation is undergoing rapid development. It is therefore desirable that the Commission 
should  examine  with  the  Member  States  the  prudential  treatment  of  asset-backed  securities 
and  put  forward,  before  22  June  1999,  proposals  aimed  at  adapting  existing  legislation  in 
order to define an appropriate prudential treatment for asset-backed securities. The competent 
authorities  may  authorise  a  50%  weighting  to  assets  secured  by  mortgages  on  offices  or  on 
multipurpose  commercial  premises  until  31  December  2006.  The  property  to  which  the 
mortgage  relates  must  be  subject  to  rigorous  assessment  criteria  and  regular  revaluation  to 
take account of the developments in the commercial property market. The property must be 
either occupied or let by the owner. Loans for property development are excluded from this 
50% weighting. 

(70) In order to ensure harmonious application of the provisions on large exposures, Member 
States  should  be  allowed  to  provide  for  the  two-stage  application  of  the  new  limits.  For 
smaller  credit  institutions,  a  longer  transitional  period  may  be  warranted  inasmuch  as  too 
rapid an application of the 25% rule could reduce their lending activity too abruptly. 

(71)  Moreover,  the  harmonisation  of  the  conditions  relating  to  the  reorganisation  and 
winding-up of credit institutions is also proceeding. 

(60)  The arrangements necessary for the supervision of liquidity risks will also have to be 

harmonised. 

(cid:208) 2000/12/EC Recital 72 
(adapted) 

This Directive must not affect to obligations of the Member States concerning the deadlines 
for transposition set out in Annex V, Part B 

(cid:208) 2000/12/EC Recital 73 
(adapted) 

EN 

28 

   EN 

 
 
 
 
 
(cid:216) new 

(61)  This Directive respects the fundamental rights and observes the principles recognised 
in particular by the Charter of Fundamental Rights of the European Union as general 
principles of Community law. 

(62)  The obligation to transpose this Directive into national law should be confined to those 
provisions  which  represent  a  substantive  change  as  compared  with  the  earlier 
Directives.  The  obligation  to  transpose  the  provisions  which  are  unchanged  arises 
under the earlier Directives. 

(63)  This  Directive  should  be  without  prejudice  to  the  obligations  of  the  Member  States 
relating to the time-limits for transposition into national law of the Directives set out in 
Annex XIII, Part B. 

HAVE ADOPTED THIS DIRECTIVE: 

(cid:208) 2000/12/EC 

TITLE I 

TITLE II 

TITLE III 

Section 1 

Section 2 

Section 3 

Section 4 

Section 5 

TITLE IV 

Section 1 

Section 2 

(cid:216) new 

CONTENTS 

SUBJECT MATTER, SCOPE AND DEFINITIONS 

REQUIREMENTS FOR ACCESS TO THE TAKING UP AND 
PURSUIT OF THE BUSINESS OF CREDIT INSTITUTIONS 

PROVISIONS CONCERNING THE FREEDOM OF 
ESTABLISHMENT AND THE FREEDOM TO PROVIDE SERVICES 

Credit institutions 

Financial institutions 

Exercise of the right of establishment 

Exercise of the freedom to provide services 

Powers of the competent authorities of the host Member State 

RELATIONS WITH THIRD COUNTRIES 

Notification in relation to third countries' undertakings and 
conditions of access to the markets of these countries 

Cooperation with third countries' competent authorities regarding 
supervision on a consolidated basis 

TITLE V 

PRINCIPLES AND TECHNICAL INSTRUMENTS FOR 

EN 

29 

   EN 

 
 
 
 
PRUDENTIAL SUPERVISION AND DISCLOSURE 

Chapter 1 

Principles of prudential supervision 

Section 1 

Section 2 

Section 3 

Section 4 

Chapter 2 

Section 1 

Section 2 

Competence of home and host Member State 

Exchange of information and professional secrecy 

Duty of persons responsible for the legal control of annual and 
consolidated accounts 

Power of sanction and right to apply to the courts 

Technical instruments of prudential supervision 

Own funds 

Provision against risks 

Subsection 1 

Level of application 

Subsection 2 

Calculation of requirements 

Subsection 3 

Minimum Level of Own Funds 

Section 3 

Minimum own funds requirements for credit risk 

Subsection 1 

Standardised Approach 

Subsection 2 

Internal Ratings based Approach 

Subsection 3 

Credit risk mitigation 

Subsection 4 

Securitisation 

Section 4 

Section 5 

Section 6 

Chapter 3 

Chapter 4 

Section 1 

Section 2 

Chapter 5 

TITLE VI 

Minimum own funds requirements for operational risk 

Large exposures 

Qualifying holdings outside the financial sector 

Credit institutions' assessment process 

Supervision and disclosure by competent authorities  

Supervision 

Disclosure by competent authorities 

Disclosure by credit institutions 

POWERS OF EXECUTION 

EN 

30 

   EN 

 
TITLE VII 

Chapter 1 

Chapter 2 

ANNEX I 

ANNEX II 

TRANSITIONAL AND FINAL PROVISIONS 

Transitional provisions 

Final provisions 

List of activities subject to mutual recognition 

Classification of off-balance-sheet items 

ANNEX III 

The treatment of derivative instruments 

ANNEX IV 

Types of derivatives 

ANNEX V 

Technical criteria on organisation and treatment of risks 

ANNEX VI  

Standardised Approach 

ANNEX VI Part 1 

Risk weights 

ANNEX VI Part 2 

Recognition of ECAIs and mapping of their credit assessments 

ANNEX VI Part 3 

Use of ECAIs’ credit assessments for the determination of risk 
weights 

ANNEX VII  

Internal Ratings based Approach 

ANNEX VII Part 1 

Risk weighted exposure amounts and expected loss amounts 

ANNEX VII Part 2 

PD, LGD, and Maturity 

ANNEX VII Part 3 

Exposure value 

ANNEX VII Part 4 

Minimum Requirements for IRB Approach 

ANNEX VIII  

Credit risk mitigation 

ANNEX VIII Part 1 

Eligibility 

ANNEX VIII Part 2 

Minimum Requirements 

ANNEX VIII Part 3 

Calculating the effects of credit risk mitigation 

ANNEX VIII Part 4 

Maturity mismatches 

ANNEX VIII Part 5 

Combinations of credit risk mitigation in the Standardised Approach 

ANNEX VIII Part 6 

Basket CRM techniques 

ANNEX IX 

Securitisation 

ANNEX IX Part 1 

Definitions for purposes of Annex X 

EN 

31 

   EN 

 
ANNEX IX Part 2 

Minimum requirements for recognition of significant credit risk 
transfer and calculation of risk-weighted exposure amounts and 
expected loss amounts for securitised exposures 

ANNEX IX Part 3 

External credit assessments 

ANNEX IX Part 4 

Calculation 

ANNEX X  

Operational Risk 

ANNEX X Part 1 

Basic Indicator Approach 

ANNEX X Part 2 

Standardised Approach 

ANNEX X Part 3 

Advanced Measurement Approaches 

ANNEX X Part 4 

Combined use of different methodologies 

ANNEX X Part 5 

Loss event type classification 

ANNEX XI 

Technical criteria on the review and evaluation by the competent 
authorities 

ANNEX XII 

Technical criteria on disclosure 

ANNEX XII Part 1 

General criteria 

ANNEX XII Part 2 

General requirements 

ANNEX XII Part 3 

Qualifying requirements for the use of particular instruments or 
methodologies 

ANNEX XIII Part A 

Repealed Directives, together with their successive amendments 
(referred to in Article 158) 

ANNEX XIII Part B 

Deadlines for implementation (referred to in Article 159) 

ANNEX XIV 

Correlation table 

EN 

32 

   EN 

 
(cid:208) 2000/12/EC (adapted) 

TITLE I 

⌦ SUBJECT MATTER, SCOPE AND ⌫ DEFINITIONS AND SCOPE 

(cid:208) 2000/12/EC Article 2(1) and (2) 
(adapted) 

Article 1 

1. 

2. 

3. 

This Directive concerns ⌦ lays down rules concerning ⌫ the taking up and pursuit 
of  the  business of  credit  institutions  ⌦ ,  and  their  prudential  supervision ⌫.  This 
Directive shall apply to all credit institutions. 

Article ⌦39⌫ and 52 to 56 ⌦ Title V, Chapter 4, Section 1 ⌫ shall also apply to 
financial holding companies and mixed-activity holding companies which have their 
head offices in the Community. 

The institutions permanently excluded by paragraph 3 ⌦ pursuant to Article 5 ⌫, 
with the exception, however, of the Member States’ central banks ⌦ of the Member 
States ⌫, shall be treated as financial institutions for the purposes of Articles 25 and 
52 to 56 ⌦ 39 and Title V, Chapter 4, Section 1⌫. 

(cid:208) 2000/12/EC Article 2(3) 
(adapted) 

This Directive shall not apply to ⌦ the following ⌫ : 

Article 2 

– 

– 

– 

– 

– 

the central banks of Member States, 

post office giro institutions, 

in  Belgium,  the  «Institut  de  Réescompte  et  de  Garantie/Herdiscontering-  en 
Waarborginstituut», 

in  Denmark, 
Skibskreditfond», and «Dansk Landbrugs Realkreditfond», 

«Dansk  Eksportfinansieringsfond», 

the 

the 

«Danmarks 

in  Germany,  the  «Kreditanstalt  für  Wiederaufbau»,  undertakings  which  are 
recognised  under  the  «Wohnungsgemeinnützigkeitsgesetz»  as  bodies  of  State 
housing policy and are not mainly engaged in banking transactions, and undertakings 
recognised under that law as non-profit housing undertakings, 

EN 

33 

   EN 

 
 
 
 
– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

in  Greece,  the  «Ελληνική  Τράπεζα  Βιομηχανικής  Αναπτύξεως,»,  (Elliniki  Trapeza 
Viomichanikis  Anaptyxeos),  the  «Ταμείο  Παρακαταθηκών  και  Δανείων»  (Tamio 
Parakatathikon  kai  Danion),  and  the  «Ταχυδρομικό  Ταμιευτήριο»  (Tachidromiko 
Tamieftirio), 

in Spain, the «Instituto de Crédito Oficial», 

in France, the «Caisse des dépôts et consignations», 

in Ireland, credit unions and the friendly societies, 

in Italy, the «Cassa depositi e prestiti», 

in  the  Netherlands,  the  «Netherlandse  Investeringsbank  voor  Ontwikkelingslanden 
NV»,  the  «NV  Noordelijke  Ontwikkelingsmaatschappij»,  the  «NV  Industriebank 
Limburgs  Instituut  voor  Ontwikkeling  en  Financiering»  and  the  «Overijsselse 
Ontwikkelingsmaatschappij NV», 

in Austria, undertakings recognised as housing associations in the public interest and 
the «Österreichische Kontrollbank AG», 

in Portugal, «Caixas Económicas» existing on 1 January 1986 with the exception of 
those  incorporated  as  limited  companies  and  of  the  «Caixa  Económica  Montepio 
Geral», 

in  Finland,  the  «Teollisen  yhteistyön  rahasto  Oy/Fonden  för  industriellt  samarbete 
AB», and the «Kera Oy/Kera Ab», 

in Sweden, the «Svenska Skeppshypotekskassan», 

the  United  Kingdom, 

in 
the  Commonwealth 
Development Finance Company Ltd, the Agricultural Mortgage Corporation Ltd, the 
Scottish  Agricultural  Securities  Corporation  Ltd,  the  Crown  Agents  for  overseas 
governments and administrations, credit unions and municipal banks. 

the  National  Savings  Bank, 

(cid:208) Act of accession 2003 

in  Latvia,  the  “kra¯jaizdevu  sabiedrı¯bas”,  undertakings  that  are  recognised  under 
the  “kra¯jaizdevu  sabiedrı¯bu  likums”  as  cooperative  undertakings  rendering 
financial services solely to their members, 

in Lithuania, the “kredito unijos” other than the “Centrine˙ kredito unija”, 

in Hungary, the “Magyar Fejlesztési Bank Rt.” and the “Magyar Export-Import Bank 
Rt.”, 

in Poland, the “Spółdzielcze  Kasy Oszcze˛dnos´ciowo -  Kreditowe” and the “Bank 
Gospodarstwa Krajowego”.’ 

EN 

34 

   EN 

 
 
The  Commission,  pursuant  to  the  procedure  set  out  in  Article  60(2)  shall  decide  on 

4. 
any amendments to the list in paragraph 3. 

(cid:208) Directive 2004/xx/EC Art. 3.1 
(adapted) 

(cid:208) 2000/12/EC Article 2(5) and (6) 
(adapted) 

Article 3 

1.  ⌦ One  or  more  ⌫  cCredit  institutions  situated  in  the  same  Member  State  and 
⌦ which  are ⌫  permanently  affiliated,  on  15  December  1977,  to  a  central  body  which 
supervises  them  and  which  is  established  in  that  ⌦ the ⌫  same  Member  State,  may  be 
exempted from the requirements of Articles ⌦ 7 and 11(1)⌫ 6(1), 8 and 59 if, no later than 
15 December 1979, national law provides that: 

(a) 

(b) 

(c) 

the commitments of the central body and affiliated institutions are joint and several 
liabilities or the commitments of its affiliated institutions are entirely guaranteed by 
the central body, 

the solvency and liquidity of the central body and of all the affiliated institutions are 
monitored as a whole on the basis of consolidated accounts, 

the  management  of  the  central  body  is  empowered  to  issue  instructions  to  the 
management of the affiliated institutions. 

Credit institutions operating locally which are ⌦ permanently ⌫ affiliated, subsequent to 15 
December 1977, to a central body within the meaning of the first subparagraph, may benefit 
from  the  conditions  laid  down  therein  if  they  constitute  normal  additions  to  the  network 
belonging to that central body. 

(cid:208) Directive 2004/xx/EC Art. 3.2 
(adapted) 

In the case of credit institutions other than those which are set up in areas newly reclaimed 
from  the  sea  or  have  resulted  from  scission  or  mergers  of  existing  institutions  dependent  or 
answerable to the central body, the Commission, pursuant to the procedure set out in Article 
60(2)  ⌦ 150 ⌫  may  lay  down  additional  rules  for  the  application  of  the  second 
subparagraph including the repeal of exemptions provided for in the first subparagraph, where 
it is of the opinion that the affiliation of new institutions benefiting from the arrangements laid 
down in the second subparagraph might have an adverse effect on competition. 

A  credit  institution  which,  as  defined ⌦ referred  to ⌫  in  the  first  subparagraph  of 
2. 
paragraph 5 ⌦ 1 ⌫, may also be exempted from the provisions of Articles⌦ 9 and 10 ⌫ 
5,  and  also  Articles  40  to  51,  and  65  ⌦ Title  V,  Chapter  2,  Sections  2,  3,  4,  5  and  6  and 

(cid:208) 2000/12/EC Article 2(5) and (6) 
(adapted) 

EN 

35 

   EN 

 
 
 
 
 
Chapter  3 ⌫  provided  that,  without  prejudice  to  the  application  of  those  provisions  to  the 
central  body,  the  whole  as  constituted  by  the  central  body  together  with  its  affiliated 
institutions is subject to the abovementioned ⌦ those ⌫ provisions on a consolidated basis. 

In case of exemption, Articles ⌦ 16, 23, 24, 25, 26(1) to (3), 28 and 29 to 37 ⌫ 13, 18, 19, 
20(1)  to  (6),  21  and  22  shall  apply  to  the  whole  as  constituted  by  the  central  body  together 
with its affiliated institutions. 

(cid:208) 2000/12/EC Art. 1 (adapted) 

Article 4 

Definitions 

For the purposes of this Directive, ⌦ the following definitions shall apply: ⌫ 

(cid:208) 2000/28/EC Art. 1(1) to (5) 
(adapted) 

(1) 

«credit institution» shall mean ⌦ means ⌫ : 

(a) 

(b) 

an undertaking whose business is to receive deposits or other repayable funds 
from the public and to grant credits for its own account;or 

an electronic money institution within the meaning of Directive 2000/46/EC of 
the  European  Parliament  and  of  the  Council  of  18  September  2000  on  the 
taking  up,  pursuit  and  prudential  supervision  of  the  business  of  electronic 
money institutions20. 

For  the  purposes  of  applying  the  supervision  on  a  consolidated  basis,  shall  be 
considered as a credit institution, a credit institution according to the first paragraph and any 
private  or  public  undertaking  which  corresponds  to  the  definition  in  the  first  paragraph  and 
which has been authorised in a third country. 

For the purposes of applying the supervision and control of large exposures, shall be 
considered as a credit institution, a credit institution according to the first paragraph, including 
branches  of  a  credit  institution  in  third  countries  and  any  private  or  public  undertaking, 
including  its  branches,  which  corresponds  to  the  definition  in  the  first  paragraph  and  which 
has been authorised in a third country; 

(2) 

(3) 

«authorisation»  shall  mean  ⌦ means ⌫  an  instrument  issued  in  any  form  by  the 
authorities by which the right to carry on the business of a credit institution is granted; 

«branch»  shall  mean  ⌦ means ⌫a  place  of  business  which  forms  a  legally 
dependent part of a credit institution and which carries out directly all or some of the 
transactions  inherent  in  the  business  of  credit  institutions;  any  number  of  places  of 

20 

OJ L 275, 27.10.2000, p. 39. 

EN 

36 

   EN 

 
 
 
 
 
                                                 
business set up in the same Member State by a credit institution with headquarters in 
another Member State shall be regarded as a single branch; 

(4) 

(5) 

«competent  authorities»  shall  mean  ⌦ means ⌫  the  national  authorities  which  are 
empowered by law or regulation to supervise credit institutions; 

«financial  institution»  shall  mean  ⌦ means ⌫  an  undertaking  other  than  a  credit 
institution, the principal activity of which is to acquire holdings or to carry on one or 
more of the activities listed in points 2 to 12 of Annex I; 

(6) 

«institutions»,  for  the  purposes  of  Sections  2  and  3  of  Title  V,  Chapter  2,  means 
institutions as defined in [Article 2(3) of Council Directive 96/3/EEC21]; 

(cid:216) new 

(cid:208) 2000/12/EC Art. 1 (6) to (8) 
adapted (adapted) 

(7) 

(8) 

(9) 

«home Member State» shall mean ⌦ means ⌫ the Member State in which a credit 
institution has been authorised in accordance with Articles 4 to 11 ⌦ 6 to 9 and 11 to 
14 ⌫ ; 

«host  Member  State»  shall  mean  ⌦ means ⌫  the  Member  State  in  which  a  credit 
institution has a branch or in which it provides services; 

«control» shall mean ⌦ means ⌫ the relationship between a parent undertaking and 
a subsidiary, as defined in Article 1 of Directive 83/349/EEC, or a similar relationship 
between any natural or legal person and an undertaking; 

(cid:208) 2002/87/EC Art. 29(1)(a) 
(adapted) 
(cid:214) new 

(10) 

«participation»  for  the  purposes  of  supervision  on  a  consolidated  basis  and  for  the 
purposes of points ⌦ (o) and (p) ⌫ 15 and 16 of Articles 34 ⌦ 57 ⌫ (2), ⌦ 71 to 
73 ⌫ Article 42 and Title V, Chapter 4 shall mean ⌦ means ⌫ participation within 
the  meaning  of  the  first  sentence  of  Article  17  of  ⌦ Council ⌫  Directive 
78/660/EEC  ⌦ 22 ⌫,  or  the  ownership,  direct  or  indirect,  of  20 %  or  more  of  the 
voting rights or capital of an undertaking; 

(11) 

«qualifying  holding»  shall  mean  ⌦ means ⌫  a  direct  or  indirect  holding  in  an 
undertaking  which  represents  10  %  or  more  of  the  capital  or  of  the  voting  rights  or 

(cid:208) 2000/12/EC Art. 1 (10) to (13) 
(adapted) 

21 
22 

OJ L 141, 11.6.1993, p. 1. 
OJ L 222, 14.8.1978, p.11. 

EN 

37 

   EN 

 
 
 
 
 
                                                 
which makes it possible to exercise a significant influence over the management of the 
⌦ that ⌫ undertaking in which a holding subsists. ⌦ ; ⌫ 

(12) «initial capital» shall mean capital as defined in Article 34 (2)(1) and (2); 

(12) 

«parent undertaking» shall mean ⌦ means ⌫ 

(a) 

a parent undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC. 

(b) 

It shall, for the purposes of supervision on a consolidated basis and control of 
large exposures, mean ⌦ Articles 71 to 73, Title V, Chapter 2, Section 5 and 
Chapter  4 ⌫,  a  parent  undertaking  within  the  meaning  of  Article  1(1)  of 
Directive  83/349/EEC  and  any  undertaking  which,  in  the  opinion  of  the 
competent authorities, effectively exercises a dominant influence over another 
undertaking; 

(13) 

«subsidiary» shall mean ⌦ means ⌫ 

(a) 

(b) 

a  subsidiary  undertaking  as  defined  in  Articles  1  and  2  of  Directive 
83/349/EEC; 

It shall, for the purposes of supervision on a consolidated basis and control of 
large exposures, mean ⌦ Articles 71 to 73, Title V, Chapter 2, Section 5, and 
Chapter  4 ⌫  a  subsidiary  undertaking  within  the  meaning  of  Article  1(1)  of 
Directive  83/349/EEC  and  any  undertaking  over  which,  in  the  opinion  of  the 
competent  authorities,  a  parent  undertaking  effectively  exercises  a  dominant 
influence. 

All  subsidiaries  of  subsidiary  undertakings  shall  also  be  considered  subsidiaries  of 
the undertaking that is their original parent; 

(cid:216) new 

(14) 

(15) 

(16) 

“parent  credit  institution  in  a  Member  State”  means  a  credit  institution  which  has  a 
credit institution or a financial institution as a subsidiary or which holds a participation 
in such an institution, and which is not itself a subsidiary of another credit institution 
authorised in the same Member State, or of a financial holding company set up in the 
same  Member  State,  and  in  which  no  other  credit  institution  authorised  in  the  same 
Member State holds a participation; 

“parent  financial  holding  company  in  a  Member  State”  means  a  financial  holding 
company which is not itself a subsidiary of a credit institution authorised in the same 
Member State, or of a financial holding company set up in the same Member State; 

“EU  parent  credit  institution”  means  a  parent  credit  institution  in  a  Member  State 
which is not a subsidiary of another credit institution authorised in any Member State, 
or of a financial holding company set up in any Member State, and in which no other 
credit institution authorised in any Member State holds a participation; 

EN 

38 

   EN 

 
 
(17) 

“EU parent financial holding company” mean a parent financial holding company in a 
Member  State  which  is  not  a  subsidiary  of  a  credit  institution  authorised  in  any 
Member State; 

(cid:208) 2000/12/EC Art. 1 (14) to (18) 
(adapted) 

(14) “Zone A» shall  comprise  all  the  Member  States  and  all  other  countries  which  are  full 
members of the Organisation for Economic Cooperation and Development (OECD) and those 
countries which have concluded special lending arrangements with the International Monetary 
Fund (IMF) associated with the Fund's general arrangements to borrow (GAB). Any country 
which  reschedules  its  external  sovereign  debt  is,  however,  precluded  from  Zone  A  for  a 
period of five years; 

(15) «Zone B» shall comprise all countries not in Zone A; 

(16) «Zone A credit institutions» 
shall  mean  all  credit  institutions  authorised  in  the 
Member States, in accordance with Article 4, including their branches in third countries, and 
all  private  and  public  undertakings  covered  by  the  definitions  in  point  1,  first  subparagraph 
and authorised in other Zone A countries, including their branches; 

(17) Zone B credit institutions» 
shall  mean  all  private  and  public  undertakings 
authorised outside Zone A covered by the definition in point 1, first subparagraph, including 
their branches within the Community; 

(18)  «non-bank  sector»  shall  mean  all  borrowers  other  than  credit  institutions  as  defined  in 
points  16  and  17,  central  governments  and  central  banks,  regional  governments  and  local 
authorities, the European Communities, the European Investment Bank (EIB) and multilateral 
development banks as defined in point 19; 

(cid:208) 2004/69/EC Art. 1 (adapted) 

«multilateral  development  banks»  shall  mean  the  International  Bank  for  Reconstruction  and 
Development, the International Finance Corporation, the Inter-American Development Bank, 
the  Asian  Development  Bank,  the  African  Development  Bank,  the  Council  of  Europe 
Resettlement  Fund,  the  Nordic  Investment  Bank,  the  Caribbean  Development  Bank,  the 
European  Bank  for  Reconstruction  and  Development,  the  European  Investment  Fund,  the 
Inter-American Investment Corporation and the Multilateral Investment Guarantee Agency; 

(20) «full-risk», «medium-risk», «medium/low-risk» and «low-risk» off-balance-sheet items» 
shall mean the items described in Article 43(2) and listed in Annex II; 

(cid:208) 2000/12/EC Art. 1 (20) 

(18) 

“public  sector  entities”  means  non-commercial  administrative  bodies  responsible  to 
central  governments,  regional  governments  or  local  authorities,  or  authorities  that  in 
the view of the competent authorities exercise the same responsibilities as regional and 
local authorities; 

(cid:216) new 

EN 

39 

   EN 

 
 
 
 
 
(cid:208) 2002/87/EC Art. 29.1(b) 
adapted (adapted) 

(19) 

«financial  holding  company»  shall  mean  ⌦ means ⌫  a  financial  institution,  the 
subsidiary undertakings of which are either exclusively or mainly credit institutions or 
financial  institutions,  at  least  one  of  such  subsidiaries  being  a  credit  institution,  and 
which  is  not  a  mixed  financial  holding  company  within  the  meaning  of  Directive 
2002/87/EC of the European Parliament and of the Council of 16 December 2002 on 
the  supplementary  supervision  of  credit  institutions,  insurance  undertakings  and 
investment firms in a financial conglomerate23; 

(20) 

«mixed-activity  holding  company»  shall  mean  ⌦ means ⌫  a  parent  undertaking, 
other  than  a  financial  holding  company  or  a  credit  institution  or  a  mixed  financial 
holding  company  within  the  meaning  of  Directive  2002/87/EC,  the  subsidiaries  of 
which include at least one credit institution; 

(cid:208) 2000/12/EC Art. 1 (23) 
(adapted) 

(21) 

«ancillary banking services undertaking» shall mean ⌦ means ⌫ an undertaking the 
principal activity of which consists in owning or managing property, managing data-
processing  services,  or  any  other  similar  activity  which  is  ancillary  to  the  principal 
activity of one or more credit institutions;  

(22) 

“operational  risk”  means  the  risk  of  loss  resulting  from  inadequate  or  failed  internal 
processes, people and systems or from external events, and includes legal risk;  

(cid:216) new 

(cid:208) 2000/12/EC Art. 1 (24) 
(adapted) 

«exposures» for the purpose of applying Articles 47, 48 and 49 shall mean the assets and off-
balance-sheet items referred to in Article 43 and in Annexes II and IV thereto Title V, Chapter 
2,  Section  2,  and  3,  without  application  of  the  risk  weightings  or  degrees  of  risk  there 
provided for; the risks referred to in Annex IV must be calculated in accordance with one of 
the methods set out in Annex III, without application of the weightings for counterparty risk; 
all  elements  entirely  covered  by  own  funds  may,  with  the  agreement  of  the  competent 
authorities, be excluded from the definition of exposures provided that such own funds are not 
included in the credit institution’s own funds calculation of the solvency ratio for the purposes 
of Article 44 or in the calculation of other monitoring ratios provided for in this Directive and 
in other Community acts; exposures shall not include: 

– 

in the case of foreign exchange transactions, exposures incurred in the ordinary 
course of settlement during the 48 hours following payment, or 

23 

OJ L 35, 11.2.2003, p. 1. 

EN 

40 

   EN 

 
 
 
 
 
                                                 
– 

in  the  case  of  transactions  for  the  purchase  or  sale  of  securities,  exposures 
incurred  in  the  ordinary  course  of  settlement  during  the  five  working  days 
following payment or delivery of the securities, whichever is the earlier; 

(cid:216) new 

(23) 

“central banks” include the European Central Bank unless otherwise indicated;  

(24) 

(25) 

(26) 

(27) 

(28) 

(29) 

(30) 

(31) 

“dilution  risk”  means  the  risk  that  an  amount  receivable  is  reduced  through  cash  or 
non-cash credits to the obligor;  

“probability of default” means the probability of default of a counterparty over a one 
year period;  

“loss”  means  economic  loss,  including  material  discount  effects,  and  material  direct 
and indirect costs associated with collecting on the instrument;  

“loss given default” means the ratio of the loss on an exposure due to the default of a 
counterparty to the amount outstanding at default;  

“conversion  factor”  means  the  ratio,  to  the  currently  undrawn  amount  of  the 
commitment, of the currently undrawn amount of a commitment subject to an advised 
limit that will be drawn and outstanding at default;  

“expected  loss  (EL)”  shall  mean  the  ratio  of  the  amount  expected  to  be  lost  on  an 
exposure from a potential default of a counterparty or dilution over a one year period 
to the amount outstanding at default;  

“credit  risk  mitigation”  means  a  technique  used  by  a  credit  institution  to  reduce  the 
credit  risk  associated  with  an  exposure  or  exposures  which  the  credit  institution 
continues to hold;  

“funded  credit  protection”  means  a  technique  of  credit  risk  mitigation  where  the 
reduction of the credit risk on the exposure of a credit institution derives from the right 
of  the  credit  institution  -  in  the  event  of  the  default  of  the  counterparty  or  on  the 
occurrence of other specified credit events relating to the counterparty - to liquidate, or 
to  obtain  transfer  or  appropriation  of,  or  to  retain  certain  assets  or  amounts,  or  to 
reduce  the  amount  of  the  exposure  to,  or  to  replace  it  with,  the  amount  of  the 
difference between the amount of the exposure and the amount of a claim on the credit 
institution;  

(32) 

“unfunded  credit  protection”  means  a  technique  of  credit  risk  mitigation  where  the 
reduction  of  the  credit  risk  on  the  exposure  of  a  credit  institution  derives  from  the 
undertaking  of  a  third  party  to  pay  an  amount  in  the  event  of  the  default  of  the 
borrower or on the occurrence of other specified events;  

(33) 

“repurchase  transaction”  means  any  transaction  governed  by  an  agreement  falling 
within the definition of ‘repurchase agreement’ or ‘reverse repurchase agreement’ as 
defined in [Article 3 point (m) of Directive 93/6/EEC];  

EN 

41 

   EN 

 
 
(34) 

(35) 

(36) 

(37) 

(38) 

(39) 

“securities  or  commodities  lending  or  borrowing  transaction”  means  any  transaction 
falling  within  the  definition  of  ‘securities  or  commodities  lending’  or  ‘securities  or 
commodities borrowing’ as defined in [Article 3 point (n) of Directive 93/6/EEC]; 

“cash  assimilated  instrument”  means  a  certificate  of  deposit  or  other  similar 
instrument issued by the lending credit institution; 

“securitisation” means a transaction or scheme, whereby the credit risk associated with 
an exposure or pool of exposures is tranched, having the following characteristics: 

(a) 

(b) 

payments in the transaction or scheme are dependent upon the performance of 
the exposure or pool of exposures; 

the  subordination  of  tranches  determines  the  distribution  of  losses  during  the 
ongoing life of the transaction or scheme; 

“traditional  securitisation”  means  a  securitisation  involving  the  economic  transfer  of 
the exposures being securitised to a securitisation special purpose entity which issues 
securities. This shall be accomplished by the transfer of ownership of the securitised 
exposures  from  the  originator  credit  institution  or  through  sub-participation.  The 
securities  issued  do  not  represent  payment  obligations  of  the  originator  credit 
institution; 

“synthetic securitisation” means a securitisation where the tranching is achieved by the 
use of credit derivatives or guarantees, and the pool of exposures is not removed from 
the balance sheet of the originator credit institution; 

“tranche” means a contractually established segment of the credit risk associated with 
an exposure or number of exposures, where a position in the segment entails a risk of 
credit loss greater than or less than a position of the same amount in each other such 
segment, without taking account of credit protection provided by third parties directly 
to the holders of positions in the segment or in other segments; 

(40) 

“securitisation position” shall mean an exposure to a securitisation; 

(41) 

“originator” means either of the following: 

(a) 

an  entity  which,  either  itself  or  through  related  entities,  directly  or  indirectly, 
was  involved  in  the  original  agreement  which  created  the  obligations  or 
potential  obligations  of  the  debtor  or  potential  debtor  giving  rise  to  exposure 
being securitised; 

(b) 

an entity which purchases a third party’s exposures onto its balance sheet and 
then securitises them; 

(42) 

“sponsor”  means  a  credit  institution  other  than  an  originator  credit  institution  that 
establishes  and  manages  an  asset-backed  commercial  paper  programme  or  other 
securitisation scheme that purchases exposures from third party entities; 

(43) 

“credit enhancement” means a contractual arrangement whereby the credit quality of a 
position  in  a  securitisation  is  improved  in  relation  to  what  it  would  have  been  if  the 

EN 

42 

   EN 

 
enhancement  had  not  been  provided,  including  the  enhancement  provided  by  more 
junior tranches in the securitisation and other types of credit protection; 

(44) 

the  activities  of  which  are 

“securitisation  special  purpose  entity  (SSPE)”  means  a  corporation  trust  or  other 
entity,  other  than  a  credit  institution,  organised  for  carrying  on  a  securitisation  or 
securitisations, 
to 
accomplishing  that  objective,  the  structure  of  which  is  intended  to  isolate  the 
obligations of the SSPE from those of the originator credit institution, and the holders 
of the beneficial interests in which have the right to pledge or exchange those interests 
without restriction; 

those  appropriate 

limited 

to 

(cid:208) 2000/12/EC Article 1(25) to 
(27) (adapted) 

(45) 

«group of connected clients» shall mean ⌦ means ⌫ :  

(a) 

(b) 

two  or  more  natural  or  legal  persons  who,  unless  it  is  shown  otherwise, 
constitute a single risk because one of them, directly or indirectly, has control 
over the other or others; or 

two or more natural or legal persons between whom there is no relationship of 
control as defined ⌦ set out ⌫ in the first indent but who are to be regarded 
as constituting a single risk because they are so interconnected that, if one of 
them were to experience financial problems, the other or all of the others would 
be likely to encounter repayment difficulties; 

(46) 

«close  links»  shall  mean  ⌦ means ⌫  a  situation  in  which  two  or  more  natural  or 
legal persons are linked by ⌦ in any of the following ways ⌫ :  

(a) 

(b) 

participation , which shall mean the ⌦ in the form of ⌫ ownership, direct or 
by  way  of  control,  of  20%  or  more  of  the  voting  rights  or  capital  of  an 
undertaking, or; 

control, which shall mean the relationship between a parent undertaking and a 
subsidiary,  in  all  the  cases  referred  to  in  Article  1(1)  and  (2)  of  Directive 
83/349/EEC, or a similar relationship between any natural or legal person and 
an  undertaking;  any  subsidiary  undertaking  of  a  subsidiary  undertaking  shall 
also be considered a subsidiary of the parent undertaking which is at the head 
of those undertakings.; 

(c)  A  situation  in  which  two  or  more  natural  or  legal  persons  are  permanently 
linked  ⌦ the  fact  that  both  or  all  are  permanently  linked ⌫  to  one  and  the 
same  ⌦ third ⌫  person  by  a  control  relationship  shall  also  be  regarded  as 
constituting a close link between such persons; 

(47) 

«recognised  exchanges»  shall  mean  ⌦ means ⌫  exchanges  ⌦ which  are ⌫ 
recognised ⌦ as such ⌫ by the competent authorities ⌦ and ⌫ which ⌦ meet the 
following conditions:⌫ 

(a)  ⌦they ⌫ function regularly; 

EN 

43 

   EN 

 
 
(b)  ⌦they ⌫have rules, issued or approved by the appropriate authorities of the 
home country of the exchange, which define ⌦ defining ⌫the conditions for 
the operation of the exchange, the conditions of access to the exchange as well 
as the conditions that must be satisfied by a contract before it can effectively be 
dealt on the exchange; 

(c)  ⌦they ⌫have  a  clearing  mechanism  that  provides  for  ⌦ whereby ⌫ 
contracts  listed  in  Annex  IV  to  be  ⌦ are ⌫  subject  to  daily  margin 
requirements providing an appropriate protection ⌦ which, ⌫ in the opinion 
of  the  competent  authorities  ⌦,  provide  appropriate  protection ⌫  in  the 
opinion of the competent authorities.  

(cid:208) 2000/12/EC Art. 3 (adapted) 

Article 5 

Prohibition for undertakings other than credit institutions from carrying on the 
business of taking deposits or other repayable funds from the public 

The Member States shall prohibit persons or undertakings that are not credit institutions from 
carrying on the business of taking deposits or other repayable funds from the public.  

⌦ The first paragraph ⌫ This prohibition shall not apply to the taking of deposits or other 
funds repayable by a Member State or by a Member State's regional or local authorities or by 
public  international  bodies  of  which  one  or  more  Member  States  are  members  or  to  cases 
expressly  covered  by  national  or  Community  legislation,  provided  that  those  activities  are 
subject to regulations and controls intended to protect depositors and investors and applicable 
to those cases. 

(cid:208) 2000/12/EC  

TITLE II 

REQUIREMENTS FOR ACCESS TO THE TAKING UP AND PURSUIT 
OF THE BUSINESS OF CREDIT INSTITUTIONS 

(cid:208) 2000/12/EC Art. 4 (adapted) 
(cid:206)1 Directive 2004/xx/EC Art. 3 

Article 6 

Authorisation 

Member  States  shall  require  credit  institutions  to  obtain  authorisation  before  commencing 
their activities. ⌦ Without prejudice to Articles 7 to 9, 11 and 12⌫ Tthey shall lay down the 

EN 

44 

   EN 

 
 
 
 
requirements  for  such  authorisation  subject  to  Articles  5  to  9,  and  notify  them  to  (cid:206)1 the 
Commission  . 

(cid:208) 2000/12/EC Art. 8 (adapted) 

Article 7 

Programme of operations and structural organisation 

Member States shall require applications for authorisation to be accompanied by a programme 
of  operations  setting  out,  inter  alia,  the  types  of  business  envisaged  and  the  structural 
organisation of the institution. 

(cid:208) 2000/12/EC Article 9 (adapted) 

Article 8 

Economic needs 

Member States may not require the application for authorisation to be examined in terms of 
the economic needs of the market. 

(cid:208) 2000/12/EC Art. 5(1) (adapted) 

Article 9 

Initial capital 

1. 

Without  prejudice  to  other  general  conditions  laid  down  by  national  law,  the 
competent  authorities  shall  not  grant  authorisation  when  the  credit  institution  does 
not possess separate own funds or in cases  where initial capital is less than EUR 5 
million. 

(cid:208) 2000/12/EC Art. 1 (11) 
(adapted) 

«Initial  capital»  shall  mean  ⌦ comprise ⌫  capital  ⌦ and  reserves  as  referred  to 
⌫ as defined in Article 34 ⌦ 57(a) and (b) ⌫ (2)(1) and (2). 

(cid:208) 2000/12/EC Article 5(1) and (2) 
(adapted) 

Member States may decide that credit institutions which do not fulfil the requirement 
of  separate  own  funds  and  which  were  in  existence  on  15  December  1979  may 
continue  to  carry  on  their  business.  They  may  exempt  such  credit  institutions  from 
complying  with  the  requirement  contained  in  the  first  subparagraph  of  Article 
⌦ 11 ⌫ 6(1). 

EN 

45 

   EN 

 
 
 
 
 
 
2. 

The  Member  States  ⌦ may,  subject  to  the  following  conditions,  grant ⌫  shall, 
however,  have  the  option  of  grantingauthorisation  to  particular  categories  of  credit 
institutions the initial capital of which is less than that ⌦ specified ⌫ prescribed in 
paragraph 1. In such cases: 

(a) 

the initial capital ⌦ must ⌫ shall not be less than EUR 1 million; 

(b) 

the Member States concerned must notify the Commission of their reasons for 
⌦ exercising ⌫  using  ⌦ this  option ⌫making  use  of  the  option  provided 
for in this paragraph, 

(c)  when  the  list  referred  to  in  Article  11  is  published,  the  name  of  each  credit 
institution that does not have the minimum capital ⌦ specified ⌫ prescribed 
in  paragraph  1  ⌦ must ⌫  shall  be  annotated  to  that  effect  ⌦ in  the  list 
referred to in Article 14. ⌫ 

(cid:208) 2000/12/EC Art. 5(3) to (7) 
(adapted) 

Article 10 

A  credit  institution's  own  funds  may  not  fall  below  the  amount  of  initial  capital 

1. 
required by ⌦ under Article 9 ⌫ paragraphs 1 and 2 at the time of its authorisation. 

2. 
The  Member  States  may  decide  that  credit  institutions  already  in  existence  on  1 
January 1993, the own funds of which do not attain the levels specified for initial capital in 
⌦ Article 9 ⌫ paragraphs 1 and 2, may continue to carry on their activities. In that event, 
their own funds may not fall below the highest level reached with effect from 22 December 
1989. 

3. 
If  control  of  a  credit  institution  falling  within  the  category  referred  to  in  paragraph 
⌦ 2 ⌫  4  is  taken  by  a  natural  or  legal  person  other  than  the  person  who  controlled  the 
institution previously, the own funds of that ⌦ credit ⌫ institution must attain at least the 
level ⌦ specified ⌫ prescribed for initial capital in ⌦ Article 9 ⌫ paragraphs 1 and 2. 

4. 
In  certain  specific  circumstances  and  with  the  consent  of  the  competent  authorities, 
where there is a merger of two or more credit institutions falling within the category referred 
to in paragraph 4 ⌦ 2 ⌫ , the own funds of the ⌦ credit ⌫ institution resulting from the 
merger may not fall below the total own funds of the merged ⌦ credit ⌫ institutions at the 
time  of  the  merger,  as  long  as  the  appropriate  levels  ⌦ specified  in ⌫  pursuant  to 
⌦ Article 9 ⌫ paragraphs 1 and 2 have not been attained. 

If, in the cases referred to in paragraphs ⌦ 1, 2 and 4 ⌫ 3, 4 and 6, the own funds 
5. 
should be reduced, the competent authorities may, where the circumstances justify it, allow an 
⌦ credit ⌫ institution a limited period in which to rectify its situation or cease its activities. 

EN 

46 

   EN 

 
 
(cid:208) 2000/12/EC Article 6 (adapted) 

Article 11 

Management body and place of the head office of credit institutions 

1. 

The  competent  authorities  shall  grant  an  authorisation  to  the  credit  institution  only 
when there are at least two persons who effectively direct the business of the credit 
institution. 

⌦ They ⌫  Moreover,  the  authorities  concerned  shall  not  grant  authorisation  if 
these  persons  are  not  of  sufficiently  good  repute  or  lack  sufficient  experience  to 
perform such duties. 

2. 

Each Member State shall require that: 

(a) 

(b) 

any credit institution which is a legal person and which, under its national law, 
has  a  registered  office ⌦ shall ⌫  have  its  head  office  in  the  same  Member 
State as its registered office; 

any  other  credit  institution  ⌦ shall ⌫  have  its  head  office  in  the  Member 
State  which  issued  its  authorisation  and  in  which  it  actually  carries  on  its 
business. 

(cid:208) 2000/12/EC Art. 7 (adapted) 

Article 12 

Shareholders and members 

The  competent  authorities  shall  not  grant  authorisation  for  the  taking-up  of  the 
business  of  credit  institutions ⌦ unless ⌫  before  they  have  been  informed  of  the 
identities of the shareholders or members, whether direct or indirect, natural or legal 
persons, that have qualifying holdings, and of the amounts of those holdings. 

⌦ In determining a ⌫ For the purpose of the definition of qualifying holding in the 
context  of  this  Article,  the  voting  rights  referred  to  in  Article  7  ⌦ 92 ⌫  of 
CouncilDirective  88/627/EEC24  ⌦ 2001/34/EC of  the  European  Parliament  and  of 
the Council25 ⌫ shall be taken into consideration. 

The competent authorities shall refuse authorisation if, taking into account the need 
to  ensure  the  sound  and  prudent  management  of  a  credit  institution,  they  are  not 
satisfied as to the suitability of the abovementioned shareholders or members. 

Council Directive 88/627/EEC of 12 December 1988 on the information to be published when a major 
holding in a listed company is acquired or disposed of (OJ L 348, 17.12.1988, p. 62). 
OJ L 184 , 6.7.2001, p. 1. 

1. 

2. 

24 

25 

EN 

47 

   EN 

 
 
 
                                                 
3. 

Where  close  links  exist  between  the  credit  institution  and  other  natural  or  legal 
persons, the competent authorities shall grant authorisation only if those links do not 
prevent the effective exercise of their supervisory functions. 

The  competent  authorities  shall  also  refuse  authorisation  if  the  laws,  regulations  or 
administrative  provisions  of  a  ⌦ third ⌫  non-member  country  governing  one  or 
more  natural  or  legal  persons  with  which  the  credit  institution  has  close  links,  or 
difficulties  involved  in  their  enforcement  ⌦ of  those  laws,  regulations  or 
administrative  provisions ⌫  ,  prevent  the  effective  exercise  of  their  supervisory 
functions. 

The  competent  authorities  shall  require  credit  institutions  to  provide  them  with  the 
information they require to monitor compliance with the conditions referred to in this 
paragraph on a continuous basis. 

(cid:208) 2000/12/EC Articles 8 & 9 
(adapted) 

Article 8 

Programme of operations and structural organisation 

Member States shall require applications for authorisation to be accompanied by a programme 
of  operations  setting  out,  inter  alia,  the  types  of  business  envisaged  and  the  structural 
organisation of the institution. 

Article 9 

Economic needs 

Member States may not require the application for authorisation to be examined in terms of 
the economic needs of the market. 

(cid:208) 2000/12/EC Article 10 
(adapted) 

Article 13 

Authorisation refusal 

Reasons  shall  be  given  whenever  an  authorisation  is  refused  and  the  applicant  shall  be 
notified  thereof  within  six  months  of  receipt  of  the  application  or,  should  the  latter  be 
incomplete,  within  six  months  of  the  applicant's  sending  the  information  required  for  the 
decision.  A  decision  shall,  in  any  case,  be  taken  within  12  months  of  the  receipt  of  the 
application. 

EN 

48 

   EN 

 
 
 
(cid:208) 2000/12/EC Article 11 
(adapted) 

Article 14 

Notification of the authorisation to the Commission 

Every authorisation shall be notified to the Commission.  

⌦ The  name  of  e ⌫  Each  credit  institution  ⌦ to ⌫  shall  be  entered  in  a  list  ⌦ which 
authorisation  has  been  granted  shall  be  entered  in  a  list ⌫.  which  t  ⌦ The ⌫  the 
Commission  shall  publish  ⌦ that  list ⌫  in  the  Official  Journal  of  the  European 
⌦ Union ⌫ Communities and shall keep ⌦ it ⌫ up to date. 

(cid:208) 2000/12/EC Art. 12 (adapted) 

Article 15 

Prior consultation with the competent authorities of other Member States 

1.  ⌦ The  competent  authority  shall,  before  granting  authorisation  to  a  credit 
institution, ⌫ There must be prior consultation with ⌦ consult ⌫ the competent authorities 
of  the  other  Member  State  involved  on  the  authorisation  of  a  credit  institution  ⌦ in  the 
following cases ⌫ which is: 

⌦ (a) the  credit  institution  concerned  is ⌫  a  subsidiary  of  a  credit  institution 

authorised in another Member State, or 

⌦ (b) the credit institution concerned is ⌫ a subsidiary of the parent undertaking of 

a credit institution authorised in another Member State, or; 

⌦ (c) the credit institution concerned is ⌫ controlled by the same persons, whether 
natural  or  legal,  as  control  a  credit  institution  authorised  in  another  Member 
State. 

The competent authority ⌦ shall, before granting authorisation to a credit institution, 
2. 
consult  the  competent  authority ⌫  of  a  Member  State  involved,  responsible  for  the 
supervision  of  insurance  undertakings  or  investment  firms,  shall  be  consulted  prior  to  the 
granting of an authorisation to a credit institution which is: ⌦ in the following cases: ⌫ 

(cid:208) 2002/87/EC Art. 29.2 (adapted) 

(a)  ⌦ the  credit  institution  concerned  is ⌫  a  subsidiary  of  an  insurance 

undertaking or investment firm authorised in the Community, or; 

(b)  ⌦ the credit institution concerned is ⌫ a subsidiary of the parent undertaking 
of an insurance undertaking or investment firm authorised in the Community;or 

EN 

49 

   EN 

 
 
 
 
(c)  ⌦ the  credit  institution  concerned  is ⌫  controlled  by  the  same  person, 
whether  natural  or  legal, ⌦ as ⌫  who  controls  an  insurance  undertaking  or 
investment firm authorised in the Community. 

The relevant competent authorities referred to in the first and second paragraphs ⌦ 1 
3. 
and  2 ⌫  shall  in  particular  consult  each  other  when  assessing  the  suitability  of  the 
shareholders  and  the  reputation  and  experience  of  directors  involved  in  the  management  of 
another  entity  of  the  same  group.  They  shall  ⌦ exchange ⌫  inform  each  other  of  any 
information  regarding  the  suitability  of  shareholders  and  the  reputation  and  experience  of 
directors which is of relevance to the other competent authorities involved for the granting of 
an  authorisation  as  well  as  for  the  ongoing  assessment  of  compliance  with  operating 
conditions. 

(cid:208) 2000/12/EC Article 13 
(adapted) 

Article 16 

Branches of credit institutions authorised in another Member State 

Host  Member  States  may  not  require  authorisation  or  endowment  capital  for  branches  of 
credit  institutions  authorised  in  other  Member  States.  The  establishment  and  supervision  of 
such branches shall be effected ⌦ in accordance with Articles 22, 25, 26(1) to (3), 29 to 37 
and 40⌫ as prescribed in Articles 17, 20(l) to (6) and Articles 22 and 26. 

(cid:208) 2000/12/EC Art. 14 (adapted) 

Article 17 

Withdrawal of authorisation 

1. 

The  competent  authorities  may  withdraw  the  authorisation  issued  to  a  credit 
institution only where such an institution: 

(a) 

does not make use of the authorisation within 12 months, expressly renounces 
the authorisation or has ceased to engage in business for more than six months, 
if the Member State concerned has made no provision for the authorisation to 
lapse in such cases; 

(b)  has  obtained  the  authorisation  through  false  statements  or  any  other  irregular 

means; 

(c) 

no longer fulfils the conditions under which authorisation was granted; 

(d)  no longer possesses sufficient own funds or can no longer be relied on to fulfil 
its  obligations  towards  its  creditors,  and  in  particular  no  longer  provides 
security for the assets entrusted to it; 

EN 

50 

   EN 

 
 
 
(e) 

falls within one of the other cases where national law provides for withdrawal 
of authorisation. 

2. 

Reasons  ⌦ shall ⌫  must  be  given  for  any  withdrawal  of  authorisation  and  those 
concerned informed thereof;. Ssuch withdrawal shall be notified to the Commission. 

(cid:208) 2000/12/EC Article 15 
(adapted) 

Article 18 

Name 

For  the  purposes  of  exercising  their  activities,  credit  institutions  may,  notwithstanding  any 
provisions ⌦ in the host Member State ⌫ concerning the use of the words «bank», «savings 
bank» or other banking names which may exist in the host Member State, use throughout the 
territory  of  the  Community  the  same  name  as  they  use  in  the  Member  State  in  which  their 
head office is situated. In the event of there being any danger of confusion, the host Member 
State may, for the purposes of clarification, require that the name be accompanied by certain 
explanatory particulars. 

(cid:208) 2000/12/EC Art. 16 (1) 
(adapted) 

Article 19 

Qualifiying holding in a credit institution 

1. 

The Member States shall require any natural or legal person who proposes to hold, 
directly  or  indirectly,  a  qualifying  holding  in  a  credit  institution  first  to  inform  the 
competent authorities, telling them of the size of the intended holding.  

Such  a  person  must  likewise  inform  the  competent  authorities  if  he  proposes  to 
increase  his  qualifying  holding  so  that  the  proportion  of  the  voting  rights  or  of  the 
capital  held  by  him  would  reach  or  exceed  20%,  33%  or  50%  or  so  that  the  credit 
institution would become his subsidiary. 

Without  prejudice  to  the  provisions  of  paragraph  2,  the  competent  authorities  shall 
have a maximum of three months from the date of the notification provided for in the 
first ⌦ and second subparagraphs ⌫ subparagraph to oppose such a plan if, in view 
of  the  need  to  ensure  sound  and  prudent  management of the credit  institution, they 
are not satisfied as to the suitability of the person ⌦ concerned ⌫ referred to in the 
first  subparagraph.  If  they  do  not  oppose  the  plan  referred  to  in  the  first 
subparagraph, they may fix a maximum period for its implementation. 

2. 

If  the  ⌦ person  proposing  to  acquire ⌫  acquirer  of  the  holdings  referred  to  in 
paragraph  1  is  a  credit  institution,  insurance  undertaking  or  investment  firm 

(cid:208) 2002/87/EC Art. 29.3 (adapted) 

EN 

51 

   EN 

 
 
 
 
authorised in another Member State or the parent undertaking of a credit institution, 
insurance  undertaking  or  investment  firm  authorised  in  another  Member  State  or  a 
natural  or  legal  person  controlling  a  credit  institution,  insurance  undertaking  or 
investment  firm  authorised  in  another  Member  State,  and  if,  as  a  result  of  that 
acquisition,  the  ⌦ credit ⌫  institution  in  which  the  acquirer  proposes  to  hold  a 
holding  would  become  a  subsidiary  or  subject  to  the  control  of  the  acquirer,  the 
assessment  of  the  acquisition ⌦ shall ⌫  must  be  subject  to  the  prior  consultation 
⌦ provided for ⌫ referred to in Article ⌦ 15 ⌫ 12. 

(cid:208) 2000/12/EC Article 16(3)  

Article 20 

3.  The  Member  States  shall  require  any  natural  or  legal  person  who  proposes  to  dispose, 
directly  or  indirectly,  of  a  qualifying  holding  in  a  credit  institution  first  to  inform  the 
competent  authorities,  telling  them  of  the  size  of  his  intended  holding.  Such  a  person  must 
likewise inform the competent authorities if he proposes to reduce his qualifying holding so 
that the proportion of the voting rights or of the capital held by him would fall below 20%, 
33% or 50% or so that the credit institution would cease to be his subsidiary. 

(cid:208) 2000/12/EC Art. 16 (4) to (6) 
(adapted) 

Article 21 

14. 

On  becoming  aware  of  them,  c  ⌦ Credit ⌫  credit  institutions  shall  ⌦ ,  on 
becoming aware ⌫ inform the competent authorities of any acquisitions or disposals 
of  holdings  in  their  capital  that  cause  holdings  to  exceed  or  fall  below  one  of  the 
thresholds referred to in ⌦ Article 19(1) and Article 20 ⌫ paragraphs 1 and 3 ⌦ , 
inform the competent authorities of those acquisitions or disposals. ⌫ 

They shall also, at least once a year, inform ⌦ the competent authorities ⌫ them of 
the names of shareholders and members possessing qualifying holdings and the sizes 
of  such  holdings  as  shown,  for  example,  by  the  information  received  at  the  annual 
general meetings of shareholders and members or as a result of compliance with the 
regulations relating to companies listed on stock exchanges. 

25. 

The Member States shall require that, where the influence exercised by the persons 
referred to in ⌦ Article 19(1) ⌫ paragraph 1 is likely to operate to the detriment of 
the prudent and sound management of the institution, the competent authorities shall 
take appropriate measures to put an end to that situation. Such measures may consist 
for  example  in  injunctions,  sanctions  against  directors  and  managers,  or  the 
suspension  of  the  exercise  of  the  voting  rights  attaching  to  the  shares  held  by  the 
shareholders or members in question. 

Similar  measures  shall  apply  to  natural  or  legal  persons  ⌦ who  fail ⌫  failing  to 
comply  with  the  obligation  to  provide  prior  information,  as  laid  down  in 
⌦ Article 19 (1). ⌫ paragraph 1. If a holding is acquired despite the opposition of 
the competent authorities, the Member States shall, regardless of any other sanctions 

EN 

52 

   EN 

 
 
 
to  be  adopted,  provide  either  for  exercise  of  the  corresponding  voting  rights  to  be 
suspended, or for the nullity of votes cast or for the possibility of their annulment. 

36.  ⌦ In determining a ⌫ For the purposes of the definition of qualifying holding and 
other  levels  of  holding  ⌦ referred  to ⌫  set  out  in  this  Article,  the  voting  rights 
referred  to  in  Article  7  ⌦ 92 ⌫  of  Council  Directive  88/627/EEC  ⌦ Directive 
2001/34/EC ⌫ shall be taken into consideration. 

(cid:208) 2000/12/EC Article 17 
(adapted) 
(cid:214) new 

Article 22 

Procedures and internal control mechanisms 

1. 

2. 

Home Member State competent authorities shall require that every credit institution 
have sound administrative  and accounting procedures and adequate internal control 
mechanisms.  (cid:214) have  robust  governance  arrangements,  which  include  a  clear 
organisational  structure  with  well  defined,  transparent  and  consistent  lines  of 
responsibility, effective processes to identify, manage, monitor and report the risks it 
is  or  might  be  exposed  to,  and  adequate  internal  control  mechanisms,  including 
sound administrative and accounting procedures.  

The  arrangements,  processes  and  mechanisms  referred  to  in  paragraph  1  shall  be 
comprehensive  and  proportionate  to  the  nature,  scale  and  complexity  of  the  credit 
institution’s  activities.  The  technical  criteria  laid  down  in  Annex  V  shall  be  taken 
into account. 

(cid:208) 2000/12/EC 

TITLE III 

PROVISIONS CONCERNING THE FREEDOM OF ESTABLISHMENT 
AND THE FREEDOM TO PROVIDE SERVICES 

⌦ SECTION 1 CREDIT INSTITUTIONS ⌫ 

(cid:208) 2000/12/EC (adapted) 

(cid:208) 2000/12/EC Art. 18 (adapted) 

EN 

Article 23 

Credit institutions 

53 

   EN 

 
 
 
 
 
The Member States shall provide that the activities listed in Annex I may be carried on within 
their territories, in accordance with Articles ⌦ 25, 26(1) to (3), 28(1) and (2) and 29 to 37 ⌫ 
20(1) to (6), 21(1) and (2), and 22, either by the establishment of a branch or by way of the 
provision  of  services,  by  any  credit  institution  authorised  and  supervised  by  the  competent 
authorities  of  another  Member  State,  provided  that  such  activities  are  covered  by  the 
authorisation. 

⌦ SECTION 2 FINANCIAL INSTITUTIONS ⌫ 

(cid:208) 2000/12/EC (adapted) 

(cid:208) 2000/12/EC Article 19 1st & 
3rd paragraphs (adapted) 

Article 24 

Financial institutions 

1. 

The  Member  States  shall  also  provide  that  the  activities  listed  in  Annex  I  may  be 
carried  on  within  their  territories,  in  accordance  with  Articles  ⌦ 25,  26(1)  to  (3), 
28(1)  and  (2)  and  29  to  37 ⌫  20(1)  to  (6),  21(1)  and  (2),  and  22,  either  by  the 
establishment  of  a  branch  or  by  way  of  the  provision  of  services,  by  any  financial 
institution from another Member State, whether a subsidiary of a credit institution or 
the jointly-owned subsidiary of two or more credit institutions, the memorandum and 
aArticles of association of which permit the carrying on of those activities and which 
fulfils each of the following conditions: 

(a) 

(b) 

(c) 

(d) 

(e) 

the parent undertaking or undertakings must be authorised as credit institutions 
in  the  Member  State  by  the  law  of  which  the  ⌦ financial  institution ⌫ 
subsidiary is governed.; 

the activities in question must actually be carried on within the territory of the 
same Member State.; 

the  parent  undertaking  or  undertakings  must  hold  90%  or  more  of  the  voting 
rights  attaching  to  shares  in  the  capital  of  the  ⌦ financial  institution; ⌫ 
subsidiary. 

the  prudent  management  of 

the  parent  undertaking  or  undertakings  must  satisfy  the  competent  authorities 
institution ⌫ 
regarding 
subsidiary  and  must  have  declared,  with  the  consent  of  the  relevant  home 
Member State competent authorities, that they jointly and severally guarantee 
the commitments entered into by the ⌦ financial institution; ⌫ subsidiary, 

the  ⌦ financial 

the ⌦ financial institution ⌫ subsidiary must be effectively included, for the 
activities in question in particular, in the consolidated supervision of the parent 
undertaking, or of each of the parent undertakings, in accordance with Articles 
52 to 56 ⌦ Title V, Chapter 4, Section 1 ⌫ , in particular for the calculation 

EN 

54 

   EN 

 
 
 
of the solvency ratio, for the control of large exposures and for purposes of the 
limitation of holdings provided for in Article ⌦ 120 ⌫ 50. 

Compliance  with  these  conditions  ⌦ shall ⌫  must  be  verified  by  the  competent 
authorities  of  the  home  Member  State  and  the  latter  ⌦ shall ⌫  must  supply  the 
⌦ financial  institution ⌫  subsidiary  with  a  certificate  of  compliance  which  must 
form part of the notification referred to in Articles ⌦ 25 and 28 ⌫ 20(1) to (6), and 
21(1) and (2). 

The competent authorities of the home Member State shall ensure the supervision of 
the ⌦ financial  institution ⌫  subsidiary  in  accordance  with  Articles ⌦10 (1),  19 
to 22, 40, 42 to 52 and 54 ⌫ 5(3), 16, 17, 26, 28, 29, 30, and 32. 

(cid:208) 2000/12/EC Art. 19 
(sixth paragraph) (adapted) 

If a financial institution ⌦ as referred to in the first subparagraph of paragraph 1 ⌫ 
eligible under this Article should ceases to fulfil any of the conditions imposed, the 
home Member State shall notify the competent authorities of the host Member State 
and the activities carried on by that ⌦ financial ⌫ institution in the host Member 
State shall become subject to the legislation of the host Member State. 

(cid:208) 2000/12/EC Art. 19 
fourth paragraph (adapted) 

The  provisions  mentioned  in  ⌦ paragraphs  1  and  2 ⌫  this  Article  shall  apply 
mutatis mutandis to subsidiaries ⌦of a financial institution as referred to in the first 
subparagraph of paragraph 1 ⌫subject to the necessary modifications. In particular, 
the  words  «credit  institution»  should  be  read  as  «financial  institution  fulfilling  the 
conditions laid down in Article 19» and the word «authorisation» as «memorandum 
and Articles of association». 

2. 

3. 

(cid:208) 2000/12/EC Art. (19) 5th & 6th 
paragraphs (adapted) 

The second subparagraph of Article 20(3) shall read:  

«The home Member State competent authorities shall also communicate the amount of own 
funds of the subsidiary financial institution and the consolidated solvency ratio of the credit 
institution which is its parent undertaking». 

If a financial institution eligible under this Article should cease to fulfil any of the conditions 
imposed, the home Member State shall notify the competent authorities of the host Member 
State and the activities carried on by that institution in the host Member State become subject 
to the legislation of the host Member State. 

EN 

55 

   EN 

 
 
 
 
⌦ SECTION 3 EXERCISE OF THE RIGHT OF ESTABLISHMENT⌫ 

(cid:208) 2000/12/EC (adapted) 

(cid:208) 2000/12/EC Art. 20 (1) (2) & 
(3) 1st & 2nd subparagraphs 
(adapted) 

Article 25 

Exercise of the right of establishment 

1. 

2. 

3. 

A  credit  institution  wishing  to  establish  a  branch  within  the  territory  of  another 
Member  State  shall  notify  the  competent  authorities  of  its  ⌦ home ⌫  Member 
State. 

TheMember States State shall require every credit institution wishing to establish a 
branch in another Member State to provide the following information when effecting 
the notification referred to in paragraph 1: 

(a) 

the Member State within the territory of which it plans to establish a branch; 

(b) 

a  programme  of  operations  setting  out,  inter  alia,  the  types  of  business 
envisaged and the structural organisation of the branch; 

(c) 

the address in the host Member State from which documents may be obtained; 

(d) 

the names of those ⌦ to be ⌫ responsible for the management of the branch. 

Unless the competent authorities of the home Member State have reason to doubt the 
adequacy  of  the  administrative  structure  or  the  financial  situation  of  the  credit 
institution,  taking  into  account  the  activities  envisaged,  they  shall  within  three 
months  of  receipt  of  the  information  referred  to  in  paragraph  2  communicate  that 
information to the competent authorities of the host Member State and shall inform 
the ⌦ credit ⌫ institution accordingly. 

The home Member State competent authorities shall also communicate the amount of 
own funds and the solvency ratio of the credit institution. 

(cid:208) 2000/12/EC Art. 19 5th 
subparagraph (adapted) 

⌦ By  way  of  derogation  from  the  second  subparagraph,  in  the  case  referred  to  in 
Article  24,⌫  “The  the  home  Member  State  competent  authorities  shall  also 
communicate the amount of own funds of the subsidiary the financial institution and 
the  consolidated  solvency  ratio  of  the  credit  institution  which  is  its  parent 
undertaking.” 

EN 

56 

   EN 

 
 
 
 
(cid:208) 2000/12/EC Art. 20 (3) 3rd 
subparagraph (adapted) 

4. 

Where the competent authorities of the home Member State refuse to communicate 
the  information  referred  to  in  paragraph  2  to  the  competent  authorities  of  the  host 
Member State, they shall give reasons for their refusal to the ⌦ credit ⌫ institution 
concerned within three months of receipt of all the information. 

That refusal, or a failure to reply, shall be subject to a right to apply to the courts in 
the home Member State. 

(cid:208) 2000/12/EC Art. 20(4) to (7) 
(adapted) 

Article 26 

14. 

25. 

36. 

47. 

Before  the  branch  of  a  credit  institution  commences  its  activities  the  competent 
authorities  of  the  host  Member  State  shall,  within  two  months  of  receiving  the 
information ⌦ referred to ⌫ mentioned in ⌦ Article 25 ⌫ (paragraph3), prepare 
for  the  supervision  of  the  credit  institution  in  accordance  with  ⌦ Section  5 ⌫ 
Article 22 and if necessary indicate the conditions under which, in the interest of the 
general good, those activities must be carried on in the host Member State. 

On receipt of a communication from the competent authorities of the host Member 
State, or in the event of the expiry of the period provided for in paragraph 14 without 
receipt  of  any  communication  from  the  latter,  the  branch  may  be  established  and 
⌦ may ⌫ commence its activities. 

In  the  event  of  a  change  in  any  of  the  particulars  communicated  pursuant  to 
⌦ points  (b),  (c)  or  (d)  of  Article  25 ⌫  (paragraph2)  (b),  (c)  or  (d),  a  credit 
institution  shall  give  written  notice  of  the  change  in  question  to  the  competent 
authorities of the home and host Member States at least one month before making the 
change so as to enable the competent authorities of the home Member State to take a 
decision pursuant to ⌦ Article 25 ⌫(paragraph3) and the competent authorities of 
the  host  Member  State  to  take  a  decision  on  the  change  pursuant  to  paragraph  14 
⌦ of this Article. ⌫ 4. 

Branches which have commenced their activities, in accordance with the provisions 
in  force  in  their  host  Member  States,  before  1  January  1993,  shall  be  presumed  to 
have been subject to the procedure laid down in ⌦ Article 25 and in ⌫ paragraphs 
1 ⌦ and 2 ⌫ to 5 ⌦ of this Article. ⌫ They shall be governed, from ⌦ that ⌫ 
the abovementioned date, by paragraph 6 ⌦ 3 of this Article ⌫ , and by ⌦ Article 
23, Sections 2 and 5 and Article 43 ⌫ Articles 18, 19, 22 and 29. 

EN 

57 

   EN 

 
 
 
(cid:208) 2000/12/EC Art. 1 (3) final 
clause 

Article 27 

Any any number of places of business set up in the same Member State by a credit institution 
with headquarters in another Member State shall be regarded as a single branch;. 

⌦ SECTION 4 EXERCISE OF THE FREEDOM TO PROVIDE SERVICES ⌫ 

(cid:208) 2000/12/EC (adapted) 

(cid:208) 2000/12/EC Art. 21 (adapted) 

Article 28 

Exercise of the freedom to provide services 

1. 

2. 

3. 

Any credit institution wishing to exercise the freedom to provide services by carrying 
on its activities within the territory of another Member State for the first time shall 
notify the competent authorities of the home Member State, of the activities on the 
list in Annex I which it intends to carry on. 

The  competent  authorities  of  the  home  Member  State  shall,  within  one  month  of 
receipt  of  the  notification ⌦ provided  for ⌫  mentioned  in  paragraph  1,  send  that 
notification to the competent authorities of the host Member State. 

This Article shall not affect rights acquired by credit institutions providing services 
before 1 January 1993. 

⌦ SECTION 5 POWERS OF THE COMPETENT AUTHORITIES OF THE HOST 
MEMBER STATE ⌫ 

(cid:208) 2000/12/EC (adapted) 

(cid:208) 2000/12/EC Art. 22(1) 
(adapted) 

Article 29 

Power of the competent authorities of the host Member State 

1.Host Member States may, for statistical purposes, require that all credit institutions having 
branches  within  their  territories  shall  report  periodically  on  their  activities  in  those  host 
Member States to the competent authorities of those host Member States. 

EN 

58 

   EN 

 
 
 
 
 
 
In  discharging  the  responsibilities  imposed  on  them  in  Article  ⌦ 41 ⌫  27,  host  Member 
States may require that branches of credit institutions from other Member States provide the 
same information as they require from national credit institutions for that purpose. 

(cid:208) 2000/12/EC Art. 22(2) to (4) 
(adapted) 

Article 30 

12. 

Where  the  competent  authorities  of  a  host  Member  State  ascertain ⌦ that ⌫  than 
an ⌦ credit ⌫ institution having a branch or providing services within its territory 
is  not  complying  with  the  legal  provisions  adopted  in  that  State  pursuant  to  the 
provisions of this Directive involving powers of the host Member State's competent 
authorities,  those  authorities  shall  require  the ⌦ credit ⌫  institution  concerned  to 
put an end to that irregular situation. 

23. 

If  the  ⌦ credit ⌫  institution  concerned  fails  to  take  the  necessary  steps,  the 
competent  authorities  of  the  host  Member  State  shall  inform  the  competent 
authorities of the home Member State accordingly.  

The  competent  authorities  of  the  home  Member  State  shall,  at  the  earliest 
opportunity, take all appropriate measures to ensure that the ⌦ credit ⌫ institution 
concerned puts an end to that irregular situation. The nature of those measures shall 
be communicated to the competent authorities of the host Member State. 

34. 

If, despite the measures taken by the home Member State or because such measures 
prove  inadequate  or  are  not  available  in  the  Member  State  in  question,  the 
⌦ credit ⌫ institution persists in violating the legal rules referred to in paragraph 2 
⌦ 1 ⌫ in force in the host Member State, the latter State may, after informing the 
competent  authorities  of  the  home  Member  State,  take  appropriate  measures  to 
prevent or to punish further irregularities and, in so far as is necessary, to prevent that 
⌦ credit ⌫  institution  from  initiating  further  transactions  within  its  territory.  The 
Member States shall ensure that within their territories it is possible to serve the legal 
documents necessary for these measures on credit institutions. 

(cid:208) 2000/12/EC Art. 22(5) 
(adapted) 

Article 31 

5.The provisions of ⌦ Articles 29 and 30 ⌫ paragraph 1 to 4 shall not affect the power of 
host  Member  States  to  take  appropriate  measures  to  prevent  or  to  punish  irregularities 
committed within their territories which are contrary to the legal rules they have adopted in 
the  interests  of  the  general  good.  This  shall  include  the  possibility  of  preventing  offending 
⌦ credit ⌫ institutions from initiating any further transactions within their territories. 

EN 

59 

   EN 

 
 
 
(cid:208) 2000/12/EC Art. 22(6) 
(adapted) 

Article 32 

6. Any measure adopted pursuant to paragraph (2) ⌦ Article 30(2) and (3), or Article 31 ⌫ 
paragraph  3,  4  and  5  involving  penalties  or  restrictions  on  the  exercise  of  the  freedom  to 
provide services must be properly justified and communicated to the ⌦ credit ⌫ institution 
concerned.  Every  such  measure  shall  be  subject  to  a  right  of  appeal  to  the  courts  in  the 
Member State the authorities of which adopted it. 

(cid:208) 2000/12/EC Art. 22(7) 
(adapted) 

Article 33 

7. Before following the procedure provided for in ⌦ Article 30 ⌫ paragraph 2, 3 and 4, the 
competent authorities of the host Member State may, in emergencies, take any precautionary 
measures  necessary  to  protect  the  interests  of  depositors,  investors  and  others  to  whom 
services  are  provided.  The  Commission  and  the  competent  authorities  of  the  other  Member 
States concerned must be informed of such measures at the earliest opportunity. 

The  Commission  may,  after  consulting  the  competent  authorities  of  the  Member  States 
concerned, decide that the Member State in question must amend or abolish those measures. 

(cid:208) 2000/12/EC Art. 22 (8) 
(adapted) 

Article 34 

8.Host  Member  States  may  exercise  the  powers  conferred  on  them  under  this  Directive  by 
taking  appropriate  measures  to  prevent  or  to  punish  irregularities  committed  within  their 
territories.  This  shall  include  the  possibility  of  preventing  ⌦ credit ⌫  institutions  from 
initiating further transactions within their territories. 

(cid:208) 2000/12/EC Art. 22(9) 
(adapted) 

Article 35 

9.In  the  event  of  the  withdrawal  of  authorisation,  the  competent  authorities  of  the  host 
Member  State  shall  be  informed  and  shall  take  appropriate  measures  to  prevent  the 
⌦ credit ⌫ institution concerned from initiating further transactions within its territory and 
to safeguard the interests of depositors. 

EN 

60 

   EN 

 
 
 
 
 
(cid:208) 2000/12/EC Art. 22 (10) 
(adapted) 

Article 36 

10.The Member States shall inform the Commission of the number and type of cases in which 
there  has  been  a  refusal  pursuant  to  Article  ⌦ 25  and  26 ⌫  20(1)  to  (6)  or  in  which 
measures have been taken in accordance with paragraph 4 of this Article ⌦ Article 30(3) ⌫ 
paragraph 4 of this Article. 

(cid:208) 2000/12/EC Art. 22(11) 
(adapted) 

Article 37 

11.⌦ This Section shall not ⌫ Nothing in this Article shall prevent credit institutions with 
head  offices  in  other  Member  States  from  advertising  their  services  through  all  available 
means of communication in the host Member State, subject to any rules governing the form 
and the content of such advertising adopted in the interests of the general good. 

(cid:208) 2000/12/EC 

TITLE IV 

RELATIONS WITH THIRD COUNTRIES 

⌦ SECTION 1 NOTIFICATION IN RELATION TO THIRD COUNTRIES' 
UNDERTAKINGS AND CONDITIONS OF ACCESS TO THE MARKETS OF THESE 
COUNTRIES ⌫ 

(cid:208) 2000/12/EC (adapted) 

(cid:208) 2000/12/EC Art. 23 (adapted) 

Notification of the subsidiaries of third countries' undertakings and conditions of access to the 
markets of these countries 

1. 

The competent authorities of the Member States shall inform the Commission 1 and 
the competent authorities of the other Member States : 

(a)  of  any  authorisation  of  a  direct  or  indirect  subsidiary  one  or  more  parent 
undertakings of which are governed by the laws of a third country; 

(b)  whenever  such  a  parent  undertaking  acquires  a  holding  in  a  Community  credit 
institution such that the latter would become its subsidiary. 

EN 

61 

   EN 

 
 
 
 
 
 
2. 

3. 

4. 

5. 

6. 

When  authorisation  is  granted  to  the  direct  or  indirect  subsidiary  of  one  or  more 
parent undertakings governed by the law of third countries, the structure of the group 
shall be specified in the notification which the competent authorities shall address to 
the Commission in accordance with Article 11. 

The  Member  States  shall  inform  the  Commission  of  any  general  difficulties 
encountered  by  their  credit  institutions  in  establishing  themselves  or  carrying  on 
banking activities in a third country. 

The  Commission  shall  periodically  draw  up  a  report  examining  the  treatment 
accorded to Community credit institutions in third countries, in the terms referred to 
in  paragraphs  4  and  5,  as  regards  establishment  and  the  carrying-on  of  banking 
activities,  and  the  acquisition  of  holdings  in  third-country  credit  institutions.  The 
Commission shall submit those reports to the Council, together with any appropriate 
proposals. 

Whenever it appears to the Commission, either on the basis of the reports referred to 
in  paragraph  3  or  on  the  basis  of  other  information,  that  a  third  country  is  not 
granting  Community  credit  institutions  effective  market  access  comparable  to  that 
granted  by  the  Community  to  credit  institutions  from  that  third  country,  the 
Commission  may  submit  proposals  to  the  Council  for  the  appropriate  mandate  for 
negotiation  with  a  view  to  obtaining  comparable  competitive  opportunities  for 
Community credit institutions. The Council shall decide by a qualified majority. 

Whenever it appears to the Commission, either on the basis of the reports referred to 
in paragraph 1 or on the basis of other information that Community credit institutions 
in  a  third  country  do  not  receive  national  treatment  offering  the  same  competitive 
opportunities  as  are  available  to  domestic  credit  institutions  and  the  conditions  of 
effective market access are not fulfilled, the Commission may initiate negotiations in 
order to remedy the situation. 

In  the  circumstances  described  in  the  first  subparagraph,  it  may  also  be  decided  at 
any time, and in addition to initiating negotiations, in accordance with the procedure 
laid down in Article 60 (2), that the competent authorities of the Member States must 
limit  or  suspend  their  decisions  regarding  requests  pending  at  the  moment  of  the 
decision or future requests for authorisations and the acquisition of holdings by direct 
or indirect parent undertakings governed by the laws of the third country in question. 
The duration of the measures referred to may not exceed three months. 

Before  the  end  of  that  three-month  period,  and  in  the  light  of  the  results  of  the 
negotiations, the Council may, acting on a proposal from the Commission, decide by 
a qualified majority whether the measures shall be continued. 

6. 

Whenever  it  appears  to  the  Commission  that  one  of  the  situations  described  in 
paragraphs  4  and  5  of  Article  39  obtains,  the  Member  States  shall  inform  it  at  its 
request: 

(a) 
of  any  request  for  the  authorisation  of  a  direct  or  indirect  subsidiary  one  or 
more parent undertakings of which are governed by the laws of the third country in 
question; 

EN 

62 

   EN 

 
(b)  whenever  they  are  informed  in  accordance  with  Article  16  that  such  an 
undertaking proposes to acquire a holding in a Community credit institution such that 
the latter would become its subsidiary. 

This obligation to provide information shall lapse whenever an agreement is reached 
with the third country referred to in paragraph 4 or 5or when the measures referred to 
in the second and third subparagraphs of paragraph 5 cease to apply. 

7. 

Measures  taken  pursuant  to  this  Article  comply  with  the  Community's  obligations 
under any international agreements, bilateral or multilateral, governing the taking-up 
and pursuit of the business of credit institutions. 

ê 2000/12/EC Art. 24 (adapted) 
(cid:206)1 Directive 2004/xx/EC Art. 3.7 

Article 38 

Branches of credit institutions having their head offices outside the Community 

1. 
Member  States  shall  not  apply  to  branches  of  credit  institutions  having  their  head 
office  outside  the  Community,  when  commencing  or  carrying  on  their  business,  provisions 
which result in more favourable treatment than that accorded to branches of credit institutions 
having their head office in the Community. 

The competent authorities shall notify the Commission and the (cid:206)1 European Banking 
2. 
Committee   of  all  authorisations  for  branches  granted  to  credit  institutions  having  their 
head office outside the Community. 

3. 
Without prejudice to paragraph 1, the Community may, through agreements concluded 
in  accordance  with  the  Treaty  with  one  or  more  third  countries,  agree  to  apply  provisions 
which, on the  basis of the principle of reciprocity, accord to branches of a credit institution 
having its head office outside the Community identical treatment throughout the territory of 
the Community. 

(cid:216) new 

SECTION 2  

COOPERATION WITH THIRD COUNTRIES' COMPETENT AUTHORITIES 
REGARDING SUPERVISION ON A CONSOLIDATED BASIS  

(cid:208) 2000/12/EC Art. 25 (adapted) 

Article 39 

1. 

The  Commission  may  submit  proposals  to  the  Council,  either  at  the  request  of  a 
Member State or on its own initiative, for the negotiation of agreements with one or 

EN 

63 

   EN 

 
 
 
 
more third countries regarding the means of exercising supervision on a consolidated 
basis over ⌦ the following ⌫: 

(a) 

(b) 

credit  institutions  the  parent  undertakings  of  which  have  their  head  offices 
situated in a third country; and 

credit institutions situated in third countries the parent undertakings of which, 
whether  credit  institutions  or  financial  holding  companies,  have  their  head 
offices in the Community. 

2. 

The agreements referred to in paragraph 1 shall, in particular, seek to ensure ⌦ the 
following ⌫ both: 

(a) 

(b) 

that  the  competent  authorities  of  the  Member  States  are  able  to  obtain  the 
information  necessary  for  the  supervision,  on  the  basis  of  their  consolidated 
financial  situations,  of  credit  institutions  or  financial  holding  companies 
situated in the Community and which have as subsidiaries credit institutions or 
financial institutions situated outside the Community, or holding participation 
in such institutions; 

that  the  competent  authorities  of  third  countries  are  able  to  obtain  the 
information  necessary  for  the  supervision  of  parent  undertakings  the  head 
offices  of  which  are  situated  within  their  territories  and  which  have  as 
subsidiaries credit institutions or financial institutions situated in one or more 
Member States or holding participation in such institutions. 

3. 

Without prejudice to Article 300(1) and (2) of the Treaty establishing the European 
Community,  the  Commission  shall,  with  the  assistance  of  the  European  Banking 
Committee, examine the outcome of the negotiations referred to in paragraph 1 and 
the resulting situation. 

(cid:208) Directive 2004/xx/EC Art. 3.8 

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(cid:208) 2000/12/EC  

TITLE V 

(cid:208) 2000/12/EC 
(cid:214) new 

PRINCIPLES AND TECHNICAL INSTRUMENTS FOR 
PRUDENTIAL SUPERVISION (cid:214) AND DISCLOSURE  

(cid:208) 2000/12/EC 

CHAPTER 1 

PRINCIPLES OF PRUDENTIAL SUPERVISION 

(cid:216) new 

SECTION 1  

COMPETENCE OF HOME AND HOST MEMBER STATE 

(cid:208) 2000/12/EC Art. 26 (adapted) 

Article 40 

Competence of control of the home Member State 

1. 

2. 

The  prudential  supervision  of  a  credit  institution,  including  that  of  the  activities  it 
carries  on  accordance  with  Articles  18  and  19  ⌦ 23  and  24 ⌫  ,  shall  be  the 
responsibility  of  the  competent  authorities  of  the  home  Member  State,  without 
prejudice  to  those  provisions  of  this  Directive  which  give  responsibility  to  the 
authorities of the host Member State. 

Paragraph  1  shall  not  prevent  supervision  on  a  consolidated  basis  pursuant  to  this 
Directive. 

(cid:208) 2000/12/EC Art 27 (adapted) 

Article 41 

Competence of the host Member State 

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Host  Member  States  shall  ⌦ ,  pending  further  coordination, ⌫  retain  responsibility  in 
cooperation with the competent authorities of the home Member State for the supervision of 
the liquidity of the branches of credit institutions pending further coordination.  

Without prejudice to the measures necessary for the reinforcement of the European Monetary 
System,  host  Member  States  shall  retain  complete  responsibility  for  the  measures  resulting 
from the implementation of their monetary policies.  

Such measures may not provide for discriminatory or restrictive treatment based on the fact 
that a credit institution is authorised in another Member State. 

(cid:208) 2000/12/EC Art 28 (adapted) 

Article 42 

Collaboration concerning supervision 

The competent authorities of the Member States concerned shall collaborate closely in order 
to supervise the activities of credit institutions operating, in particular by having established 
branches there, in one or more Member States other than that in which their head offices are 
situated. They shall supply one another with all information concerning the management and 
ownership  of  such  credit  institutions  that  is  likely  to  facilitate  their  supervision  and  the 
examination  of  the  conditions  for  their  authorisation,  and  all  information  likely  to  facilitate 
the  monitoring  of  such  institutions,  in  particular  with  regard  to  liquidity,  solvency,  deposit 
guarantees,  the  limiting  of  large  exposures,  administrative  and  accounting  procedures  and 
internal control mechanisms. 

(cid:208) 2000/12/EC Art. 29 (adapted) 

Article 43 

On-the-spot verification of branches established in another Member State 

1. 

2. 

3. 

Host  Member  States  shall  provide  that,  where  a  credit  institution  authorised  in 
another  Member  State  carries  on  its  activities  through  a  branch,  the  competent 
authorities of the home Member State may, after having first informed the competent 
authorities  of  the  host  Member  State,  carry  out  themselves  or  through  the 
intermediary of persons they appoint for that purpose on-the-spot verification of the 
information referred to in Article ⌦ 42 ⌫ 28. 

The competent authorities of the home Member State may also, for purposes of the 
verification of branches, have recourse to one of the other procedures laid down in 
Article ⌦ 141 ⌫ 55(7). 

This  Article  ⌦ Paragraphs  1  and  2 ⌫  shall  not  affect  the  right  of  the  competent 
authorities  of  the  host  Member  State  to  carry  out,  in  the  discharge  of  their 
responsibilities under this Directive, on-the-spot verifications of branches established 
within their territory. 

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⌦ SECTION 2 EXCHANGE OF INFORMATION AND PROFESSIONAL SECRECY ⌫ 

(cid:208) 2000/12/EC (adapted) 

(cid:208) 2000/12/EC Art. 30 (1) to (3) 
(adapted) 

Article 44 

Exchange of information and professional secrecy 

1. 

TheMember  States  shall  provide  that  all  persons  working  ⌦ for ⌫  or  who  have 
worked for the competent authorities, as well as auditors or experts acting on behalf 
of  the  competent  authorities,  shall  be  bound  by  the  obligation  of  professional 
secrecy.  

⌦ No ⌫  This  means  that  no  confidential  information  which  they  may  receive  in 
the  course  of  their  duties  may  be  divulged  to  any  person  or  authority  whatsoever, 
except in summary or collective form, such that individual ⌦ credit ⌫ institutions 
cannot be identified, without prejudice to cases covered by criminal law. 

Nevertheless,  where  a  credit  institution  has  been  declared  bankrupt  or  is  being 
compulsorily  wound  up,  confidential  information  which  does  not  concern  third 
parties involved in attempts to rescue that credit institution may be divulged in civil 
or commercial proceedings. 

2. 

Paragraph 1 shall not prevent the competent authorities of the various Member States 
from  exchanging  information  in  accordance  with  this  Directive  and  with  other 
Directives  applicable  to  credit  institutions.  That  information  shall  be  subject  to  the 
conditions of professional secrecy indicated in paragraph 1. 

(cid:208) 2000/12/EC Art. 30 (4) 
(adapted) 

Article 45 

information  under  ⌦ Article  44 ⌫ 
4.Competent  authorities  receiving  confidential 
paragraphs 1 or 2 may use it only in the course of their duties ⌦ and only for the following 
purposes ⌫: 

(a) 
to  check  that  the  conditions  governing  the  taking-up  of  the  business  of  credit 
institutions are met and to facilitate monitoring, on a non-consolidated or consolidated basis, 
of  the  conduct  of  such  business,  especially  with  regard  to  the  monitoring  of  liquidity, 
solvency, large exposures, and administrative and accounting procedures and internal control 
mechanisms;, or 

(b) 

to impose sanctions;, or 

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(c) 

in an administrative appeal against a decision of the competent authority;, or 

in court proceedings initiated pursuant to Article 33 ⌦ 55 ⌫ or to special provisions 

(d) 
provided for in this in other Directives adopted in the field of credit institutions. 

(cid:208) 2000/12/EC Art. 30 (3) 
(adapted) 

Article 46 

3. 
Member  States  may  conclude  cooperation  agreements,  providing  for  exchanges  of 
information, with the competent authorities of third countries or with authorities or bodies of 
third  countries  as  defined  in  paragraphs  5  and  6  ⌦ Articles  47  and  48(1) ⌫  only  if  the 
information  disclosed  is  subject  to  guarantees  of  professional  secrecy  at  least  equivalent  to 
those  referred  to  in  this  Article.  Such  exchange  of  information  must  be  for  the  purpose  of 
performing the supervisory task of the authorities or bodies mentioned. 

Where the information originates in another Member State, it may not be disclosed without 
the  express  agreement  of  the  competent  authorities  which  have  disclosed  it  and,  where 
appropriate, solely for the purposes for which those authorities gave their agreement. 

(cid:208) 2000/12/EC Art 30 (5) 
(adapted) 

Article 47 

5.  Paragraphs  1  and  4  ⌦ Articles  44(1)  and  45 ⌫  shall  not  preclude  the  exchange  of 
information within a Member State, where there are two or more competent authorities in the 
same  Member  State,  or  between  Member  States,  between  competent  authorities  and ⌦ the 
following⌫:  

(a) 
authorities entrusted with the public duty of supervising other financial organisations 
and  insurance  companies  and  the  authorities  responsible  for  the  supervision  of  financial 
markets.; 

bodies  involved  in  the  liquidation  and  bankruptcy  of  credit  institutions  and  in  other 

(b) 
similar procedures.; 

persons  responsible  for  carrying  out  statutory  audits  of  the  accounts  of  credit 

(c) 
institutions and other financial institutions., 

in the discharge of their supervisory functions., and 

⌦ Nor  shall  they  preclude ⌫  the  disclosure  to  bodies  which  administer  deposit-guarantee 
schemes of information necessary to the exercise of their functions.  

⌦ In  both  cases,  the ⌫  The  information  received  shall  be  subject  to  the  conditions  of 
professional secrecy ⌦ specified ⌫ indicated in paragraph 1⌦ Article 44(1) ⌫. 

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(cid:208) 2000/12/EC Art. 30 (6) & (7) 
(adapted) 

Article 48 

16. 

Notwithstanding  ⌦ Articles  44  to  46 ⌫  paragraphs  1  to  4,  Member  States  may 
authorise the exchanges of information between the competent authorities and ⌦ the 
following⌫:  

(a) 

(b) 

the  authorities  responsible  for  overseeing  the  bodies,  involved  in  the 
liquidation and bankruptcy of credit institutions and other similar procedures; , 
or 

the  authorities  responsible  for  overseeing  persons  charged  with  carrying  out 
statutory  audits  of  the  accounts  of  insurance  undertakings,  credit  institutions, 
investment firms and other financial institutions. 

⌦ In  such  cases, ⌫  Member  States  which  have  recourse  to  the  provisions  of  the 
first  subparagraph  shall  require  ⌦ fulfilment  of ⌫  at  least  that  the  following 
conditions are met: 

the  information  ⌦ must ⌫  shall  be  for  the  purpose  of  performing  the 

(a) 
supervisory task referred to in the first subparagraph.; 

(b) 

information  received  in  this  context  ⌦ must ⌫  shall  be  subject  to  the 
in  ⌦ Article  44(1) ⌫ 
conditions  of  professional  secrecy 
paragraph1).; 

imposed 

(c)  where  the  information  originates  in  another  Member  State,  it  may  not  be 
disclosed  without  the  express  agreement  of  the  competent  authorities  which 
have  disclosed  it  and,  where  appropriate,  solely  for  the  purposes  for  which 
those authorities gave their agreement. 

Member  States  shall  communicate  to  the  Commission  and  to  the  other  Member 
States  the  names  of  the  authorities  which  may  receive  information  pursuant  to  this 
paragraph. 

27. 

Notwithstanding  ⌦ Articles  44  to  46 ⌫  paragraphs  1  to  4,  Member  States  may, 
with  the  aim  of  strengthening  the  stability,  including  integrity,  of  the  financial 
system, authorise the exchange of information between the competent authorities and 
the authorities or bodies responsible under law for the detection and investigation of 
breaches of company law. 

⌦ In such cases ⌫ Member States which have recourse to the provision in the first 
subparagraph shall require ⌦ fulfilment of ⌫ at least that the following conditions 
are met: 

(a) 

the information is for the purpose of performing the task referred to in the first 
subparagraph.; 

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(b) 

information received in this context ⌦ is ⌫ shall be subject to the conditions 
of professional secrecy imposed in ⌦ Article 44(1) ⌫ (paragraph1).; 

(c)  where  the  information  originates  in  another  Member  State,  it  may  not  be 
disclosed  without  the  express  agreement  of  the  competent  authorities  which 
have  disclosed  it  and,  where  appropriate,  solely  for  the  purposes  for  which 
those authorities gave their agreement. 

Where,  in  a  Member  State,  the  authorities  or  bodies  referred  to  in  the  first 
subparagraph perform their task of detection or investigation with the aid, in view of 
their specific competence, of persons appointed for that purpose and not employed in 
the public sector, the possibility of exchanging information provided for in the first 
subparagraph may be extended to such persons under the conditions ⌦ specified ⌫ 
stipulated in the second subparagraph. 

In order to implement the third indent of the second subparagraph, the authorities or 
bodies  referred  to  in  the  first  subparagraph  shall  communicate  to  the  competent 
authorities  which  have  disclosed 
the  names  and  precise 
responsibilities of the persons to whom it is to be sent. 

information, 

the 

Member  States  shall  communicate  to  the  Commission  and  to  the  other  Member 
States the names of the authorities or bodies which may receive information pursuant 
to this ⌦ Article ⌫ paragraph. 

Before 31 December 2000, t The Commission shall draw up a report on the application of the 
provisions of this ⌦ Article ⌫ paragraph. 

(cid:208) 2000/12/EC Art 30 (8) 
(adapted) 

Article 49 

8.This  ⌦ Section ⌫  Article  shall  not  prevent  a  competent  authority  from  transmitting 
⌦ information to the following for the purposes of their tasks ⌫: 

central  banks  and  other  bodies  with  a  similar  function  in  their  capacity  as  monetary 

(a) 
authorities.; 

where  appropriate,  to  other  public  authorities  responsible  for  overseeing  payment 

(b) 
systems. 

information intended for the performance of their task, nor ⌦ Nor ⌫ shall it prevent such 
authorities  or  bodies  from  communicating  to  the  competent  authorities  such  information  as 
they may need for the purposes of ⌦ Article 45⌫ paragraph 4.  

Information received in this context shall be subject to the conditions of professional secrecy 
⌦ set out ⌫ imposed in this Article ⌦ 44(1) ⌫. 

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(cid:208) 2000/12/EC Art. 30 (9) 1st and 
2nd paragraphs (adapted) 

Article 50 

9.  In  addition,  nNotwithstanding  the  provisions  referred  to  in  ⌦ Articles 44(1)  and  45⌫ 
paragraph  1  and  4,  the  Member  States  may,  by  virtue  of  provisions  laid  down  by  law, 
authorise  the  disclosure  of  certain  information  to  other  departments  of  their  central 
government  administrations  responsible  for  legislation  on  the  supervision  of  credit 
institutions,  financial  institutions,  investment  services  and  insurance  companies  and  to 
inspectors acting on behalf of those departments. 

However,  such  disclosures  may  be  made  only  where  necessary  for  reasons  of  prudential 
control. 

(cid:208) 2000/12/EC Art 30 (9) 3rd 
paragraph (adapted) 

Article 51 

However,  tThe  Member  States  shall  provide  that  information  received  under  ⌦ Articles 
44(2) and 47 ⌫ paragraph 2 and 5 and ⌦ information ⌫ that obtained by means of the on-
the-spot verification referred to in Article ⌦ 43 ⌫ 29(1) and (2) may never be disclosed in 
the cases referred to in this ⌦ Article ⌫ paragraph except with the express consent of the 
competent authorities which disclosed the information or of the competent authorities of the 
Member State in which on-the-spot verification was carried out. 

(cid:208) 2000/12/EC Art. 30 (10) 
(adapted) 

Article 52 

10.⌦ This  Section ⌫  Article  shall  not  prevent  the  competent  authorities ⌦ of  a  Member 
State ⌫  from  communicating  the  information  referred  to  in  ⌦ Articles 44  to  46⌫ 
paragraph 1 to 4 to a clearing house or other similar body recognised under national law for 
the provision of clearing or settlement services for one of their Member States' markets if they 
consider  that  it  is  necessary  to  communicate  the  information  in  order  to  ensure  the  proper 
functioning of those bodies in relation to defaults or potential defaults by market participants. 
The  information  received  in  this  context  shall  be  subject  to  the  conditions  of  professional 
secrecy ⌦ laid down ⌫ imposed in ⌦ Article 44(1) ⌫ paragraph 1.  

The  Member  States  shall,  however,  ensure  that  information  received  under  paragraph  2 
⌦ Article  44(2) ⌫  may  not  be  disclosed  in  the  circumstances  referred  to  in  this 
⌦ Article ⌫  paragraph  without  the  express  consent  of  the  competent  authorities  which 
disclosed it. 

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(cid:216) new 

SECTION 3  

DUTY OF PERSONS RESPONSIBLE FOR THE LEGAL CONTROL OF ANNUAL AND 
CONSOLIDATED ACCOUNTS 

(cid:208) 2000/12/EC Art. 31 (adapted) 

Article 53 

Duty of persons responsible for the legal control of annual and consolidated accounts 

1. 

Member  States  shall  provide  at  least  that:  (a)  any  person  authorised  within  the 
meaning  of  ⌦ eight ⌫  Council  Directive  84/253/EEC26,  performing  in  a  credit 
institution  the  task  described  in  Article  51  of  ⌦ fourth ⌫  Council  Directive 
78/660/EEC27,  or  Article  37  of  Council  Directive  83/349/EEC,  or  Article  31  of 
⌦ Council ⌫ Directive 85/611/EEC28, or any other statutory task, shall have a duty 
to report promptly to the competent authorities any fact or decision concerning that 
⌦ credit ⌫ institution of which he has become aware while carrying out that task 
which is liable to: 

(a) 

constitute  a  material  breach  of  the  laws,  regulations  or  administrative 
provisions  which  lay  down  the  conditions  governing  authorisation  or  which 
specifically govern pursuit of the activities of credit institutions, or; 

(b) 

affect the continuous functioning of the credit institution, or; 

(c) 

lead to refusal to certify the accounts or to the expression of reservations. 

⌦ Member States shall provide at least that ⌫ (b) that person shall likewise have a 
duty  to  report  any  fact  ⌦ or ⌫  and  decision  of  which  he  becomes  aware  in  the 
course of carrying out a task as described in ⌦ the first sub-paragraph ⌫ (a) in an 
undertaking  having  close  links  resulting  from  a  control  relationship  with  the  credit 
institution within which he is carrying out ⌦ that ⌫ the abovementioned task. 

2. 

The  disclosure  in  good  faith  to  the  competent  authorities,  by  persons  authorised 
within  the  meaning  of  Directive  84/253/EEC,  of  any  fact  or  decision  referred  to  in 
paragraph  1  shall  not  constitute  a  breach  of  any  restriction  on  disclosure  of 
information  imposed  by  contract  or  by  any  legislative,  regulatory  or  administrative 
provision and shall not involve such persons in liability of any kind. 

26 
27 
28 

OJ L 126, 12.5.1984, p. 20. 
OJ L 222, 14.8.1978, p. 11, as last amended by Directive 1999/60/EC (OJ L 62, 26.6.1999, p. 65). 
OJ L 375, 31.12.1985, p. 3, as last amended by Directive 95/26/EC (OJ L 168, 18.7.1995, p. 7). 

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⌦SECTION 4 POWER OF SANCTION AND RIGHT TO APPLY TO THE COURTS ⌫ 

(cid:208) 2000/12/EC (adapted) 

(cid:208) 2000/12/EC Art. 32 (adapted) 

Article 54 

Power of sanction of the competent authorities 

Without prejudice to the procedures for the withdrawal of authorisations and the provisions of 
criminal law, the Member States shall provide that their respective competent authorities may, 
as  against  credit  institutions,  or  those  who  effectively  control  the  business  of  credit 
institutions,  which  breach  laws,  regulations  or  administrative  provisions  concerning  the 
supervision  or  pursuit  of  their  activities,  adopt  or  impose  in  respect  of  them  penalties  or 
measures  aimed  specifically  at  ending  ⌦ the ⌫  observed  breaches  or  the  causes  of  such 
breaches. 

(cid:208) 2000/12/EC Art. 33 (adapted) 

Article 55 

Right to apply to the courts 

Member States shall ensure that decisions taken in respect of a credit institution in pursuance 
of laws, regulations and administrative provisions adopted in accordance with this Directive 
may be subject to the right to apply to the courts. The same shall apply where no decision is 
taken, within six months of its submission, in respect of an application for authorisation which 
contains all the information required under the provisions in force. 

(cid:208) 2000/28/EC 1.2 (adapted) 

Article 3 of Directive 2000/46/EC shall apply to credit institutions 

Article 33a 

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(cid:208) 2000/12/EC 

CHAPTER 2 

TECHNICAL INSTRUMENTS OF PRUDENTIAL SUPERVISION 

SECTION 1 

OWN FUNDS 

Article 56 

General principles 

(cid:208) 2000/12/EC Art. 34 (1) 
(adapted) 

1.Wherever a Member State lays down by law, regulation or administrative action a provision 
in  implementation  of  Community  legislation  concerning  the  prudential  supervision  of  an 
operative credit institution which uses the term or refers to the concept of own funds, it shall 
bring  this  term  or  concept  into  line  with  the  definition  given  in  ⌦ Articles  57  to  61  and 
Articles 63 to 66⌫paragraph 2, 3 and 4 and Articles 35 to 38. 

(cid:208) 2000/12/EC Art. 34 (2) 1st 
paragraph (adapted) 
(cid:214) new 

Article 57 

Subject to the limits imposed in Article 38 ⌦ 66 ⌫ , the unconsolidated own funds of credit 
institutions shall consist of the following items: 

(1a)  capital within the meaning of Article 22 of Directive 86/635/EEC, in so far as 
it  has  been  paid  up,  plus  share  premium  accounts  but  excluding  cumulative 
preferential shares; 

(2b)  reserves within the meaning of Article 23 of Directive 86/635/EEC and profits 
and losses brought forward as a result of the application of the final profit or 
loss;..  The  Member  States  may  permit  inclusion  of  interim  profits  before  a 
formal  decision  has  been  taken  only  if  these  profits  have  been  verified  by 
persons  responsible  for  the  auditing  of  the  accounts  and  if  it  is  proved  to  the 
satisfaction  of  the  competent  authorities  that  the  amount  thereof  has  been 
evaluated  in  accordance  with  the  principles  set  out  in  Directive  86/635/EEC 
and is net of any foreseeable charge or dividend;  

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(3c)  funds for general banking risks within the meaning of Article 38 of Directive 

86/635/EEC; 

(4d)  revaluation reserves within the meaning of Article 33 of Directive 78/660/EEC; 

(5e)  value  adjustments  within 

the  meaning  of  Article  37(2)  of  Directive 

86/635/EEC; 

(6f)  other items within the meaning of Article 35 ⌦ 63 ⌫ ; 

(7g)  the  commitments  of  the  members  of  credit  institutions  set  up  as  cooperative 
societies  and  the  joint  and  several  commitments  of  the  borrowers  of  certain 
institutions organised as funds, as referred to in Article 36 ⌦ 64 ⌫ (1); 

(8h)  fixed-term  cumulative  preferential  shares  and  subordinated  loan  capital  as 

referred to in Article 36 ⌦ 64 ⌫ (3). 

The following items shall be deducted in accordance with Article 38 ⌦ 66 ⌫ : 

(9i)  own shares at book value held by a credit institution; 

(10j)  intangible  assets  within  the  meaning  of  Article  4(9)  («Assets»)  of  Directive 

86/635/EEC; 

(k11) material losses of the current financial year; 

(cid:208) 2002/87/EC Art. 29.4(a) 
(adapted) 

(l12)  holdings in other credit and financial institutions amounting to more than 10 % 

of their capital; 

(m13) subordinated  claims  and  instruments  referred  to  in  Article  35  ⌦ 63 ⌫  and 
Article 36 ⌦ 64 ⌫ (3) which a credit institution holds in respect of credit and 
financial institutions in which it has holdings exceeding 10 % of the capital in 
each case; 

(n14) holdings in other credit and financial institutions of up to 10 % of their capital, 
the subordinated claims and the instruments referred to in Article 35 ⌦ 63 ⌫ 
and Article 36 ⌦ 64 ⌫ (3) which a credit institution holds in respect of credit 
and financial institutions other than those referred to in points 12 and 13 of this 
subparagraph  in  respect  of  the  amount  of  the  total  of  such  holdings, 
subordinated  claims  and  instruments  which  exceed  10 %  of  that  credit 
institution's own funds calculated before the deduction of items in points ⌦ (l) 
to (p) ⌫ 12 to 16 of this subparagraph; 

(o15) participations  within  the  meaning  of  Article ⌦ 4(10) ⌫  1(9)  which  a  credit 

institution holds in: 

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(i) 

insurance  undertakings  within  the  meaning  of  Article  6  of  ⌦ First 
Council ⌫  Directive  73/239/EEC  ⌦ 29 ⌫  ,  Article  6  of  ⌦ First 
Council ⌫ Directive 79/267/EEC ⌦ 30 ⌫ or Article 1(b) of Directive 
98/78/EC of the European Parliament and of the Council31; 

(ii) 

reinsurance undertakings within the meaning of Article 1(c) of Directive 
98/78/EC; 

(iii) 

insurance  holding  companies  within  the  meaning  of  Article  1(i)  of 
Directive 98/78/EC; 

(p16) each of the following items which the credit institution holds in respect of the 

entities defined in point (15o) in which it holds a participation: 

(i) 

instruments referred to in Article 16(3) of Directive 73/239/EEC, 

(ii) 

instruments referred to in Article 18(3) of Directive 79/267/EEC. 

(cid:216) new 

(q)  For  credit  institutions  calculating  risk-weighted  exposure  amounts  under 
Section  3,  Subsection  2,  negative  amounts  resulting  from  the  calculation  in 
Annex  VII,  Part  1,  paragraph  34  and  expected  loss  amounts  calculated  in 
accordance with Annex VII, Part 1 paragraphs 30 and 31;  

(r)  The exposure amount of securitisation positions which receive a risk weight of 
1250% under Annex IX, Part 4, calculated in the manner there specified. 

(cid:208) 2000/12/EC Art. 34 (2) point 2, 
final sentence (adapted) 
(cid:214) new 

⌦ For the purposes of point (b), the ⌫ The Member States may permit inclusion of 
interim profits before a formal decision has been taken only if these profits have been 
verified by persons responsible for the auditing of the accounts and if it is proved to 
the  satisfaction  of  the  competent  authorities  that  the  amount  thereof  has  been 
evaluated  in  accordance  with  the  principles  set  out  in  Directive  86/635/EEC  and  is 
net of any foreseeable charge or dividend;. 

(cid:214) In  the  case  of  a  credit  institution  which  is  the  originator  of  a  securitisation,  net 
gains arising from the capitalisation of future income from the securitised assets and 
providing  credit  enhancement  to  positions  in  the  securitisation  shall  be  excluded 
from the item specified in point (b). 

29 
30 
31 

⌦ OJ L 228, 16.8.1973, p. 3 ⌫ 
⌦ OJ L 63, 13.3.1979, p. 1 ⌫ 
OJ L 330, 5.12.1998, p. 1. 

EN 

76 

   EN 

 
 
 
                                                 
(cid:208) 2002/87/EC Art. 29.4(b) 
(adapted) 

Article 58 

Where  shares  in  another  credit  institution,  financial  institution,  insurance  or  reinsurance 
undertaking or insurance holding company are held temporarily for the purposes of a financial 
assistance operation designed to reorganise and save that entity, the competent authority may 
waive the provisions on deduction referred to in points ⌦ (l) to (p) ⌫12 to 16. 

Article 59 

As an alternative to the deduction of the items referred to in points ⌦ (o) to (p) ⌫ 15 and 
16, Member States may allow their credit institutions to apply mutatis mutandis methods 1, 2, 
or 3 of Annex I to Directive 2002/87/EC. Method 1 (Accounting consolidation) ⌦ may ⌫ 
shall  only  be  applied ⌦ only ⌫  if  the  competent  authority  is  confident  about  the  level  of 
integrated management and internal control regarding the entities which would be included in 
the scope of consolidation. The method chosen shall be applied in a consistent manner over 
time. 

Article 60 

Member  States  may  provide  that  for  the  calculation  of  own  funds  on  a  stand-alone  basis, 
credit institutions subject to supervision on a consolidated basis in accordance with Chapter 
⌦ 4,  Section  1 ⌫  3,  or  to  supplementary  supervision  in  accordance  with  Directive 
2002/87/EC, need not deduct the items referred to in points ⌦ (l) to (p) ⌫12 to 16 which are 
held  in  credit  institutions,  financial  institutions,  insurance  or  reinsurance  undertakings  or 
insurance  holding  companies,  which  are  included  in  the  scope  of  consolidated  or 
supplementary supervision. 

This provision shall apply to all the prudential rules harmonised by Community acts. 

(cid:208) 2000/12/EC Art 34 (3) 
(adapted) 

Article 61 

3.The  concept  of  own  funds  as  defined  in  points ⌦ (a) to  (h) ⌫  (1)  to  (8)  of  paragraph  2 
⌦ Article 57 ⌫ embodies a maximum number of items and amounts. The use of those items 
and the fixing of lower ceilings, and the deduction of items other than those listed in points 
(9) to (13) ⌦ (i) to (r) ⌫ of ⌦ Article 57 ⌫ paragraph 2 shall be left to the discretion of 
the  Member  States.  Member  States  shall  nevertheless  be  obliged  to  consider  increased 
convergence with a view to a common definition of own funds. 

To  that  end,  the  Commission  shall,  by  1  January  1996  at  the  latest,  submit  a  report  to  the 
European Parliament and to the Council on the application of this Article and Articles 35 to 
39,  accompanied,  where  appropriate,  by  such  proposals  for  amendment  as  it  shall  deem 

EN 

77 

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necessary.  Not  later  than  1  January  1998,  the  European  Parliament  and  the  Council  shall, 
acting  in  accordance  with  the  procedure  laid  down  in  Article  251  of  the  Treaty  and  after 
consultation  of  the  Economic  and  Social  Committee,  examine  the  definition  of  own  funds 
with a view to the uniform application of the common definition. 

(cid:208) 2000/12/EC Art 34 (4) 
(adapted) 

4The items listed in points ⌦ (a) to (e) ⌫ (1) to (5) of ⌦ Article 57 ⌫ paragraph 2 must 
be available to a credit institution for unrestricted and immediate use to cover risks or losses 
as soon as these occur. The amount must be net of any foreseeable tax charge at the moment 
of its calculation or be suitably adjusted in so far as such tax charges reduce the amount up to 
which these items may be applied to cover risks or losses. 

(cid:216) new 

Article 62 

Member States will report to the Commission on the progress achieved in convergence with a 
view  to  a  common  definition  of  own  funds.  On  the  basis  of  these  reports  the  Commission 
shall,  if  appropriate,  by  1  January  2009  at  the  latest,  submit  a  proposal  to  the  European 
Parliament and to the Council for amendment of this Article and Articles 35 to 39.  

(cid:208) 2000/12/EC Art 35 (adapted) 

Article 63 

Other items 

1. 

The concept of own funds used by a Member State may include other items provided 
that,  whatever  their  legal  or  accounting  designations  might  be,  they  have  the 
following characteristics: 

(a) 

they are freely available to the credit institution to cover normal banking risks 
where revenue or capital losses have not yet been identified; 

(b) 

their existence is disclosed in internal accounting records; 

(c) 

their amount is determined by the management of the credit institution, verified 
by independent auditors, made known to the competent authorities and placed 
under the supervision of the latter. 

2. 

Securities  of  indeterminate  duration  and  other  instruments  that  fulfil  the  following 
conditions may also be accepted as other items: 

(a) 

they  may  not  be  reimbursed  on  the  bearer's  initiative  or  without  the  prior 
agreement of the competent authority; 

EN 

78 

   EN 

 
 
 
 
(b) 

(c) 

(d) 

the debt agreement must provide for the credit institution to have the option of 
deferring the payment of interest on the debt; 

the  lender's  claims  on  the  credit  institution  must  be  wholly  subordinated  to 
those of all non-subordinated creditors; 

the documents governing the issue of the securities must provide for debt and 
unpaid  interest  to  be  such  as  to  absorb  losses,  whilst  leaving  the  credit 
institution in a position to continue trading; 

(e) 

only fully paid-up amounts shall be taken into account. 

To these may be added cumulative preferential shares other than those referred to in 
point ⌦ (h) ⌫ 8 of Article 34 ⌦ 57 ⌫ (2). 

(cid:216) new 

For  credit  institutions  calculating  risk-weighted  exposure  amounts  under  Section  3, 
Subsection 2, positive amounts resulting from the calculation in Annex VII, Part 1, 
paragraph 34, may, up to 0.6% of risk weighted exposure amounts calculated under 
Subsection  2,  be  accepted  as  other  items.  For  these  credit  institutions  value 
adjustments  and  provisions  included  in  the  calculation  referred  to  in  Annex  VII, 
Section 3, Part 1, paragraph 34 and value adjustments and provisions for exposures 
referred to in point (e) of Article 57 shall not be included in own funds other than in 
accordance with this provision. For these purposes, risk-weighted exposure amounts 
shall not include those calculated in respect of securitisation positions which have a 
risk weight of 1250%. 

(cid:208)2000/12/EC Art 36 (adapted) 

Article 64 

Other provisions concerning own funds 

The  commitments  of  the  members  of  credit  institutions  set  up  as  cooperative 
societies  referred  to  in  point  ⌦ (g) ⌫  7  of  Article  34(2)⌦57⌫,  shall  comprise 
those societies' uncalled capital; together with the legal commitments of the members 
of  those  cooperative  societies  to  make  additional  non-refundable  payments  should 
the credit institution incur a loss, in which case it must be possible to demand those 
payments without delay. 

The  joint  and  several  commitments  of  borrowers  in  the  case  of  credit  institutions 
organised as funds shall be treated in the same way as the preceding items. 

All such items may be included in own funds in so far as they are counted as the own 
funds of institutions of this category under national law. 

3. 

1. 

2. 

Member  States  shall  not  include  in  the  own  funds  of  public  credit  institutions 
guarantees which they or their local authorities extend to such entities. 

EN 

79 

   EN 

 
 
 
3. 

Member  States  or  the  competent  authorities  may  include  fixed-term  cumulative 
preferential  shares  referred  to  in  point  ⌦ (h) ⌫  (8)  of  Article  34(2)⌦57⌫  and 
subordinated  loan  capital  referred  to  in  that  provision  in  own  funds,  if  binding 
agreements  exist  under  which,  in  the  event  of  the  bankruptcy  or  liquidation  of  the 
credit  institution,  they  rank  after  the  claims  of  all  other  creditors  and  are  not  to  be 
repaid until all other debts outstanding at the time have been settled. 

Subordinated loan capital must also fulfil the following additional criteria: 

(a) 

only fully paid-up funds may be taken into account; 

(b) 

(c) 

(d) 

the  loans  involved  must  have  an  original  maturity  of  at  least  five  years,  after 
which they may be repaid; if the maturity of the debt is not fixed, they shall be 
repayable  only  subject  to  five  years'  notice  unless  the  loans  are  no  longer 
considered  as  own  funds  or  unless  the  prior  consent  of  the  competent 
authorities  is  specifically  required  for  early  repayment.  The  competent 
authorities  may  grant  permission  for  the  early  repayment  of  such  loans 
provided the request is made at the initiative of the issuer and the solvency of 
the credit institution in question is not affected; 

the  extent  to  which  they  may  rank  as  own  funds  must  be  gradually  reduced 
during at least the last five years before the repayment date; 

the  loan  agreement  must  not  include  any  clause  providing  that  in  specified 
circumstances, other than the winding-up of the credit institution, the debt will 
become repayable before the agreed repayment date. 

(cid:208) 2000/12/EC Art. 36(3)(b), 
excluding first 19 words  
(cid:214) new 

(cid:214) For the purposes of point (b) of the second subparagraph,  if the maturity of the 
debt is not fixed, they shall be repayable only subject to five years' notice unless the 
loans  are  no  longer  considered  as  own  funds  or  unless  the  prior  consent  of  the 
competent  authorities  is  specifically  required  for  early  repayment.  The  competent 
authorities may grant permission for the early repayment of such loans provided the 
request is made at the initiative of the issuer and the solvency of the credit institution 
in question is not affected; 

4. 

Credit institutions shall not include in own funds either the fair value reserves related 
to gains or losses on cash flow hedges of financial instruments measured at amortised 
cost,  or  any  gains  or  losses  on  their  liabilities  valued  at  fair  value  that  are  due  to 
changes in the credit institutions’ own credit standing. 

(cid:216) new 

EN 

80 

   EN 

 
 
 
(cid:208)2000/12/EC Art 37 (adapted) 

Article 65 

Calculation of own funds on a consolidated basis 

1. 

Where  the  calculation  is  to  be  made  on  a  consolidated  basis,  the  consolidated 
amounts  relating  to  the  items  listed  under  Article  34  ⌦57⌫(2)  shall  be  used  in 
accordance with the rules laid down in Articles 52 to 56⌦Chapter 4, Section 1⌫. 
Moreover, the following may, when they are credit («negative») items, be regarded 
as consolidated reserves for the calculation of own funds: 

(a) 

(b) 

(c) 

(d) 

any  minority  interests  within  the  meaning  of  Article  21  of  Directive 
83/349/EEC, where the global integration method is used; 

the first consolidation difference within the meaning of Articles 19, 30 and 31 
of Directive 83/349/EEC; 

the translation differences included in consolidated reserves in accordance with 
Article 39(6) of Directive 86/635/EEC; 

any difference resulting from the inclusion of certain participating interests in 
accordance with the method prescribed in Article 33 of Directive 83/349/EEC. 

2. 

Where the above debit (“positive”) items, they must be deducted in the calculation of 
consolidated  own  funds  ⌦  Where  the  items  referred  to  in  points  (a)  to  (d)  of 
paragraph 1 are debit («positive») items, they shall be deducted in the calculation of 
consolidated own funds. ⌫ 

(cid:208) 2000/12/EC Art 38 (1) 
(adapted) 
(cid:214) new 

Article 66 

Deductions and limits 

1. The items referred to in points ⌦ (d) to (h) ⌫ (4) to (8) of Article 34(2)⌦57⌫, shall be 

subject to the following limits: 

(a) 

(b) 

the  total  of  the  items  in  points ⌦ (d)  to  (h) ⌫  (4)  to  (8)  may  not  exceed  a 
maximum of 100%  of the items  in points ⌦ (a) plus (b) and (c) ⌫ (1) plus 
(2) and (3) minus ⌦ (i) to (k) ⌫ (9), (10) (11) (cid:214) and 50% of the amounts in 
item (q) ; 

the total of the items in points ⌦ (g) to (h) ⌫ (7) and (8) may not exceed a 
maximum of 50% of the items in points ⌦ (a) plus (b) and (c) ⌫ (1) plus (2) 
and (3) minus (i) to (k) (9), (10) and (11) (cid:214) and 50% of the amounts in item 
(q)  ; 

EN 

81 

   EN 

 
 
 
(c) 

the  total  of  the  items  in  points  (l)  (12)  and  (13)  (cid:214) to  (q) shall  be  deducted 
from the total of the items. 

2. 

The items referred to in point (r) of Article 57 shall be deducted from the total of the 
items  specified  in  points  (a)  to  (h)  of  that  Article,  unless  the  credit  institution 
includes  the  former  items  in  its  calculation  of  risk-weighted  exposure  amounts  for 
the purposes of Article 75 as specified in Annex IX, Part 4. 

(cid:216) new 

23. 

The  competent  authorities  may  authorise  credit  institutions  to  exceed  the  limit  laid 
down in paragraph 1 in temporary and exceptional circumstances. 

(cid:208) 2000/12/EC Art 38 (2) 

(cid:208) 2000/12/EC Art 39 (adapted) 

Article 67 

Provision of proof to the competent authorities 

Compliance with the conditions laid down  in ⌦ this Section ⌫ Article 34 (2), (3) and (4) 
and Articles 35 to 38 must be proved to the satisfaction of the competent authorities. 

(cid:216) new 

SECTION 2 

PROVISION AGAINST RISKS 

SUBSECTION 1 - LEVEL OF APPLICATION 

Article 68 

1. 

2. 

3. 

Credit institutions shall comply with the obligations laid down in Articles 22 and 75 
and Section 5 on an individual basis. 

Every credit institution which is neither a subsidiary in the Member State where it is 
authorised and supervised, nor a parent undertaking, and every credit institution not 
included  in  the  consolidation  pursuant  to  Article  73,  shall  comply  with  the 
obligations laid down in Articles 120 and 123 on an individual basis. 

Every credit institution which is neither a parent undertaking, nor a subsidiary, and 
every  the  credit  institution  not  included  in  the  consolidation  pursuant  to  Article73, 
shall comply with the obligations laid down in Chapter 5 on an individual basis. 

EN 

82 

   EN 

 
 
 
 
 
Article 69 

1. 

The  Member  States  may  choose  not  to  apply  Article  68(1)  to  any  subsidiary  of  a 
credit  institution,  where  both  the  subsidiary  and  the  credit  institution  are  subject  to 
authorisation and supervision by the Member State concerned, and the subsidiary is 
included in the supervision on a consolidated basis of the credit institution which is 
the parent undertaking, and all of the following conditions are satisfied, in order to 
ensure that own funds are distributed adequately among the parent undertaking and 
the subsidiaries: 

(a) 

(b) 

(c) 

(d) 

there  is  no  current  or  foreseen  material  or  legal  impediment  to  the  prompt 
transfer of own funds or repayment of liabilities by its parent undertaking; 

its  parent  undertaking  is  committed  to  an  unconditional,  explicit  and 
irrevocable  obligation  to  transfer  own  funds  to  the  subsidiary  and  meet  its 
liabilities, or the risks in the subsidiaries are of negligible interest; 

the  risk  evaluation,  measurement  and  control  procedures  of  the  parent 
undertaking cover the subsidiary; 

the  parent  undertaking  has  the  right  to  appoint  or  remove  a  majority  the 
members of the management body of the subsidiary. 

2. 

The Member States may exercise the option provided for in paragraph 1 where the 
parent undertaking is a financial holding company set up in the same Member State 
as  the  credit  institution,  provided  that  it  is  subject  to  the  same  supervision  as  that 
exercised  over  credit  institutions,  and  in  particular  to  the  standards  laid  down  in 
Article 71(1). 

Article 70 

The  competent  authorities  may  allow  on  a  case  by  case  basis  parent  credit  institutions  in  a 
Member  State  to  incorporate  in  the  calculation  of  their  requirement  under  Article  68(1) 
subsidiaries in the Community which meet the conditions laid down in the points (a), (c) and 
(d)  of  Article  69(1),  and  whose  material  exposures  or  material  liabilities  are  to  that  parent 
credit institution in a Member State. 

Article 71 

1. 

2. 

Without prejudice to Articles 68 to 70, parent credit institutions in a Member State 
shall  comply,  to  the  extent  and  in  the  manner  prescribed  in  Article  133,  with  the 
obligations  laid  down  in  Articles  75,  120,  123  and  Section  5  on  the  basis  of  their 
consolidated financial situation. 

Without  prejudice  to  Articles  68  to  70,  credit  institutions  controlled  by  a  parent 
financial holding company in a Member State shall comply, to the extent and in the 
manner prescribed in Article 133, with the obligations laid down in Articles 75, 120, 
123 and Section 5 on the basis of the consolidated financial situation of that financial 
holding company.  

EN 

83 

   EN 

 
Where  more  than  one  credit  institution  is  controlled  by  a  parent  financial  holding 
company  in  a  Member  State,  the  first  subparagraph  shall  apply  only  to  the  credit 
institution  to  which  supervision  on  a  consolidated  basis  applies  in  accordance  with 
Articles 125 and 126. 

Article 72 

1. 

EU parent credit institutions shall comply with the obligations laid down in Chapter 
5 on the basis of their consolidated financial situation. 

2. 

3. 

However,  in  respect  of  their  significant  subsidiaries,  they  shall  disclose  the 
information  specified  in  Annex  XII,  Part  1,  paragraph  5,  on  an  individual  or  sub-
consolidated basis. 

Credit  institutions  controlled  by  an  EU  parent  financial  holding  company  shall 
comply with the obligations laid down in Chapter 5 on the basis of the consolidated 
financial situation of that financial holding company. 

However,  in  respect  of  their  significant  subsidiaries,  they  shall  disclose  the 
information  specified  in  Annex  XII,  Part  1,  paragraph  5,  on  an  individual  or  sub-
consolidated basis. 

The  competent  authorities  responsible  for  exercising  supervision  on  a  consolidated 
basis  pursuant  to  Articles  125  to  131  may  decide  not  to  apply  in  full  or  in  part 
paragraphs  1  and  2  to  the  credit  institutions  which  are  included  within  comparable 
disclosures provided on a consolidated basis by a parent undertaking established in a 
third country. 

(cid:208) 2000/12/EC Art. 52 (3) 
(adapted) 

Article 73 

61. 

The  Member  States  or  the  competent  authorities  responsible  for  exercising 
supervision  on  a  consolidated  basis  pursuant  to  Article  53  ⌦ 125  to  131 ⌫  may 
decide  in  the ⌦ following ⌫  cases  listed  below  that  a  credit  institution,  financial 
institution  or  ancillary  banking  services  undertaking  which  is  a  subsidiary  or  in 
which a participation is held need not be included in the consolidation: 

(a)  where if the undertaking ⌦ concerned ⌫ that should be included is situated 
in  a  third  country  where  there  are  legal  impediments  to  the  transfer  of  the 
necessary information.; 

(b)  where  if,  in  the  opinion  of  the  competent  authorities,  the  undertaking 
⌦ concerned ⌫  that  should  be  included  is  of  negligible  interest  only  with 
respect  to  the  objectives  of  monitoring  credit  institutions  and  in  ⌦ any 
event where⌫  all  cases 
the  undertaking 
the  balance-sheet 
⌦ concerned ⌫  that  should  be  included  is  less  than  the  smaller  of  the 
following two amounts: 

total  of 

EN 

84 

   EN 

 
 
(i)  EUR 10 million; 

(ii)  or1%  of  the  balance-sheet  total  of  the  parent  undertaking  or  the 

undertaking that holds the participation. 

If several undertakings meet the above criteria, they must nevertheless be included in 
the consolidation where collectively they are of non-negligible interest with respect 
to the aforementioned objectives, or 

(c)  where if, in the opinion of the competent authorities responsible for exercising 
supervision on a consolidated basis, the consolidation of the financial situation 
of  the  undertaking  ⌦ concerned ⌫  that  should  be  included  would  be 
inappropriate or misleading as far as the objectives of the supervision of credit 
institutions are concerned. 

(cid:208) 2000/12/EC Art. 52 (3) 2nd 
indent, final sentence (adapted) 

If  ⌦ ,  in  the  cases  referred  to  in  point  (b)  of  the  first  subparagraph ⌫  ,  several 
undertakings meet the above criteria ⌦ set out therein ⌫ , they must nevertheless 
be included in the consolidation where collectively they are of non-negligible interest 
with respect to the specified aforementioned objectives, or. 

(cid:216) new 

Competent  authorities  shall  require  subsidiary  credit  institutions  to  apply  the 
requirements laid down in Articles 75, 120, 123 and Section 5 on a sub-consolidated 
basis  if  those  credit  institutions,  or  the  parent  undertaking  where  it  is  a  financial 
holding  company,  have  a  credit  institution  or  a  financial  institution  or  an  asset 
management  company  as  defined  in  Article  2(5)  of  Directive  2002/87/EC  as  a 
subsidiary in a third country, or hold a participation in such an undertaking. 

The  competent  authorities  shall  require  the  parent  undertakings  and  subsidiaries 
subject  to  this  Directive  to  meet  the  obligations  laid  down  in  Article  22  on  a 
consolidated  or sub-consolidated  basis, to ensure that their arrangements, processes 
and mechanisms are consistent and well-integrated and that any data and information 
relevant to the purpose of supervision can be produced. 

SUBSECTION 2 - CALCULATION OF REQUIREMENTS 

Article 74 

Save  where  otherwise provided, the valuation of assets and off-balance-sheet items 
shall  be  effected  in  accordance  with  the  accounting  framework  to  which  the  credit 
institution 
is  subject  under  Regulation  (EC)  No  1606/2002  and  Directive 
86/635/EEC. 

Notwithstanding  the  requirements  laid  down  in  Articles  68  to  72,  the  competent 
authorities  shall  ensure  that  the  calculations  to  verify  the  compliance  of  credit 

2. 

3. 

1. 

2. 

EN 

85 

   EN 

 
 
 
institutions with the obligations laid down in Article 75 are carried out not less than 
twice each year. 

The  calculations  shall  be  carried  out  either  by  the  credit  institutions  themselves,  in 
which case they shall communicate the results and any component data required to 
the competent authorities, or by the competent authorities, using data supplied by the 
credit institutions. 

SUBSECTION 3 - MINIMUM LEVEL OF OWN FUNDS 

Article 75 

Without  prejudice  to  Article  136,  Member  States  shall  require  credit  institutions  to  provide 
own  funds  which  are  at  all  times  more  than  or  equal  to  the  sum  of  the  following  capital 
requirements: 

(a) 
for  credit  risk  and  dilution  risk  in  respect  of  all  of  their  business  activities  with  the 
exception of their trading book business and illiquid assets if deducted from own funds under 
[Directive 93/6/EEC, Article 13(2)(d) ], 8 per cent of the total of their risk-weighted exposure 
amounts calculated in accordance with Section 3;  

in  respect  of  their  trading-book  business,  for  position  risk,  settlement  and  counter-
(b) 
party  risk  and,  in  so  far  as  the  limits  laid  down  in  Articles  111  to  117  are  authorised  to  be 
exceeded, for large  exposures exceeding such limits, the capital  requirements determined in 
accordance with [Directive 93/6/EEC, Chapter V, Section 4]; 

(c) 
in  respect  of  all  of  their  business  activities,  for  foreign-exchange  risk  and  for 
commodities  risk,  the  capital  requirements  determined  according  to  [Article  18  of  Directive 
93/6/EEC]; 

in  respect  of  all  of  their  business  activities,  for  operational  risk,  the  capital 

(d) 
requirements determined in accordance with Section 4. 

(cid:208) 2000/12/EC 

SECTION 2 

SOLVENCY RATIO 

Article 40 

General principles 

1. The solvency ratio expresses own funds, as defined in Article 41, as a proportion of total 
assets and off-balance-sheet items, risk-adjusted in accordance with Article 42. 

EN 

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2. The solvency ratios of credit institutions which are neither parent undertakings as defined 
in  Article  1  of  Directive  83/349/EEC,  nor  subsidiaries  of  such  undertakings  shall  be 
calculated on an individual basis. 

3. The solvency ratios of credit institutions which are parent undertakings shall be calculated 
on  a  consolidated  basis  in  accordance  with  the  methods  laid  down  in  this  Directive  and  in 
Directive 86/635/EEC. 

4. The competent authorities responsible for authorising and supervising a parent undertaking 
which  is  a  credit  institution  may  also  require  the  calculation  of  a  subconsolidated  or 
unconsolidated ratio in respect of that parent undertaking and of any of its subsidiaries which 
are  subject  to  authorisation  and  supervision  by  them.  Where  such  monitoring  of  the 
satisfactory  allocation  of  capital  within  a  banking  group  is  not  carried  out,  other  measures 
must be taken to attain that end. 

5. Without prejudice to credit institutions' compliance with the requirements of paragraphs 2, 
3  and  4,  and  of  Article  52(8)  and  (9),  the  competent  authorities  shall  ensure  that  ratios  are 
calculated not less than twice each year, either by credit institutions themselves, which shall 
communicate the results and any component data required to the competent authorities, or by 
the competent authorities, using data supplied by the credit institutions. 

6.  The  valuation  of  assets  and  off-balance-sheet  items  shall  be  effected  in  accordance  with 
Directive 86/635/EEC. 

Article 41 

The numerator: own funds 

Own funds as defined in this Directive shall form the numerator of the solvency ratio. 

Article 42 

The denominator: risk-adjusted assets and off-balance-sheet items 

1. Degrees of credit risk, expressed as percentage weightings, shall be assigned to asset items 
in accordance with Articles 43 and 44, and exceptionally Articles 45, 62 and 63. The balance-
sheet value of each asset shall then be multiplied by the relevant weighting to produce a risk-
adjusted value. 

2.  In  the  case  of  the  off-balance-sheet  items  listed  in  Annex  II,  a  two-stage  calculation  as 
prescribed in Article 43(2) shall be used. 

3. In the case of the off-balance-sheet items referred to in Article 43(3), the potential costs of 
replacing contracts in the event of counterparty default shall be calculated by means of one of 
the  two  methods  set  out  in  Annex  III.  Those  costs  shall  be  multiplied  by  the  relevant 
counterparty  weightings  in  Article  43(1),  except  the  100%  weightings  as  provided  for  there 
shall be replaced by 50% weightings to produce risk-adjusted values. 

4. The total of the risk-adjusted values of the assets and off-balance-sheet items mentioned in 
paragraphs 2 and 3 shall be the denominator of the solvency ratio. 

EN 

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Article 43 

Risk weightings 

1. The following weightings shall be applied to the various categories of asset items, although 
the competent authorities may fix higher weightings as they see fit: 

(a) 

Zero weighting 

(1) 

cash in hand and equivalent items; 

(2) 

asset  items  constituting  claims  on  Zone  A  central  governments  and  central 
banks; 

(3) 

asset items constituting claims on the European Communities; 

(4) 

(5) 

(6) 

(7) 

asset  items  constituting  claims  carrying  the  explicit  guarantees  of  Zone  A 
central governments and central banks or of the European Communities; 

asset  items  constituting  claims  on  Zone  B  central  governments  and  central 
banks denominated and funded in the national currencies of the borrowers; 

asset  items  constituting  claims  carrying  the  explicit  guarantees  of  Zone  B 
central governments and central banks denominated and funded in the national 
currency common to the guarantor and the borrower; 

asset items secured to the satisfaction of the competent authorities, by collateral 
in  the  form  of  Zone  A  central  government  or  central  bank  securities  or 
securities issued by the European Communities or by cash deposits placed with 
the lending institution or by certificates of deposit or similar instruments issued 
by and lodged with the latter; 

(b) 

20% weighting 

(1) 

asset items constituting claims on the EIB; 

(2) 

asset items constituting claims on multilateral development banks; 

(3) 

asset items constituting claims carrying the explicit guarantee of the EIB; 

(4) 

(5) 

(6) 

(7) 

asset  items  constituting  claims  carrying  the  explicit  guarantees  of  multilateral 
development banks; 

asset  items  constituting  claims  on  Zone  A  regional  governments  or  local 
authorities, subject to Article 44; 

asset  items  constituting  claims  carrying  the  explicit  guarantees  of  Zone  A 
regional governments or local authorities, subject to Article 44; 

asset  items  constituting  claims  on  Zone  A  credit  institutions  but  not 
constituting such institutions' own funds; 

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(8) 

asset items constituting claims with a maturity of one year or less, on Zone B 
credit  institutions,  other  than  securities  issued  by  such  institutions  which  are 
recognised as components of their own funds; 

(9) 

asset items carrying the explicit guarantees of Zone A credit institutions; 

(10)  asset items constituting claims with a maturity of one year or less carrying the 

explicit guarantees of Zone B credit institutions; 

(11)  asset  items  secured,  to  the  satisfaction  of  the  competent  authorities,  by 
collateral  in  the  form  of  securities  issued  by  the  EIB  or  by  multilateral 
development banks; 

(12)  cash items in the process of collection; 

(c) 

50% weighting 

(1) 

loans  fully  and  completely  secured,  to  the  satisfaction  of  the  competent 
authorities, by mortgages on residential property which is or will be occupied 
or  let  by  the  borrower,  and  loans  fully  and  completely  secured,  to  the 
satisfaction  of  the  competent  authorities,  by  shares  in  Finnish  residential 
housing  companies,  operating  in  accordance  with  the  Finnish  Housing 
Company  Act  of  1991  or  subsequent  equivalent  legislation,  in  respect  of 
residential property which is or will be occupied or let by the borrower; 

«mortgage-backed securities» which may be treated as loans referred to in the 
first  subparagraph  or  in  Article  62(1),  if  the  competent  authorities  consider, 
having regard to the legal framework in force in each Member State, that they 
are equivalent in the light of the credit risk. Without prejudice to the types of 
securities which may be included in and are capable of fulfilling the conditions 
in  this  point  1,  «mortgage-backed  securities»  may  include  instruments  within 
the  meaning  of  Section  B(1)(a)  and  (b)  of  the  Annex  to  Council  Directive 
93/22/EEC32. The competent authorities must in particular be satisfied that: 

(i) 

(ii) 

such  securities  are  fully  and  directly  backed  by  a  pool  of  mortgages 
which are of the same nature as those defined in the first subparagraph or 
in  Article  62(1)  and  are  fully  performing  when  the  mortgage-backed 
securities are created; 

an  acceptable  high-priority  charge  on  the  underlying  mortgage-asset 
items is held either directly by investors in mortgage-backed securities or 
on  their  behalf  by  a  trustee  or  mandated  representative  in  the  same 
proportion to the securities which they hold; 

(2)  prepayments and accrued income: these assets shall be subject to the weighting 
corresponding to the counterparty where a credit institution is able to determine 
it  in  accordance  with  Directive  86/635/EEC.  Otherwise,  where  it  is  unable  to 
determine the counterparty, it shall apply a flat-rate weighting of 50%; 

32 

Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field (OJ L 141, 
11.6.1993, p. 27). Directive as last amended by Directive 97/9/EC (OJ L 84, 26.3.1997, p. 22). 

EN 

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(d) 

100% weighting 

(1) 

(2) 

(3) 

asset  items  constituting  claims  on  Zone  B  central  governments  and  central 
banks  except  where  denominated  and  funded  in  the  national  currency  of  the 
borrower; 

asset  items  constituting  claims  on  Zone  B  regional  governments  or  local 
authorities; 

asset items constituting claims with a maturity of more than one year on Zone 
B credit institutions; 

(4) 

asset items constituting claims on the Zone A and Zone B non-bank sectors; 

(5) 

tangible  «Assets»  within 
86/635/EEC; 

the  meaning  of  Article  4(10)  of  Directive 

(6)  holdings  of  shares,  participation  and  other  components  of  the  own  funds  of 
other  credit  institutions  which  are  not  deducted  from  the  own  funds  of  the 
lending institutions; 

(7) 

all other assets except where deducted from own funds. 

2. The following treatment shall apply to off-balance-sheet items other than those covered in 
paragraph 3. They shall first be grouped according to the risk groupings set out in Annex II. 
The  full  value  of  the  full-risk  items  shall  be  taken  into  account,  50%  of  the  value  of  the 
medium-risk items and 20% of the medium/low-risk items, while the value of low-risk items 
shall  be  set  at  zero.  The  second  stage  shall  be  to  multiply  the  off-balance-sheet  values, 
adjusted  as  described  above,  by  the  weightings  attributable  to  the  relevant  counterparties  in 
accordance with the treatment of asset items prescribed in paragraph 1 and Article 44. In the 
case of asset sale and repurchase agreements and outright forward purchases, the weightings 
shall  be  those  attaching  to  the  assets  in  question  and  not  to  the  counterparties  to  the 
transactions. The portion of unpaid capital subscribed to the European Investment Fund may 
be weighted at 20%. 

3. The methods set out in Annex III shall be applied to the off-balance-sheet items listed in 
Annex IV except for: 

– 

– 

contracts traded on recognised exchanges, 

foreign-exchange  contracts  (except  contracts  concerning  gold)  with  an  original 
maturity of 14 calendar days or less. 

Until 31 December 2006, the competent authorities of Member States may exempt from the 
application of the methods set out in Annex III over-the-counter (OTC) contracts cleared by a 
clearing  house  where  the  latter  acts  as  the  legal  counterparty  and  all  participants  fully 
collateralise  on  a  daily  basis  the  exposure  they  present  to  the  clearing  house,  thereby 
providing a protection covering both the current exposure and the potential future exposure. 
The competent authorities must be satisfied that the posted collateral gives the same level of 
protection as collateral which complies with paragraph 1(a)(7) and that the risk of a build-up 
of the clearing house's exposures beyond the market value of posted collateral is eliminated. 
Member States shall inform the Commission of the use they make of this option. 

EN 

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4. Where off-balance-sheet items carry explicit guarantees, they shall be weighted as if they 
had been incurred on behalf of the guarantor rather than the counterparty. Where the potential 
exposure  arising  from  off-balance-sheet  transactions  is  fully  and  completely  secured,  to  the 
satisfaction of the competent authorities, by any of the asset items recognised as collateral in 
paragraph  1(a)(7)  and  (b)(11),  weightings  of  0%  or  20%  shall  apply  depending  on  the 
collateral in question. 

The Member States may apply a 50% weighting to off-balance-sheet items which are sureties 
or guarantees having the character of credit substitutes and which are fully guaranteed, to the 
satisfaction  of  the  competent  authorities,  by  mortgages  meeting  the  conditions  set  out  in 
paragraph 1(c)(1), subject to the guarantor having a direct right to such collateral. 

5.  Where  asset  and  off-balance-sheet  items  are  given  a  lower  weighting  because  of  the 
existence of explicit guarantees or collateral acceptable to the competent authorities, the lower 
weighting shall apply only to that part which is guaranteed or which is fully covered by the 
collateral. 

Article 44 

Weighting of claims for regional governments or local authorities of the Member States 

1.  Notwithstanding  the  requirements  of  Article  43(1)(b),  the  Member  States  may  fix  a 
weighting  of  0%  for  their  own  regional  governments  and  local  authorities  if  there  is  no 
difference  in  risk  between  claims  on  the  latter  and  claims  on  their  central  governments 
because of the revenue-raising powers of the regional governments and local authorities and 
the  existence  of  specific  institutional  arrangements  the  effect  of  which  is  to  reduce  the 
chances of default by the latter. A zero-weighting fixed in accordance with these criteria shall 
apply to claims on and off-balance-sheet items incurred on behalf of the regional governments 
and local authorities in question and claims on others and off-balance-sheet items incurred on 
behalf  of  others  and  guaranteed  by  those  regional  governments  and  local  authorities  or 
secured, to the satisfaction of the competent authorities concerned, by collateral in the form of 
securities issued by those regional governments or local authorities. 

2.  The  Member  States  shall  notify  the  Commission  if  they  believe  a  zero-weighting  to  be 
justified according  to the  criteria laid down in paragraph 1. The Commission shall circulate 
that information. Other Member States may offer the credit institutions under the supervision 
of  their  competent  authorities  the  possibility  of  applying  a  zero-weighting  where  they 
undertake  business  with  the  regional  governments  or  local  authorities  in  question  or  where 
they hold claims guaranteed by the latter, including collateral in the form of securities. 

Article 45 

Other weighting 

1.  Without  prejudice  to  Article  44(1)  the  Member  States  may  apply  a  weighting  of  20%  to 
asset items which are secured, to the satisfaction of the competent authorities concerned, by 
collateral in the form of securities issued by Zone A regional governments or local authorities, 
by  deposits  placed  with  Zone  A  credit  institutions  other  than  the  lending  institution,  or  by 
certificates of deposit or similar instruments issued by such credit institutions. 

EN 

91 

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2. The Member States may apply a weighting of 10% to claims on institutions specialising in 
the  inter-bank  and  public-debt  markets  in  their  home  Member  States  and  subject  to  close 
supervision  by  the  competent  authorities  where  those  asset  items  are  fully  and  completely 
secured,  to  the  satisfaction  of  the  competent  authorities  of  the  home  Member  States,  by  a 
combination of asset items mentioned in Article 43(1)(a) and (b) recognised by the latter as 
constituting adequate collateral. 

3.  The  Member  States  shall  notify  the  Commission  of  any  provisions  adopted  pursuant  to 
paragraphs  1  and  2  and  of  the  grounds  for  such  provisions.  The  Commission  shall  forward 
that  information  to  the  Member  States.  The  Commission  shall  periodically  examine  the 
implications of those provisions in order to ensure that they do not result in any distortions of 
competition. 

Article 46 

Administrative bodies and non-commercial undertakings 

For  the  purposes  of  Article  43  (1)(b),  the  competent  authorities  may  include  within  the 
concept of regional governments and local authorities non-commercial administrative bodies 
responsible to regional governments or local authorities or authorities which, in the view of 
the competent authorities, exercise the same responsibilities as regional and local authorities. 

The competent authorities may also include within the concept of regional governments and 
local authorities, churches and religious communities constituted in the form of a legal person 
under  public  law,  in  so  far  as  they  raise  taxes  in  accordance  with  legislation  conferring  on 
them the right to do so. However, in this case the option set out in Article 44 shall not apply. 

Article 47 

Solvency ratio level 

1. Credit institutions shall be required permanently to maintain the ratio defined in Article 40 
at a level of at least 8%. 

2.  Notwithstanding  paragraph  1,  the  competent  authorities  may  prescribe  higher  minimum 
ratios as they consider appropriate. 

3. If the ratio falls below 8% the competent authorities shall ensure that the credit institution 
in question takes appropriate measures to restore the ratio to the agreed minimum as quickly 
as possible. 

EN 

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(cid:216) new 

SECTION 3 

MINIMUM OWN FUNDS REQUIREMENTS FOR CREDIT RISK  

Article 76  

Credit institutions shall apply either the Standardised Approach provided for in Articles 78 to 
83  or,  if  permitted  by  the  competent  authorities  in  accordance  with  Article  84,  the  Internal 
Ratings  Based  Approach  provided  for  in  Articles  84  to  89  to  calculate  their  risk-weighted 
exposure amounts for the purposes of Article 75(a). 

Article 77 

“Exposure” for the purposes of this Section means an asset or off-balance sheet item. 

SUBSECTION 1 – STANDARDISED APPROACH 

Article 78 

1. 

2. 

3. 

4. 

Subject to paragraph 2, the exposure value of an asset item shall be its balance-sheet 
value and the exposure value of an off-balance sheet item listed in Annex II shall be 
the  following  percentage  of  its  value:  100%  if  it  is  a  full-risk  item,  50%  if  it  is  a 
medium-risk item, 20% if it is a medium/low-risk item, 0% if its is a low-risk item. 
The off-balance sheet items referred to in the first sentence of this paragraph shall be 
assigned to risk categories as indicated in Annex II. 

The exposure value of a derivative instrument listed in Annex IV shall be determined 
in accordance with one of the two methods set out in Annex III with the effects of 
contracts  of  novation  and  other  netting  agreements  taken  into  account  for  the 
purposes of those methods in accordance with Annex III. 

Where  an  exposure  is  subject  to  funded  credit  protection,  the  exposure  value 
applicable to that item may be modified in accordance with Subsection 3. 

In  the  case  of  a  credit  institution  using  the  Financial  Collateral  Comprehensive 
Method under Annex VIII, Part 3, where an exposure takes the form of securities or 
commodities sold, posted or lent under a repurchase transaction or under a securities 
or  commodities  lending  or  borrowing  transaction,  the  exposure  value  shall  be  the 
value of the securities or commodities determined in accordance with Article 74(1) 
and  shall be increased  by  the volatility  adjustment  appropriate  to such  securities or 
commodities as prescribed in Annex VIII, Part 3, paragraphs 35 to 60. 

EN 

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1. 

Each exposure shall be assigned to one of the following exposure classes: 

Article 79 

(a) 

claims or contingent claims on central governments or central banks; 

(b) 

claims or contingent claims on regional governments or local authorities; 

(c) 

claims  or  contingent  claims  on  administrative  bodies  and  non-commercial 
undertakings; 

(d) 

claims or contingent claims on multilateral development banks; 

(e) 

claims or contingent claims on international organisations; 

(f) 

claims or contingent claims on institutions; 

(g) 

claims or contingent claims on corporates; 

(h) 

retail claims or contingent retail claims; 

(i) 

claims or contingent claims secured on real estate property; 

(j) 

past due items; 

(k) 

items belonging to regulatory high-risk categories; 

(l) 

claims in the form of covered bonds; 

(m)  securitisation positions; 

(n) 

short-term claims on institutions and corporate; 

(o) 

claims in the form of collective investment undertakings (CIU); 

(p)  other items. 

2. 

To be eligible for the retail exposure class referred to in point (h) of paragraph 1, an 
exposure shall meet the following conditions: 

(a) 

(b) 

(c) 

the exposure must be either to an individual person or persons, or to a small or 
medium sized entity; 

the  exposure  must  be  one  of  a  significant  number  of  exposures  with  similar 
characteristics such that the risks associated with such lending are substantially 
reduced; 

the total amount owed to the credit institution and any parent undertaking and 
its subsidiaries, including any past due exposure, by the obligor client or group 
of connected clients must not, to the knowledge of the credit institution, exceed 
EUR 1 million. The credit institution must take reasonable steps to acquire this 
knowledge. 

EN 

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1. 

2. 

3. 

4. 

5. 

6. 

7. 

Securities shall not be eligible for the retail exposure class. 

Article 80 

To  calculate  risk-weighted  exposure  amounts,  risk  weights  shall  be  applied  to  all 
exposures,  unless  deducted  from  own  funds,  in  accordance  with  the  provisions  of 
Annex  VI,  Part  1.  The  application  of  risk  weights  shall  be  based  on  the  exposure 
class to which the exposure is assigned and, to the extent specified in Annex VI, Part 
1,  its  credit  quality.  Credit  quality  may  be  determined  by  reference  to  the  credit 
assessments of External Credit Assessment Institutions (‘ECAIs’) in accordance with 
the  provisions  of  Articles  81  to  83  or  the  credit  assessments  of  Export  Credit 
Agencies as described in Annex VI, Part 1. 

For  the  purposes  of  applying  a  risk  weight,  as  referred  to  in  paragraph  1,  the 
exposure  value  shall  be  multiplied  by  the  risk  weight  specified  or  determined  in 
accordance with this Subsection. 

For  the  purposes  of  calculating  risk-weighted  exposure  amounts  for  exposures  to 
institutions, competent authorities shall decide whether to adopt the method based on 
the  credit  quality  of  the  central  government  of  the  jurisdiction  in  which  the  credit 
institution  is  incorporated  or  the  method  based  on  the  credit  quality  of  the 
counterparty institution in accordance with Annex VI. 

Notwithstanding  paragraph  1,  where  an  exposure  is  subject  to  credit  protection  the 
risk weight applicable to that item may be modified in accordance with Subsection 3. 

Risk-weighted  exposure  amounts  for  securitised  exposures  shall  be  calculated  in 
accordance with Subsection 4. 

Exposures  the  calculation  of  risk-weighted  exposure  amounts  for  which  is  not 
otherwise  provided  for  under  this  Subsection  shall  be  assigned  a  risk-weight  of 
100%. 

With  the  exception  of  exposures  giving  rise  to  liabilities  in  the  form  of  the  items 
referred  to  in  points  (1)  to  (8)  of  Article  57(1),  competent  authorities  may  exempt 
from  the  requirements  of  paragraph  1  of  this  Article  the  exposures  of  a  credit 
institution  to  a  counterparty  which  is  its  parent  undertaking,  its  subsidiary  or  a 
subsidiary of its parent undertaking, provided that the following conditions are met: 

(a) 

(b) 

(c) 

(d) 

the  counterparty  is  an  institution  or  a  financial  holding  company,  financial 
institution,  asset  management  company  or  ancillary  services  undertaking 
subject to appropriate prudential requirements; 

the counterparty is included in the same consolidation as the credit institution 
on a full basis; 

the  counterparty  is  subject  to  the  same  risk  evaluation,  measurement  and 
control procedures as the credit institution; 

the  counterparty  is  established  in  the  same  Member  State  as  the  credit 
institution; 

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(e) 

there  is  no  current  or  foreseen  material  or  legal  impediment  to  the  prompt 
transfer  of  own  funds  or  repayment  of  liabilities  from  the  counterparty  to  the 
credit institution. 

In such a case, a risk weight of 0% shall be applied. 

Article 81 

An  external  credit  assessment  may  be  used  to  determine  the  risk  weight  of  an 
exposure in accordance with Article 80 only if the ECAI which provides it has been 
recognised  as  eligible  for  those  purposes  by  the  competent  authorities,  hereinafter 
“an eligible ECAI’. 

Competent authorities shall recognise an ECAI as eligible for the purposes of Article 
80  only  if  they  are  satisfied  that  its  assessment  methodology  complies  with  the 
requirements  of  objectivity,  independence,  ongoing  review  and  transparency,  and 
that  the  resulting  credit  assessments  meet  the  requirements  of  credibility  and 
transparency.  For  those  purposes;  the  competent  authorities  shall  take  into  account 
the technical criteria set out in Annex VI, Part 2. 

If an ECAI has been recognised as eligible by the competent authorities of a Member 
State, the competent authorities of other Member States may recognise that ECAI as 
eligible without carrying out their own evaluation process. 

Competent  authorities  shall  make  publicly  available  an  explanation  of  the 
recognition process, and a list of eligible ECAIs. 

Article 82 

The competent authorities shall determine, taking into account the technical criteria 
set out in Annex VI, Part 2, with which of the credit quality steps set out in Part 1 of 
that Annex the relevant credit assessments of an eligible ECAI are to be associated. 
Those determinations shall be objective and consistent. 

When the competent authorities of a Member State have made a determination under 
paragraph  1,  the  competent  authorities  of  other  Member  States  may  recognise  that 
determination without carrying out their own determination process. 

Article 83 

The use of ECAI credit assessments for the calculation of a credit institution’s risk-
weighted  exposure  amounts  shall  be  consistent  and  in  accordance  with  Annex  VI, 
Part 3. Credit assessments shall not be used selectively. 

Credit  institutions  shall  use  solicited  credit  assessments.  However,  with  the 
permission  of 
they  may  use  unsolicited 
assessments. 

the  relevant  competent  authority, 

1. 

2. 

3. 

4. 

1. 

2. 

1. 

2. 

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SUBSECTION 2 - INTERNAL RATINGS BASED APPROACH  

Article 84  

In  accordance  with  this  Subsection,  the  competent  authorities  may  permit  credit 
institutions  to  calculate  their  risk-weighted  exposure  amounts  using  the  Internal 
Ratings  Based  Approach  (IRB  Approach).  Explicit  permission  shall  be  required  in 
the case of each credit institution. 

Permission shall be given only if the competent authority is satisfied that the credit 
institution's  systems  for  the  management  and  rating  of  credit  risk  exposures  are 
sound and implemented with integrity and, in particular, that they meet the following 
standards in accordance with Annex VII, Part 4: 

(a) 

(b) 

(c) 

(d) 

(e) 

the  credit  institution’s  rating  systems  provide  for  a  meaningful  assessment  of 
obligor and transaction characteristics, a meaningful differentiation of risk and 
accurate and consistent quantitative estimates of risk; 

internal ratings and default and loss estimates used in the calculation of capital 
requirements and associated systems and processes play an essential role in the 
risk  management  and  decision-making  process,  and  in  the  credit  approval, 
internal  capital  allocation  and  corporate  governance  functions  of  the  credit 
institution; 

the  credit  institution  has  a  credit  risk  control  unit  responsible  for  its  rating 
systems that is appropriately independent and free from undue influence; 

the  credit  institution  collects  and  stores  all  relevant  data  to  provide  effective 
support to its credit risk measurement and management process; 

the credit institution documents its rating systems, the rationale for their design 
and validates its rating systems. 

Where an EU parent credit institution and its subsidiaries or an EU parent financial 
institution and its subsidiaries use the IRB Approach on a unified basis for the parent 
and its subsidiaries, the competent authorities may allow minimum requirements of 
Annex VII, Part 4 to be met by the parent and its subsidiaries considered together. 

A credit institution applying for the use of the IRB Approach shall demonstrate that 
it has been using for the IRB exposure classes in question rating systems that were 
broadly in line with the minimum requirements set out in this Annex for internal risk 
measurement  and  management  purposes  for  at  least  three  years  prior  to  its 
qualification  to  use  the  IRB  Approach.  This  requirement  shall  apply  from  the  31 
December 2010 onwards. 

A credit institution applying for the use of own estimates of LGDs and/or conversion 
factors shall demonstrate that it has been estimating and employing own estimates of 
LGDs  and/or  conversion  factors  in  a  manner  that  was  broadly  consistent  with  the 
minimum requirements for use of own estimates of those parameters set out in this 
Annex  for  at  least  three  years  prior  to  qualification  to  use  own  estimates  of  LGDs 

1. 

2. 

3. 

4. 

EN 

97 

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and/or conversion factors. This requirement shall apply from the 31 December 2010 
onwards. 

5. 

6. 

If  a  credit  institution  ceases  to  comply  with  the  requirements  set  out  in  this 
Subsection, it shall either present to the competent authority a plan for a timely return 
to compliance or demonstrate that the effect of non-compliance is immaterial. 

When  the  IRB  Approach  is  intended  to  be  used  by  the  EU  parent  credit  institution 
and  its  subsidiaries,  or  by  the  EU  parent  financial  holding  company  and  its 
subsidiaries, the competent authorities of the different legal entities shall co-operate 
closely as provided for in Articles 129 to 132. 

1. 

Without prejudice to Article 89, credit institutions and any parent undertaking and its 
subsidiaries shall implement the IRB Approach for all exposures. 

Article 85 

Subject to the approval of the competent authorities, implementation may be carried 
out sequentially across the different exposure classes, referred to in Article 86, within 
the same business unit, across different business units in the same group or for the 
use  of  own  estimates  of  LGDs  or  conversion  factors  for  the  calculation  of  risk 
weights for exposures to corporates, institutions, and central governments and central 
banks.  

In the case of the retail exposure class referred to in Article 86, implementation may 
be carried out sequentially across the categories of exposures to which the different 
correlations in Annex VII, Part 1, paragraphs 9, 10 and 11 correspond. 

Implementation as referred to in paragraph 1 shall be carried out within a reasonable 
period of time to be agreed with the competent authorities. The implementation shall 
be  carried  out  subject  to  strict  conditions  determined  by  the  competent  authorities. 
Those conditions shall be designed to ensure that the flexibility under paragraph 1 is 
not  used  selectively  with  the  purpose  of  achieving  reduced  minimum  capital 
requirements in respect of those exposure classes or business units that are yet to be 
included  in  the  IRB  Approach  or  in  the  use  of  own  estimates  of  LGDs  and 
conversion factors. 

Credit institutions using the IRB Approach for any exposure class shall at the same 
time use the IRB Approach for the equity exposure class. 

Subject to paragraphs 1 to 3 and Article 89, credit institutions which have obtained 
permission under Article 84 to use the IRB Approach shall  not revert to the use of 
Subsection  1  for  the  calculation  of  risk-weighted  exposure  amounts  except  for 
demonstrated good cause and subject to the approval of the competent authorities. 

Subject to paragraphs 1 and 2 and Article 89, credit institutions which have obtained 
permission under Article 87(9) to use own estimates of LGDs and conversion factors, 
shall not revert to the use of LGD values and conversion factors referred to in Article 
87(8)  except  for  demonstrated  good  cause  and  subject  to  the  approval  of  the 
competent authorities. 

2. 

3. 

4. 

5. 

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Article 86 

1. 

Each exposure shall be assigned to one of the following exposure classes: 

(a) 

claims or contingent claims on central governments and central banks; 

(b) 

claims or contingent claims on institutions; 

(c) 

claims or contingent claims on corporates; 

(d) 

retail claims or contingent retail claims; 

(e) 

equity claims; 

(f) 

securitisation positions; 

(g)  other non credit-obligation assets. 

The  following  exposures  shall  be  treated  as  exposures  to  central  governments  and 

2. 
central banks: 

(a) 

(b) 

exposures  to  regional  governments  and  local  authorities  which  are  treated  as 
exposures to central governments under Subsection 1; 

exposures to Multilateral Development Banks and International Organisations 
which attract a risk weight of 0% under Subsection 1. 

3. 

The following exposures shall be treated as exposures to institutions: 

(a) 

(b) 

(c) 

exposures to regional governments and local authorities which are not treated 
as exposures to central governments under Subsection 1; 

exposures  to  Public  Sector  Entities  which  are  treated  as  exposures  to 
institutions under the Subsection 1; 

exposures  to  Multilateral  Development  Banks  which  do  not  attract  a  0%  risk 
weight under Subsection 1.  

To  be  eligible  for  the  retail  exposure  class  referred  to  in  point  (d)  of  paragraph  1, 

4. 
exposures shall meet the following criteria: 

(a) 

(b) 

(c) 

they shall be either to an individual person or persons, or to a small or medium 
sized entity, provided in the latter case that the total amount owed to the credit 
institution  and  to  any  parent  undertaking  and  its  subsidiaries  by  the  obligor 
client  or  group  of  connected  clients  does  not,  to  the  knowledge  of  the  credit 
institution,  which  must  have  taken  reasonable  steps  to  confirm  the  situation, 
exceed EUR 1 million; 

they  are  treated  by  the  credit  institution  in  its  risk  management  consistently 
over time and in a similar manner; 

they  are  not  managed  individually  in  a  way  comparable  to  exposures  in  the 
corporate exposure class; 

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(d) 

they  each  represent  one  of  a  significant  number  of  similarly  managed 
exposures. 

5. 

The following exposures shall be classed as equity exposures: 

(a) 

non-debt  exposures  conveying  a  subordinated,  residual  claim  on  the  assets  or 
income of the issuer; 

(b)  debt  exposures  the  economic  substance  of  which  is  similar  to  the  exposures 

specified in point (a). 

Within  the  corporate  exposure  class,  credit  institutions  shall  separately  identify  as 

6. 
specialised lending exposures, exposures which possess the following characteristics:  

(a) 

(b) 

(c) 

the  exposure  is  to  an  entity  which  was  created  specifically  to  finance  and/or 
operate physical assets; 

the  contractual  arrangements  give  the  lender  a  substantial  degree  of  control 
over the assets and the income that they generate;  

the primary source of repayment of the obligation is the income generated by 
the  assets  being  financed,  rather  than  the  independent  capacity  of  a  broader 
commercial enterprise.  

7. 
Any credit obligation not assigned to the exposure classes referred to in points (a), (b) 
and (d) to (f) of paragraph 1 shall be assigned to the exposure class referred to in point (c) of 
that paragraph. 

The  exposure  class  referred  to  in  point  (g)  of  paragraph  1  shall  include  the  residual 

8. 
value of leased properties, if not covered elsewhere in this Directive. 

The  methodology  used  by  the  credit  institution  for  assigning  exposures  to  different 

9. 
exposure classes shall be appropriate and consistent over time. 

Article 87 

1. 
The risk-weighted exposure amounts for credit risk for exposures belonging to one of 
the  exposure  classes  referred  to  in  points  (a)  to  (e)  or  (g)  of  Article  86(1)  shall,  unless 
deducted from own funds, be calculated in accordance with Annex VII, Part 1, paragraphs 1 
to 25. 

The risk-weighted exposure amounts for dilution risk for purchased receivables shall 

2. 
be calculated according to Annex VII, Part 1, paragraph 26.  

3. 
The  calculation  of  risk-weighted  exposure  amounts  for  credit  risk  and  dilution  risk 
shall  be  based  on  the  relevant  parameters  associated  with  the  exposure  in  question.  These 
shall  include  probability  of  default  (PD),  loss  given  default  (LGD),  maturity  (M)  and  the 
exposure  value  of  the  exposure.  PD  and  LGD  may  be  considered  separately  or  jointly,  in 
accordance with Annex VII, Part 2. 

EN 

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4. 
Notwithstanding  paragraph  3,  the  calculation  of  risk-weighted  exposure  amounts  for 
credit risk for all exposures belonging to the exposure class referred to in point (e) of Article 
86(1) shall be calculated in accordance with Annex VII, Part 1, paragraphs 15 to 24 subject to 
approval of competent authorities. Competent authorities shall only allow a credit institution 
to use the approach set out in Annex VII, Part 1, paragraphs 24 to 25, if the credit institution 
meets the minimum requirements Annex VII, Part 4, paragraphs 114 to 122. 

5. 
Notwithstanding  paragraph  3,  the  calculation  of  risk  weighted  exposure  amounts  for 
credit risk for specialised lending exposures may be calculated in accordance with Annex VII, 
Part 1, paragraph 5. Competent authorities shall publish guidance on how institutions should 
assign risk weights to specialised lending exposures under Annex VII, Part 1, paragraph 5 and 
shall approve institutions assignment methodologies. 

6. 
For  exposures  belonging  to  the  exposure  classes  referred  to  in  points  (a)  to  (d)  of 
Article 86(1), credit institutions shall provide their own estimates of PDs in accordance with 
Article 84 and Annex VII, Part 4. 

7. 
For exposures belonging to the exposure class referred to in point (d) of Article 86(1), 
credit institutions shall provide own estimates of LGDs and conversion factors in accordance 
with Article 84 and Annex VII, Part 4. 

8. 
For  exposures  belonging  to  the  exposure  classes  referred  to  in  points  (a)  to  (c)  of 
Article  86(1),  credit  institutions  shall  apply  the  LGD  values  set  out  in  Annex  VII,  Part 2, 
paragraph 8, and the conversion factors set out in Annex VII, Part 3, paragraph 11 points (a) 
to (c). 

9. 
Notwithstanding  paragraph  8,  for  all  exposures  belonging  to  the  exposure  classes 
referred  to  in  points  (a)  to  (c)  of  Article  86(1),  competent  authorities  may  permit  credit 
institutions to use own estimates of LGDs and conversion factors in accordance with Article 
84 and Annex VII, Part 4. 

10. 
The  risk-weighted  exposure  amounts  for  securitised  exposures  and  for  exposures 
belonging to the exposure class referred to in point (f) of Article 86(1) shall be calculated in 
accordance with Subsection 4. 

11.  Where exposures to a collective investment undertaking (CIU) meet the criteria set out 
in  Annex  VI,  Part  1,  paragraphs  74  to  75  and  the  credit  institution  is  aware  of  all  of  the 
underlying exposures of the CIU, the credit institution shall look through to those underlying 
exposures in order to calculate risk-weighted exposure amounts and expected loss amounts in 
accordance with the methods set out in this Subsection.  

Where the credit institution does not meet the conditions for using the methods set out in this 
Subsection, risk weighted exposure amounts and expected loss amounts shall be calculated in 
accordance with the following approaches: 

(a) 

for exposures belonging to the exposure class referred to in point (e) of Article 
86(1),  the  approach  set  out  in  Annex  VII,  Part 1,  paragraphs  17  to  19.  If,  for 
those purposes; the credit institution is unable to differentiate between private 
equity, exchange-traded and other equity exposures, it shall treat the exposures 
concerned as other equity exposures. 

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(b) 

for all other underlying exposures, the approach set out in Subsection 1, subject 
to the following modifications: 

(i) 

the  exposures  are  assigned  to  the  appropriate  exposure  class  and 
attributed  the  risk  weight  of  the  credit  quality  step  immediately 
above the credit quality step that would normally be assigned to the 
exposure; 

(ii) 

exposures  assigned  to  the  higher  credit  quality  steps,  to  which  a  risk 
weight  of  150%  would  normally  be  attributed,  are  assigned  a  risk 
weight of 200%. 

12.  Where  exposures  to  a  CIU  do  not  meet  the  criteria  set  out  in  Annex  VI,  Part  1, 
paragraphs 74 to 75, or the credit institution is not aware of all of the underlying exposures of 
the  CIU,  the  credit  institution  shall  look  through  to  the  underlying  exposures  and  calculate 
risk-weighted exposure amounts and expected loss amounts in accordance with the approach 
set out in Annex VII, Part 1, paragraphs 17 to 19. If, for those purposes, the credit institution 
is unable to differentiate between private equity, exchange-traded and other equity exposures, 
it  shall  treat  the  exposures  concerned  as  other  equity  exposures.  For  these  purposes,  non-
equity exposures are assigned to one of the classes (private equity, exchange traded equity or 
other equity) set out in Annex VII, Part 1, paragraph 17 and unknown exposures are assigned 
to other equity class.  

Alternatively  to  the  method described above, credit institutions may rely on a third party to 
calculate and report the average risk weighted exposure amounts based on the CIUs underling 
exposures  and  calculated  in  accordance  with  the  following  approaches,  provided  that  the 
correctness of the calculation and the report is adequately ensured: 

(a) 

for exposures belonging to the exposure class referred to in point (e) of Article 
86(1),  the  approach  set  out  in  Annex  VII,  Part 1,  paragraphs  17  to  19.  If,  for 
those purposes, the credit institution is unable to differentiate between private 
equity, exchange-traded and other equity exposures, it shall treat the exposures 
concerned as other equity exposures. 

(b) 

for all other underlying exposures, the approach set out in Subsection 1, subject 
to the following modifications: 

(i) 

(ii) 

the  exposures  are  assigned  to  the  appropriate  exposure  class  and 
attributed the risk weight of the credit quality step immediately above the 
credit quality step that would normally be assigned to the exposure; 

exposures  assigned  to  the  higher  credit  quality  steps,  to  which  a  risk 
weight of 150% would normally be attributed, are assigned a risk weight 
of 200%. 

Article 88 

1. 
The  expected  loss  amounts  for  exposures  belonging  to  one  of  the  exposure  classes 
referred  to  in  points  (a)  to  (e)  of  Article  86(1)  shall  be  calculated  in  accordance  with  the 
methods set out in Annex VII, Part 1, paragraphs 27 to 33. 

EN 

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2. 
The  calculation  of  expected  loss  amounts  in  accordance  with  Annex  VII,  Part 1, 
paragraphs 27 to 33 shall be based on the same input figures of PD, LGD and the exposure 
value for each exposure as being used for the calculation of risk-weighted exposure amounts 
in accordance with Article 87. 

The expected loss amounts for securitised exposures shall be calculated in accordance 

3. 
with Subsection 4.  

The expected loss amount for exposures belonging to the exposure class referred to in 

4. 
point (g) of Article 86(1) shall be zero. 

The  expected  loss  amounts  for  dilution  risk  of  purchased  receivables  shall  be 

5. 
calculated in accordance with the methods set out in Annex VII, Part 1, paragraph 33. 

6. 
The expected loss amounts for exposures referred to in Article 87(11) and (12) shall 
be calculated in accordance with the methods set out in Annex VII, Part 1, paragraphs 27 to 
33. 

Article 89 

1. 
Subject  to  the  approval  of  the  competent  authorities,  credit  institutions  permitted  to 
use the IRB Approach in the calculation of risk-weighted exposure amounts and expected loss 
amounts for one or more exposure classes may apply Subsection 1 for the following: 

(a) 

(b) 

(c) 

(d) 

the exposure class referred to in point (a) of Article 86(1), where the number of 
material  counterparties  is  limited  and  it  would  be  unduly  burdensome  for  the 
credit institution to implement a rating system for these counterparties; 

the exposure class referred to in point (b) of Article 86(1), where the number of 
material  counterparties  is  limited  and  it  would  be  unduly  burdensome  for  the 
credit institution to implement a rating system for these counterparties; 

exposures in non-significant business units as well as exposure classes that are 
immaterial in terms of size and perceived risk profile;  

exposures  to  central  governments  of  the  home  Member  State  and  to  their 
regional  governments,  local  authorities  and  administrative  bodies,  provided 
that: 

(i) 

there  is  no  difference  in  risk  between  the  exposures  to  that  central 
government  and  those  other  exposures  because  of  specific  public 
arrangements; 

(ii) 

exposures  to  the  central  government  are  associated  with  credit  quality 
assessment step 1 under Subsection 1. 

(e) 

exposures  of  a  credit  institution  to  a  counterparty  which  is  its  parent 
undertaking,  its  subsidiary  or  a  subsidiary  of  its  parent  undertaking  provided 
that the counterparty is an institution or a financial holding company, financial 
institution,  asset  management  company  or  ancillary  services  undertaking 
subject to appropriate prudential requirements. 

EN 

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f) 

g) 

equity  exposures  to  entities  whose  credit  obligations  qualify  for  a  zero  risk 
weight under Subsection 1 (including those publicly sponsored entities where a 
zero weight can be applied). 

equity  exposures  incurred  under  legislated  programmes  to  promote  specified 
sectors of the economy that provide significant subsidies for the investment to 
the  credit  institution  and  involve  some  form  of  government  oversight  and 
restrictions on the equity investments. This exclusion is limited to an aggregate 
of 10% of original own funds plus additional own funds. 

This paragraph shall not prevent the competent authorities of other Member State to 
allow  the  application  of  the  rules  of  Subsection  1  for  equity  exposures  which  have 
been allowed for this treatment in other Member States. 

2. 
For the purposes of point (c), the equity exposure class of a credit institution shall be 
considered  material  if  their  aggregate  value,  excluding  equity  exposures  incurred  under 
legislative  programmes  as  referred  to  in  point  (g),  exceeds,  on  average  over  the  preceding 
year, 10% of the credit institution’s own funds. If the number of those equity exposures is less 
than 10 individual holdings, that threshold shall be 5% of the credit institution’s own funds. 

SUBSECTION 3 - CREDIT RISK MITIGATION  

Article 90 

For  the  purposes  of  this  Subsection,  ‘lending  credit  institution’  shall  mean  the  credit 
institution which has the exposure in question, whether or not deriving from a loan. 

Article 91 

Credit institutions using the Standardised Approach under Articles 78 to 83 or using the IRB 
Approach under Articles 84 to 89, but not using their own estimates of LGD and conversion 
factors under Articles 87 and 88, may recognise credit risk mitigation in accordance with this 
Subsection in the calculation of risk-weighted exposure amounts for the purposes of Article 
75 point (a) or as relevant expected loss amounts for the purposes of the calculation referred 
to in point (q) of Article 57, and Article 63(3). 

Article 92 

1. 

2. 

3. 

The  technique  used  to  provide  the  credit  protection  together  with  the  actions  and 
steps taken and procedures and policies implemented by the lending credit institution 
shall be such as to result in credit protection arrangements which are legally effective 
and enforceable in all relevant jurisdictions. 

The  lending  credit  institution  shall  take  all  appropriate  steps  to  ensure  the 
effectiveness of the credit protection arrangement and to address related risks. 

In the case of funded credit protection, to be eligible for recognition the assets relied 
upon  must  be  sufficiently  liquid  and  their  value  over  time  sufficiently  stable  to 
provide appropriate certainty as to the credit protection achieved having regard to the 
approach  used  to  calculate  risk-weighted  exposure  amounts  and  to  the  degree  of 

EN 

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4. 

5. 

recognition allowed. Eligibility shall be limited to the assets set out in Annex VIII, 
Part 1.  

In  the  case  of  funded  credit  protection,  the  lending  credit  institution  shall  have  the 
right to liquidate or retain, in a timely manner, the assets from which the protection 
derives in the event of the default, insolvency or bankruptcy - or other credit event 
set  out  in  the  transaction  documentation  -  and,  where  applicable,  of  the  custodian 
holding  the  collateral.  The  degree  of  correlation  between  the  value  of  the  assets 
relied upon for protection and the credit quality of the borrower must not be undue.  

In  the  case  of  unfunded  credit  protection,  to  be  eligible  for  recognition  the  party 
giving  the  undertaking  must  be  sufficiently  reliable,  and  the  protection  agreement 
legally  effective  in  the  relevant  jurisdictions,  to  provide  appropriate  certainty  as  to 
the credit protection  achieved having regard to the approach used to calculate risk-
weighted  exposure  amounts  and  to  the  degree  of  recognition  allowed.  Eligibility 
shall be limited to the protection providers and types of protection agreement set out 
in Annex VIII, Part 1. 

6. 

The minimum requirements set out in Annex VIII, Part 2 shall be complied with. 

Article 93 

1. 

2. 

3. 

Where  the  requirements  of  Article  92  are  met  the  calculation  of  risk-weighted 
exposure  amounts,  and,  as  relevant,  expected  loss  amounts,  may  be  modified  in 
accordance with Annex VIII, Parts 3 to 6. 

No  exposure  in  respect  of  which  credit  risk  mitigation  is  obtained  shall  produce  a 
higher  risk-weighted  exposure  amount  or  expected  loss  amount  than  an  otherwise 
identical exposure in respect of which there is no credit risk mitigation.  

Where the risk-weighted exposure amount already takes account of credit protection 
under Articles 78 to 83 or Articles 84 to 93, as relevant, the calculation of the credit 
protection shall not be further recognised under this Subsection. 

SUBSECTION 4 - SECURITISATION 

Article 94 

Where  a  credit  institution  uses  the  Standardised  Approach  set  out  in  Subsection  1  for  the 
calculation of risk-weighted exposure amounts for the exposure class to which the securitised 
exposures  would  be  assigned  under  Article  79,  it  shall  calculate  the  risk-weighted  exposure 
amount for a securitisation position in accordance with Annex IX, Part 4, paragraphs 6 to 35.  

In  all  other  cases,  it  shall  calculate  the  risk-weighted  exposure  amount  in  accordance  with 
Annex IX, Part 4, paragraphs 36 to 74. 

EN 

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Article 95 

1. 
Where  significant  credit  risk  associated  with  securitised  exposures  has  been 
transferred  from  the  originator  credit  institution  in  accordance  with  the  terms  of  Annex  IX, 
Part 2, that credit institution may: 

(a) 

(b) 

in the case of a traditional securitisation, exclude from its calculation of risk-
weighted  exposure  amounts,  and,  as  relevant,  expected  loss  amounts,  the 
exposures which it has securitised;  

in  the  case  of  a  synthetic  securitisation,  calculate  risk-weighted  exposure 
amounts, and, as relevant, expected loss amounts, in respect of the securitised 
exposures in accordance with Annex IX, part 2. 

2. 
Where  paragraph  1  applies,  the  originator  credit  institution  shall  calculate  the  risk-
weighted exposure amounts prescribed in Annex IX for the positions that it may hold in the 
securitisation.  

Where  the  originator  credit  institution  fails  to  transfer  significant  credit  risk  in  accordance 
with  paragraph  1,  it  need  not  calculate  risk-weighted  exposure  amounts  for  any  positions  it 
may have in the securitisation in question. 

Article 96 

1. 
To  calculate  the  risk-weighted  exposure  amount  of  a  securitisation  position,  risk 
weights shall be applied to the exposure value of the position in accordance with Annex IX, 
based on the credit quality of the position, which may be determined by reference to an ECAI 
credit assessment or otherwise, as set out in Annex IX.  

2. 
Where  there  is  an  exposure  to  different  tranches  in  a  securitisation,  the  exposure  to 
each  tranche  shall  be  considered  a  separate  securitisation  position.  The  providers  of  credit 
protection to securitisation positions shall be considered to hold positions in the securitisation. 
Securitisation positions shall include exposures to a securitisation arising from interest rate or 
currency derivative contracts. 

3. 
Where a securitisation position is subject to funded or unfunded credit protection the 
risk-weight to be applied to that position may be modified in accordance with Articles 90 to 
93, read in conjunction with Annex IX. 

4. 
Subject to point (r) of Article 57 and Article 66(2), the risk-weighted exposure amount 
shall  be  included  in  the  credit  institution’s  total  of  risk-weighted  exposure  amounts  for  the 
purposes of Article 75(a). 

Article 97 

1. 
An  ECAI  credit  assessment  may  be  used  to  determine  the  risk  weight  of  a 
securitisation position in accordance with Article 96 only if the ECAI has been recognised as 
eligible by the competent authorities for this purpose, hereinafter “an eligible ECAI”.  

EN 

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2. 
The  competent  authorities  shall  recognise  an  ECAI  as  eligible  for  the  purposes  of 
paragraph 1 only if they are satisfied as to its compliance with the requirements laid down in 
Article  81,  taking  into  account  the  technical  criteria  in  Annex  VI,  Part  2,  and  that  it  has  a 
demonstrated ability in the area of securitisation, which may be evidenced by a strong market 
acceptance. 

3. 
If an ECAI has been recognised as eligible by the competent authorities of a Member 
State for the purposes of paragraph 1, the competent authorities of other Member States may 
recognise that ECAI as eligible for those purposes without carrying out their own evaluation 
process. 

The  competent  authorities  shall  make  publicly  available  an  explanation  of  the 

4. 
recognition process and a list of eligible ECAIs.  

To be used for this purpose a credit assessment of an eligible ECAI shall comply with 

5. 
the principles of credibility and transparency as elaborated in Annex IX, Part 3.  

Article 98 

For  the  purposes  of  applying  risk  weights  to  securitisation  positions,  the  competent 
1. 
authorities  shall  determine  with  which  of  the  credit  quality  steps  set  out  in  Annex  IX  the 
relevant  credit  assessments  of  an  eligible  ECAI  are  to  be  associated.  Those  determinations 
shall be objective and consistent. 

2. 
When the competent authorities of a Member State have made a determination under 
paragraph  1,  the  competent  authorities  of  other  Member  States  may  recognise  that 
determination without carrying out their own determination process. 

Article 99 

The use of ECAI credit assessments for the calculation of a credit institution’s risk-weighted 
exposure amounts under Article 96 shall be consistent and in accordance with Annex IX, Part 
3. Credit assessments shall not be used selectively. 

Article 100 

1. 

2. 

Where  there  is  a  securitisation  of  revolving  exposures  subject  to  an  early 
amortisation  provision,  the  originator  credit  institution  or  sponsor  credit  institution 
shall calculate, in accordance with Annex IX, an additional risk-weighted exposure 
amount in respect of the risk that the levels of credit risk to which it is exposed may 
increase following the operation of the early amortisation provision. 

For those purposes, a revolving exposure shall be an exposure whereby a customer 
may  vary  the  amount  drawn  within  an  agreed  limit,  and  an  early  amortisation 
provision shall be a contractual clause which requires, on the occurrence of defined 
events,  investors’  positions  to  be  redeemed  before  the  originally  stated  maturity  of 
the securities issued. 

EN 

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3. 

4. 

In  the  case  of  securitisations  subjects  to  an  early  amortisation  provision  of  retail 
exposures  which  are  uncommitted  and  unconditionally  cancellable  without  prior 
notice, where the early amortisation is triggered by a quantitative value in respect of 
something  other  than  the  three  months  average  excess  spread,  the  competent 
authorities  may  apply  a  treatment  which  approximates  closely  to  that  prescribed  in 
Annex  IX,  Part  4,  paragraphs  27  to  30  for  determining  the  conversion  figure 
indicated. 

Where  a  competent  authority  intends  to  apply  a  treatment  in  accordance  with 
paragraph  3  in  respect  of  a  particular  securitisation,  it  shall  first  of  all  inform  the 
relevant competent authorities of all the other Member States. Before the application 
of  such  a  treatment  becomes  part  of  the  general  policy  approach  of  the  competent 
authority  to  securitisations  containing  early  amortisation  clauses  of  the  type  in 
question, the competent authority shall consult the relevant competent authorities of 
all  the  other  member  States  and  take  into  consideration  the  views  expressed.  The 
views  expressed  in  such  consultation  and  the  treatment  adopted  shall  be  publicly 
disclosed by the competent authority in question. 

Article 101 

1. 
An  originator  credit  institution  or  sponsor  credit  institution  shall  not,  with  a  view  to 
reducing potential or actual losses to investors, provide support to the securitisation beyond its 
contractual obligations. 

2. 
If  an  originator  credit  institution  or  a  sponsor  credit  institution  fails  to  comply  with 
paragraph  1  in  respect  of  a  securitisation,  the  competent  authority  shall  require  it  at  a 
minimum,  to  hold  capital  against  all  of  the  securitised  exposures  as  if  they  had  not  been 
securitised. The credit institution shall disclose publicly that it has provided non-contractual 
support and the regulatory capital impact of having done so. 

SECTION 4 

MINIMUM OWN FUNDS REQUIREMENTS FOR OPERATIONAL RISK 

Article 102 

Competent  authorities  shall  require  credit  institutions  to  hold  own  funds  against 

1. 
operational risk in accordance with the approaches set out in Articles 103, 104 and 105. 

2. 
Without  prejudice  to  paragraph  4,  credit  institutions  that  use  the  approach  set  out  in 
Article  104  shall  not  revert  to  the  use  of  the  approach  set  out  in  Article  103,  except  for 
demonstrated good cause and subject to approval by the competent authorities. 

3. 
Without  prejudice  to  paragraph  4,  credit  institutions  that  use  the  approach  set  out  in 
Article 105 shall not revert to the use of the approaches set out in Articles 103 or 104 except 
for demonstrated good cause and subject to approval by the competent authorities. 

EN 

108 

   EN 

 
Competent  authorities  may  allow  credit  institutions  to  use  a  combination  of 

4. 
approaches in accordance with Annex X, Part 4. 

Article 103 

The  capital  requirement  for  operational  risk  under  the  Basic  Indicator  Approach  shall  be  a 
certain percentage of a relevant indicator, in accordance with the parameters set out in Annex 
X, Part 1. 

Article 104 

1. 

2. 

3. 

4. 

5. 

6. 

Under the Standardised Approach, credit institutions shall divide their activities into 
a number of business lines as set out in Annex X, Part 2. 

For  each  business  line,  credit  institutions  shall  calculate  a  capital  requirement  for 
operational risk as a certain percentage of a relevant indicator, in accordance with the 
parameters set out in Annex X, Part 2. 

For  certain  business  lines,  the  competent  authorities  may  under  certain  conditions 
authorise a credit institution to use an alternative indicator for determining its capital 
requirement for operational risk. 

The  capital  requirement  for  operational  risk  under  the  Standardised  Approach  shall 
be  the  sum  of  the  capital  requirements  for  operational  risk  across  all  individual 
business lines. 

The parameters for the Standardised Approach are in Annex X, Part 2. 

To  qualify  for  use  of  the  Standardised  Approach,  credit  institutions  shall  meet  the 
criteria set out in Annex X, Part 2. 

Article 105 

1. 
Credit  institutions  may  use  Advanced  Measurement  Approaches  based  on  their  own 
internal risk measurement systems, provided that the competent authority expressly approves 
the use of the models concerned for calculating the own funds requirement. 

Credit  institutions  must  satisfy  their  competent  authorities  that  they  meet  the 

2. 
qualifying criteria set out in Annex X, Part 3. 

When  an  Advanced  Measurement  Approach  is  intended  to  be  used  by  an  EU  parent 
3. 
credit institution and its subsidiaries or by the subsidiaries of an EU parent financial holding 
company,  the  competent  authorities  of  the  different  legal  entities  shall  cooperate  closely  as 
provided for in Articles 128 to 132. The application shall include the elements listed in Annex 
X, Part 3. 

4. 
Where  an  EU  parent  credit  institution  and  its  subsidiaries  or  an  EU  parent  financial 
institution and its subsidiaries use an Advanced Measurement Approach on a unified basis for 

EN 

109 

   EN 

 
the parent and its subsidiaries, the competent authorities may allow the qualifying criteria set 
out in Annex X, Part 3 to be met by the parent and its subsidiaries considered together. 

(cid:208) 2000/12/EC 

SECTION 35 

LARGE EXPOSURES 

(cid:208) 2000/12/EC Art 1(24) (adapted) 
(cid:214) new 

Article 106 

1. 

«eExposures»,  for  the  purposes  of  applying  Articles  48,  49  and  50  ⌦ this 
Section ⌫  ,  shall  mean  the  assets  ⌦ any asset  ⌫  or  off-balance-sheet  items 
referred to in Article 43 and in Annexes II and IV thereto ⌦ Section 3, Subsection 
1 ⌫  ,  without  application  of  the  ⌦ risk ⌫ weightings  or  degrees  of  risk  there 
provided for;. 

the  risks  ⌦ Exposures  arising  from  the  items ⌫  referred  to  in  Annex  IV  must 
⌦ shall ⌫  be  calculated  in  accordance  with  one  of  the  methods  set  out  in  Annex 
III;. 

without application of the weightings for  counterparty  risk;  all ⌦ All ⌫ elements 
entirely covered by own funds may, with the agreement of the competent authorities, 
be excluded from the determination of exposures, provided that such own funds are 
not  included  in  the  (cid:214) credit  institution’s  own  funds   calculation  of  the  solvency 
ratio  (cid:214) for  the  purposes  of  Article  75  or  (cid:214) in  the  calculation   of  other 
monitoring ratios provided for in this Directive and in other Community acts.; 

2. 

eExposures shall not include either of the following: 

(a) 

(b) 

in the case of foreign exchange transactions, exposures incurred in the ordinary 
course of settlement during the 48 hours following payment, or ⌦ ; ⌫ 

in  the  case  of  transactions  for  the  purchase  or  sale  of  securities,  exposures 
incurred  in  the  ordinary  course  of  settlement  during  the  five  working  days 
following payment or delivery of the securities, whichever is the earlier;. 

EN 

110 

   EN 

 
 
 
(cid:208) 2000/12/EC Art. 1(1) 3rd 
subparagraph (adapted) 

Article 107 

For  the  purposes  of  applying  the  supervision  and  control  of  large  exposures  ⌦ this 
Section ⌫ , shall be considered as a credit institution, ⌦ the term “credit institution” shall 
cover the following: ⌫ 

(a) 

(b) 

a credit institution according to the first paragraph, including ⌦ its ⌫ branches of a 
credit institution in third countries; and 

any  private  or  public  undertaking,  including  its  branches,  which  corresponds  to 
⌦ meets ⌫  the  definition  in  the  first  paragraph  of  “credit  institution”  and  which 
has been authorised in a third country;. 

(cid:208) 2000/12/EC Art. 48(1) 
(adapted) 
(cid:214) new 

Article 108 

Reporting of large exposures 

A  credit  institution's  exposure  to  a  client  or  group  of  connected  clients  shall  be 

1. 
considered a large exposure where its value is equal to or exceeds 10% of its own funds. 

(cid:214) For those purposes, Section 1 may be read without the inclusion of point (q) of Article 57 
and Article 63(3) and shall be read without the inclusion of Article 66(2).  

(cid:208) 2000/12/EC Art 48 (4) 1st 
paragraph (adapted) 

Article 109 

The competent authorities shall require that every credit institution have sound administrative 
and  accounting  procedures  and  adequate  internal  control  mechanisms  for  the  purposes  of 
identifying  and  recording  all  large  exposures  and  subsequent  changes  to  them,  ⌦ in 
accordance with ⌫ as defined and required by this Directive, and for that of monitoring those 
exposures in the light of each credit institution's own exposure policies. 

EN 

111 

   EN 

 
 
 
 
(cid:208) 2000/12/EC Art. 48(2) 
(adapted) 

Article 110 

Reporting of large exposures 

A credit institution shall report every large exposure within the meaning of paragraph 

21. 
1to the competent authorities. 

Member  States  shall  provide  that  reporting  is  to  be  carried  out,  at  their  discretion,  in 
accordance with one of the following two methods: 

(a) 

reporting of all large exposures at least once a year, combined with reporting during 
the year of all new large exposures and any increases in existing large exposures of at 
least 20% with respect to the previous communication; 

(b) 

reporting of all large exposures at least four times a year. 

(cid:208) 2000/12/EC Art. 48.3 (adapted) 
(cid:214) new 

3.2  (cid:214) Except  in  the  case  of  credit  institutions  relying  on  Article  114  for  the  recognition  of 
collateral in calculating the value of exposures for the purposes of paragraphs 1, 2 and 3 of 
Article 111,  eExposures exempted under Article 49 ⌦ 111 ⌫ (7)(cid:214) (3) (a), (b), (c), (d), 
(f),  (g)  and  (h)  need  not,  however,  be  reported  as  laid  down  in  paragraph  (cid:214) 1   2  and  the 
reporting frequency laid down in (cid:214) point (b) of  the second indent to paragraph (cid:214) 1  2 
may  be  reduced  to  twice  a  year  for  the  exposures  referred  to  in  Article  49  ⌦ 111 ⌫ 
(7)(cid:214) (3) (e) and (i), and also in paragraphs 8, 9 and 10 (cid:214)Articles 115 and 116 . 

(cid:208) 2000/12/EC Art. 48(4) 2nd 
subparagraph (adapted) 

Where a credit institution invokes paragraph ⌦ 2 ⌫ 3, it shall keep a record of the grounds 
advanced  for  at  least  one  year  after  the  event  giving  rise  to  the  dispensation,  so  that  the 
competent authorities may establish whether it is justified. 

3.  Member  States  may  require  the  reporting  of  concentrated  exposures  to  the  issuers  of 
collateral taken by the credit institution. 

(cid:216) new 

EN 

112 

   EN 

 
 
 
 
 
(cid:208) 2000/12/EC Art 49(1) to (5) 
(adapted) 
(cid:206)1 2004/xx/EC Art. 3.7 
(cid:214) new 

Article 111 

Limits on large exposures 

1. 

2. 

A  credit  institution  may  not  incur  an  exposure  to  a  client  or  group  of  connected 
clients the value of which exceed 25% of its own funds (cid:214) . For these purposes and 
the  purposes  of  the  other  provisions  of  this  Article,  Section  1  may  be  read  without 
taking into account point (q) of Article 57 and Article 63(3) and shall be read without 
the inclusion of Article 66(2). 

Where  that  client  or  group  of  connected  clients  is  the  parent  undertaking  or 
subsidiary  of  the  credit  institution  and/or  one  or  more  subsidiaries  of  that  parent 
undertaking,  the  percentage  laid  down  in  paragraph  1  shall  be  reduced  to  20%. 
Member  States  may,  however,  exempt  the  exposures  incurred  to  such  clients  from 
the  20%  limit  if  they  provide  for  specific  monitoring  of  such  exposures  by  other 
measures  or  procedures.  They  shall  inform  the  Commission  and  the  (cid:206)1 European 
Banking Committee  of the content of such measures or procedures. 

3. 

A credit institution may not incur large exposures which in total exceed 800% of its 
own funds. 

4. Member States may impose limits more stringent than those laid down in paragraphs 1, 2 
and 3. 

(cid:208) 2000/12/EC Art. 49.4 (adapted) 

(cid:208) 2000/12/EC Art 49(1) to (5) 

54. 

A credit institution shall at all times comply with the limits laid down in paragraphs 
1,  2  and  3  in  respect  of  its  exposures.  If  in  an  exceptional  case  exposures  exceed 
those  limits,  that  fact  must  be  reported  without  delay  to  the  competent  authorities 
which may, where the circumstances warrant it, allow the credit institution a limited 
period of time in which to comply with the limits. 

(cid:216) new 

Article 112 

For the purposes of Articles 113 to 117, ‘guarantee’ shall include credit derivatives 
recognised under Articles 90 to 93 other than credit linked notes. 

Subject to paragraph 3, where, under Articles 113 to 117, the recognition of funded 
or unfunded credit protection may be permitted, this shall be subject to compliance 

113 

   EN 

1. 

2. 

EN 

 
 
 
 
 
with  the  eligibility  requirements  and  other  minimum  requirements,  set  out  under 
Articles  90  to  93  for  the  purposes  of  calculating  risk-weighted  exposure  amounts 
under Articles 78 to 83. 

3. 

Where  a  credit  institution  relies  upon  Article  114(2),  the  recognition  of  credit 
protection shall be subject to the relevant requirements under Articles 84 to 89. 

(cid:208) 2000/12/EC Art 49(4) & (6) 
adapted (adapted) 

Article 113 

Member  States  may  impose  limits  more  stringent  than  those  laid  down  in  Article 

1. 
⌦ 111 ⌫ 75 paragraphs 1, 2 and 3. 

62.  Member  States  may  fully  or  partially  exempt  from  the  application  of  Article 
⌦ 111 ⌫  75  paragraphs  1,  2  and  3  exposures  incurred  by  a  credit  institution  to  its  parent 
undertaking, to other subsidiaries of that parent undertaking or to its own subsidiaries, in so 
far as those undertakings are covered by the supervision on a consolidated basis to which the 
credit  institution  itself  is  subject,  in  accordance  with  this  Directive  or  with  equivalent 
standards in force in a third country. 

73. Member States may fully or partially exempt the following exposures from the application 
of paragraphs (1), (2) and (3) ⌦ Article 111 ⌫: 

(cid:208) 2000/12/EC Art 49(7) (adapted) 
(cid:214) new 

(a) 

(b) 

(c) 

(d) 

asset  items  constituting  claims  on  Zone  A  central  governments  or  central 
banks; (cid:214) central governments or central banks which would unsecured receive 
a 0% risk weighting under Articles 78 to 83;  

asset  items  constituting  claims  on  the  European  Communities(cid:214) international 
organisations  or  multilateral  development  banks  which  would  unsecured 
receive a 0% risk weight under Articles 78 to 83;  

asset  items  constituting  claims  carrying  the  explicit  guarantees  of  Zone  A 
central  governments  or  central  banks  or  of  the  European  Communities 
(cid:214) central  governments,  central  banks, 
international  organisations  or 
multilateral  development  banks,  where  unsecured  claims  on  the  entity 
providing the guarantee would achieve a 0% risk weight under Articles 78 to 
83;  

other exposures attributable to, or guaranteed by, Zone A central governments 
or central banks or the European Communities (cid:214) central governments, central 
banks,  international  organisations,  or  multilateral  development  banks  where 
unsecured  claims  on  the  entity  to  which  the  exposure  is  attributable  or  by 
which  it  is  guaranteed  would  receive  a  0%  risk  weight  under  Articles  78  to 
83; 

EN 

114 

   EN 

 
 
 
(e) 

(f) 

(g) 

(h) 

(i) 

(j) 

(k) 

(l) 

(m) 

(n) 

asset  items  constituting  claims  on  and  other  exposures  to  Zone  B  central 
governments or central banks (cid:214) not mentioned in paragraph a) above  which 
are denominated and, where applicable, funded in the national currencies of the 
borrowers; 

asset  items  and  other  exposures  secured,  to  the  satisfaction  of  the  competent 
authorities, by collateral in the  form of  (cid:214) debt  securities issued by Zone A 
central  governments  or  central  banks,  securities,  or  securities  issued  by  the 
European  Communities  or  by  Member  State  regional  or  local  authorities  for 
which  Article  44  lays  down  a  zero  weighting  for  solvency  purposes 
(cid:214) international  organisations,  multilateral  development  banks  or  Member 
States’  regional  governments  or  local  authorities,  which  securities  constitute 
claims on their issuer which would receive a 0% risk weighting under Articles 
78 to 83; 

asset  items  and  other  exposures  secured,  to  the  satisfaction  of  the  competent 
authorities,  by  collateral  in  the  form  of  cash  deposits  placed  with  the 
lending ⌦ credit ⌫ institution or with a credit institution which is the parent 
undertaking or a subsidiary of the lending institution; 

asset  items  and  other  exposures  secured,  to  the  satisfaction  of  the  competent 
authorities,  by  collateral  in  the  form  of  certificates  of  deposit  issued  by  the 
lending ⌦ credit ⌫  institution  or  by  a  credit  institution  which  is  the  parent 
undertaking or a subsidiary of the lending ⌦ credit ⌫ institution and lodged 
with either of them; 

asset  items  constituting  claims  on  and  other  exposures  to  credit  institutions, 
with a maturity of one year or less, but not constituting such institutions' own 
funds; 

asset  items  constituting  claims  on  and  other  exposures  to  those  institutions 
which  are  not  credit  institutions  but  which  fulfil  the  conditions  referred  to  in 
Article 45(2)(cid:214) Annex VI, Part 1, paragraph 82 , with a maturity of one year 
or less, and secured in accordance with the same paragraph; 

bills of trade and other similar bills, with a maturity of one year or less, bearing 
the signatures of other credit institutions; 

debt securities as defined in Article 22(4) of Directive 85/611/EEC;(cid:214) covered 
bonds as defined in Articles 78 to 83; 

(cid:208) 2000/12/EC (adapted) 

pending subsequent coordination, holdings in the insurance companies referred 
to  in  Article  51(3)  ⌦ 122(1) ⌫  up  to  40%  of  the  own  funds  of  the  credit 
institution acquiring such a holding; 

asset  items  constituting  claims  on  regional  or  central  credit  institutions  with 
which  the  lending  ⌦ credit ⌫  institution  is  associated  in  a  network  in 
accordance with legal or statutory provisions and which are responsible, under 
those provisions, for cash-clearing operations within the network; 

EN 

115 

   EN 

 
 
(o) 

(p) 

(q) 

(i) 

(cid:208) 2000/12/EC 

exposures secured, to the satisfaction of the competent authorities, by collateral 
in the form of securities other than those referred to in (f); provided that those 
securities  are  not  issued  by  the  credit  institution  itself,  its  parent  company  or 
one  of  their  subsidiaries,  or  by  the  client  or  group  of  connected  clients  in 
question. The securities used as collateral must be valued at market price, have 
a value that exceeds the exposures guaranteed and be either traded on a stock 
exchange or effectively negotiable and regularly quoted on a market operated 
under  the  auspices  of  recognised  professional  operators  and  allowing,  to  the 
satisfaction of the competent authorities of the Member State of origin of the 
credit  institution,  for  the  establishment  of  an  objective  price  such  that  the 
excess  value  of  the  securities  may  be  verified  at  any  time.  The  excess  value 
required  shall  be  100%  it  shall,  however,  be  150%  in  the  case  of  shares  and 
50% in the case of debt securities issued by credit institutions, Member State 
regional or local authorities other than those referred to in Article 44, and in the 
case  of  debt  securities  issued  by  the  EIB  and  multilateral  development  banks 
Securities used as collateral may not constitute credit institutions' own funds; 

(cid:208) 2000/12/EC 

loans secured, to the satisfaction of the competent authorities, by mortgages on 
residential  property  or  by  shares  in  Finnish  residential  housing  companies, 
operating  in  accordance  with  the  Finnish  Housing  Company  Act  of  1991  or 
subsequent  equivalent  legislation  and  leasing  transactions  under  which  the 
lessor retains full ownership of the residential property leased for as long as the 
lessee has not  exercised his option to purchase, in all cases up to 50% of the 
value of the residential property concerned; The value of the property shall be 
calculated, to the satisfaction of the competent authorities, on the basis of strict 
valuation standards laid down by law, regulation or administrative provisions. 
Valuation  shall  be  carried  out  at  least  once  a  year.  For  the  purposes  of  this 
point  residential  property  shall  mean  a  residence  to  be  occupied  or  let  by  the 
borrower; 

(cid:216) new 

the following, where they would receive a 50% risk weight under Articles 78 to 
83, and only up to 50% of the value of the property concerned: 

exposures  secured  by  mortgages  on  offices  or  other  commercial  premises,  or 
by  shares  in  Finnish  housing  companies,  operating  in  accordance  with  the 
Finnish Housing Company Act of 1991 or subsequent equivalent legislation, in 
respect of offices or other commercial premises;  

(ii) 

exposures  related  to  property  leasing  transactions  concerning  offices  or  other 
commercial premises; 

For the purposes of point (ii), until 31 December 2011, the competent authorities of 
each Member State may allow credit institutions to recognise 100% of the value of 

EN 

116 

   EN 

 
 
 
 
the  property  concerned.  At  the  end  of  this period,  this  treatment shall be reviewed. 
Member states shall inform the Commission of the use they make of this preferential 
treatment. 

(cid:208) 2000/12/EC (adapted) 

(qr)  50% of the medium/low-risk off-balance-sheet items referred to in Annex II; 

subject  to  the  competent  authorities'  agreement,  guarantees  other  than  loan 
(rs) 
guarantees which have a legal or regulatory basis and are given for their members by 
mutual  guarantee  schemes  possessing  the  status  of  credit  institutions,  subject  to  a 
weighting of 20% of their amount. 

Member States shall inform the Commission of the use they make of this option in 
order to ensure that it does not result in distortions of competition; 

(st) 
the low-risk off-balance-sheet items referred to in Annex II, to the extent that 
an agreement has been concluded with the client or group of connected clients under 
which  the  exposure  may  be  incurred  only  if  it  has  been  ascertained  that  it  will  not 
cause the limits applicable under ⌦ Article 111(1) to (3) ⌫ paragraphs 1, 2 and 3 
to be exceeded. 

(cid:216) new 

Cash received under a credit linked note issued by the credit institution and loans and 
deposits of a counterparty to or with the credit institution which are subject to an on-
balance sheet netting agreement recognised under Articles 90 to 93 shall be deemed 
to fall under point (g). 

(cid:208) 2000/12/EC Art 49(o) 2nd & 3rd 
sentences (adapted) 
(cid:214) new 

⌦ For  the  purposes  of  point  (o), the  ⌫  The  securities  used  as  collateral  must  be 
valued  at  market  price,  have  a  value  that  exceeds  the  exposures  guaranteed  and  be 
either traded on a stock exchange or effectively negotiable and regularly quoted on a 
market  operated  under  the  auspices  of  recognised  professional  operators  and 
allowing,  to  the  satisfaction  of  the  competent  authorities  of  the  Member  State  of 
origin  of the credit institution, for the establishment  of  an  objective  price  such  that 
the  excess  value  of  the  securities  may  be  verified  at  any  time.  The  excess  value 
required shall be 100%. iIt shall, however, be 150% in the case of shares and 50% in 
the  case  of  debt  securities  issued  by  credit  institutions,  Member  State  regional 
⌦ governments ⌫  or  local  authorities  other  than  those  referred  to  in  Article  44 
⌦ sub-point  (f) ⌫,  and  in  the  case  of  debt  securities  issued  by  the  EIB  and 
multilateral  development  banks  (cid:214) other  than  those  receiving  a  0%  risk  weighting 
under the Standardised Approach. Where there is a mismatch between the maturity 
of the exposure and the maturity of the credit protection, the collateral shall not be 
recognised.  ⌦ Securities used as collateral may not constitute credit institutions' 
own funds. ⌫ 

EN 

117 

   EN 

 
 
 
 
⌦ For  the  purposes  of  point  (p) ,  the  ⌫  The  value  of  the  property  shall  be 
calculated,  to  the  satisfaction  of  the  competent  authorities,  on  the  basis  of  strict 
valuation  standards  laid  down  by  law,  regulation  or  administrative  provisions. 
Valuation  shall  be  carried  out  at  least  once  a  year.  For  the  purposes  of  this  point 
⌦ (p), ⌫  residential  property  shall  mean  a  residence  to  be  occupied  or  let  by  the 
borrower;. 

Member  States  shall  inform  the  Commission  of  any  exemption  granted  ⌦ under 
point (s) ⌫ the use they make of this optionin order to ensure that it does not result 
in distortion of competition;. 

(cid:216) new 

Article 114 

1. 
Subject to paragraph 3, for the purposes of calculating the value of exposures for the 
purposes  of  Article  111(1)  to  (3)  Member  States  may,  in  respect  of  credit  institutions  using 
the Financial Collateral (Comprehensive Method) under Articles 90 to 93, in the alternative to 
availing of the full or partial exemptions permitted under points (f), (g), (h), and (o) of Article 
113(3), permit such credit institutions to use a value lower than the value of the exposure, but 
no lower than the total of the fully-adjusted exposure values of their exposures to the client or 
group of connected clients. 

For these purposes ‘fully adjusted exposure value’ means that calculated under Articles 90 to 
93  taking  into  account  the  credit  risk  mitigation,  volatility  adjustments,  and  any  maturity 
mismatch (E*). 

Where this paragraph is applied to a credit institution, points (f), (g), (h), and (o) of Article 
113(3) shall not apply to the credit institution in question. 

2. 
Subject  to  paragraph  3,  a  credit  institution  permitted  to  use  own  estimates  of  LGDs 
and conversion factors for an exposure class under Articles 84 to 89 may be permitted, where 
it  is  able  to  the  satisfaction  of  the  competent  authorities  to  estimate  the  effects  of  financial 
collateral  on  their  exposures  separately  from  other  LGD-relevant  aspects,  to  recognise  such 
effects in calculating the value of exposures for the purposes of Article 113(3). 

Competent authorities shall be satisfied as to the suitability of the estimates produced by the 
credit  institution  for  use  for  the  reduction  of  the  exposure  value  for  the  purposes  of 
compliance with the provisions of Article 111. 

Where  a  credit  institution  is  permitted  to  use  its  own  estimates  of  the  effects  of  financial 
collateral, it must do so on a consistent basis to the satisfaction of the competent authorities. 
In particular, this approach must be adopted for all large exposures. 

Credit  institutions  permitted  to  use  own  estimates  of  LGDs  and  conversion  factors  for  an 
exposure class under Articles 84 to 89 which does not calculate the value of their exposures 
using the method referred to in the first subparagraph, may be permitted to use the approach 
set out in paragraph 9(1) above or the approach set out in point (o) of Article 113(3) above for 
calculating  the  value  of  exposures.  A  credit  institution  shall  use  only  one  of  these  two 
methods. 

EN 

118 

   EN 

 
 
3. 
A  credit  institution  which  is  permitted  to  use  the  methods  described  in  paragraphs  1 
and  2  in  calculating  the  value  of  exposures  for  the  purposes  of  Article  111(1)  to  (3)  shall 
conduct  periodic  stress  tests  of  their  credit  risk  concentrations  including  in  relation  to  the 
realisable value of any collateral taken. 

These  shall  address  risks  arising  from  potential  changes  in  market  conditions  that  could 
adversely  impact  the  credit  institutions’  adequacy  of  own  funds  and  risks  arising  from  the 
realisation of collateral in stressed situations. 

The credit institution shall satisfy the competent authorities that the stress tests carried out are 
adequate and appropriate for the assessment of such risks. 

In the event that such a stress test indicates a lower realisable value of collateral taken than 
would  be  permitted  to  be  taken  into  account  under  paragraphs  2  and  3  as  appropriate,  the 
value  of  collateral  permitted  to  be  recognised  in  calculating  the  value  of  exposures  for  the 
purposes of Article 111(1) to (3) shall be reduced accordingly. 

Such credit institutions shall include the following in their strategies to address concentration 
risk: 

(a) 

(b) 

policies  and  procedures  to  address  risks  arising  from  maturity  mismatches  between 
exposures and any credit protection on those exposures; 

policies and procedures relating to concentration risk arising from the application of 
credit  risk  mitigation  techniques,  and  in  particular  large  indirect  credit  exposures 
(e.g. to a single issuer of securities taken as collateral). 

Where  the  effects  of  collateral  are  recognised  under  the  terms  of  paragraphs  1  or  2 
4. 
above, Member States may treat any covered part of the exposure as having been incurred to 
the collateral issuer rather than to the client. 

(cid:208) 2000/12/EC Art 49 (8) & (9) 
(adapted) 
(cid:214) new 

Article 115 

For the purposes of ⌦ Article 111(1) to (3) ⌫paragraphs 1, 2 and 3, Member States 
81. 
may apply a weighting of 20% to asset items  constituting  claims  on  Member  State  regional 
⌦ governments ⌫  and  local  authorities  (cid:214) where  those  claims  would  receive  a  20%  risk 
weight under Article 78 to 83 and to other exposures to or guaranteed by such governments 
and authorities claims  on  which  receive a 20% risk weight under Article 78 to 83. and to 
other exposures to or guaranteed by such authorities; subject to the conditions laid down in 
Article 44, however, Member States may reduce that rate to 0%. 

(cid:214) However,  Member  States  may  reduce  that  rate  to  0%  in  respect  of  to  asset  items 
constituting claims on Member States’ regional governments and local authorities where those 
claims  would  receive  a  0%  risk  weight  under  Article  78  to  83 and  to  other  exposures  to  or 
guaranteed  by  such  governments  and  authorities  claims  on  which  receive  a  0%  risk  weight 
under Article 78 to 83.  

EN 

119 

   EN 

 
 
For the purposes of ⌦ Article 111(1) to (3) ⌫ paragraphs 1, 2 and 3, Member States 
9.2. 
may apply a weighting of 20% to asset items constituting claims on and other exposures to 
credit  institutions  with  a  maturity  of  more  than  one  but  not  more  than  three  years  and  a 
weighting of 50% to asset items constituting claims on credit institutions with a maturity of 
more than three years, provided that the latter are represented by debt instruments that were 
issued  by  a  credit  institution  and  that  those  debt  instruments  are,  in  the  opinion  of  the 
competent  authorities,  effectively  negotiable  on  a  market  made  up  of  professional  operators 
and are subject to daily quotation on that market, or the issue of which was authorised by the 
competent  authorities  of  the  Member  State  of  origin  of  the  issuing  credit  institutions.  In  no 
case may any of these items constitute own funds. 

(cid:208) 2000/12/EC Art 49 (10) 
(adapted) 

Article 116 

10.By  way  of  derogation  from  paragraphs  7  (i)  and 9  ⌦ Article  113(3)(i)  and  Article 
115(2) ⌫, Member States may apply a weighting of 20% to asset items constituting claims 
on and other exposures to credit institutions, regardless of their maturity. 

(cid:208) 2000/12/EC Art. 49 (11) 
(adapted) 

Article 117 

111.  Where an exposure to a client is guaranteed by a third party, or by collateral in the 
form of securities issued by a third party under the conditions laid down in paragraph 
7 ⌦ Article 113(3)⌫ (o), Member States may: 

(a) 

(b) 

treat the exposure as having been incurred to the ⌦ guarantor ⌫ third party 
rather  than  to  the  client,  if  the  exposure  is  directly  and  unconditionally 
guaranteed by that third party, to the satisfaction of the competent authorities,; 

treat the exposure as having been incurred to the third party rather than to the 
client, if the exposure defined in sub-paragraph 7 ⌦ Article 113(3) ⌫ (o) is 
guaranteed by collateral under the conditions there laid down. 

2. 

Where Member States apply the treatment provided for in point (a) of paragraph 1: 

(cid:216) new 

(a)  where the guarantee is denominated in a currency different from that in which 
the exposure is denominated the amount of the exposure deemed to be covered 
will  be  calculated  in  accordance  with  the  provisions  on  the  treatment  of 
currency mismatch for unfunded protection in Annex VIII; 

(b) 

a  mismatch  between  the  maturity  of  the  exposure  and  the  maturity  of  the 
protection will be treated in accordance with the provisions on the treatment of 
maturity mismatch in Annex VIII; 

EN 

120 

   EN 

 
 
 
 
(c) 

partial coverage may be recognised in accordance with the treatment set out in 
Annex VIII. 

(cid:208) 2000/12/EC Art 49 (2) 
(adapted) 

12.  By  1  January  1999  at  the  latest,  the  Council  shall,  on  the  basis  of  a  report  from  the 
Commission, examine the treatment of interbank exposures provided for in paragraphs 7(i), 9 
and  10.  The  Council  shall  decide  on  any  changes  to  be  made  on  a  proposal  from  the 
Commission. 

(cid:208) 2000/12/EC Art 50 (adapted) 
(cid:214) new 

Article 118 

Supervision on a consolidated or unconsolidated basis of large exposures 

1. If the credit institution is neither a parent undertaking nor a subsidiary, compliance with the 
obligations imposed in Articles 48 and 49 or in any other Community provision applicable to 
this area shall be monitored on an unconsolidated basis. 

2. In the other cases, compliance with the obligations imposed in Articles 48 and 49 or in any 
other Community provision applicable to this area shall be monitored on a consolidated basis 
in accordance with Articles 52 to 56. 

3.  Member  States  may  waive  monitoring  on  an  individual  or  subconsolidated  basis  of 
compliance  with  the  obligations  imposed  in  Articles  48  and  49  or  in  any  other  Community 
provision  applicable  to  this  area  by  a  credit  institution  which,  as  a  parent  undertaking,  is 
subject to monitoring on a consolidated basis and by any subsidiary of such a credit institution 
which  is  subject  to  their  authorisation  and  supervision  and  is  covered  by  monitoring  on  a 
consolidated basis. 

Member  States  also  waive  such  monitoring  where  the  parent  undertaking  is  a  financial 
holding company established in the same Member State as the credit institution, provided that 
company is subject to the same monitoring as credit institutions. 

In the cases referred to in the first and second subparagraphs. 

(cid:214) Where compliance by a credit institution  on  an individual or sub-consolidated basis with 
the obligations imposed in this Section is disapplied under Article 69(1), or the provisions of 
Article 70 are applied in the case of parent credit institutions in a Member State,  measures 
must be taken to ensure the satisfactory allocation of risks within the group. 

EN 

121 

   EN 

 
 
 
(cid:216) new 

Article 119 

By 31 December 2007, the Commission shall submit to the European Parliament and to the 
Council a report on the functioning of this Section, together with any appropriate proposals. 

(cid:208) 2000/12/EC 

SECTION 6 

QUALIFYING HOLDINGS OUTSIDE THE FINANCIAL SECTOR 

(cid:208) 2000/12/EC Art. 51 (1) & (2) 
(adapted) 

Article 120 

Limits to non-financial qualifying holdings 

1. 
No credit institution may have a qualifying holding the amount of which exceeds 15% 
of  its  own  funds  in  an  undertaking  which  is  neither  a  credit  institution,  nor  a  financial 
institution, nor an undertaking carrying on an activity referred to in the second subparagraph 
of Article 43(2)(f) of Directive 86/635/EEC. 

The total amount of a credit institution's qualifying holdings in undertakings other than 
2. 
credit institutions, financial institutions or undertakings carrying on activities referred to in the 
second subparagraph of Article 43(2)(f) of Directive 86/635/EEC may not exceed 60% of its 
own funds. 

(cid:208) 2002/87/EC Art. 29(5) 
(adapted) 

5. The Member States need not apply the limits laid down in paragraphs 1 and 2 to holdings in 
insurance  companies  as  defined  in  Directive  73/239/EEC  and  Directive  79/267/EEC,  or  in 
reinsurance companies as defined in Directive 98/78/EC. 

(cid:208) 2000/12/EC Art. 51(4) 
(adapted) 

4. Shares held temporarily during a financial reconstruction or rescue operation or during the 
normal course of underwriting or in an institution's own name on behalf of others shall not be 
counted  as  qualifying  holdings  for  the  purpose  of  calculating  the  limits  laid  down  in 
paragraphs 1 and 2. Shares which are not financial fixed assets as defined in Article 35(2) of 
Directive 86/635/EEC shall not be included. 

EN 

122 

   EN 

 
 
 
 
 
 
53. 
The  limits  laid  down  in  paragraphs  1  and  2  may  be  exceeded  only  in  exceptional 
circumstances.  In  such  cases,  however,  the  competent  authorities  shall  require  a  credit 
institution either to increase its own funds or to take other equivalent measures. 

(cid:208) 2000/12/EC Art. 51 (5) 

(cid:208) 2000/12/EC Art. 51 (6) 
(adapted) 

6.  The  Member  States  may  provide  that  the  competent  authorities  shall  not  apply  the  limits 
laid down in paragraphs 1 and 2 if they provide that 100% of the amounts by which a credit 
institution's qualifying holdings exceed those limits must be  covered  by own  funds and that 
the latter shall not be included in the calculation of the solvency ratio. If both the limits laid 
down in paragraphs 1 and 2 are exceeded, the amount to be covered by own funds shall be the 
greater of the excess amounts. 

(cid:208) 2000/12/EC Art. 51 (4) 

Article 121 

4.Shares held temporarily during a financial reconstruction or rescue operation or during the 
normal course of underwriting or in an institution's own name on behalf of others shall not be 
counted  as  qualifying  holdings  for  the  purpose  of  calculating  the  limits  laid  down  in 
paragraphs 1 and 2. Shares which are not financial fixed assets as defined in Article 35(2) of 
Directive 86/635/EEC shall not be included. 

(cid:208) 2002/87/EC Art. 29(5) 

Article 122 

31. 

The  Member  States  need  not  apply  the  limits  laid  down  in  paragraphs  1  and  2  to 
holdings in insurance companies as defined in Directive 73/239/EEC and Directive 
79/267/EEC, or in reinsurance companies as defined in Directive 98/78/EC. 

(cid:208) 2000/12/EC Art. 51(6) 
(adapted) 

62. 

The Member States may provide that the competent authorities are not to apply the 
limits laid down in ⌦ Article 120(1) and (2) ⌫ paragraphs 1 and 2 if they provide 
that 100% of the amounts by which a credit institution's qualifying holdings exceed 
those limits must be covered by own funds and that the latter shall not be included in 
the calculation of the solvency ratio. If both the limits laid down in ⌦ Article 120(1) 
and (2) ⌫ paragraphs 1 and 2 are exceeded, the amount to be covered by own funds 
shall be the greater of the excess amounts. 

EN 

123 

   EN 

 
 
 
 
 
 
(cid:216) new 

CHAPTER 3 

CREDIT INSTITUTIONS' ASSESSMENT PROCESS  

Article 123 

Credit institutions shall have in place sound, effective and complete strategies and processes 
to  assess  and  maintain  on  an  ongoing  basis  the  amounts,  types  and  distribution  of  internal 
capital that they consider adequate to cover the nature and level of the risks to which they are 
or might be exposed. 

These strategies and processes shall be subject to regular internal review to ensure that they 
remain comprehensive and proportionate to the nature, scale and complexity of the activities 
of the credit institution concerned. 

(cid:208) 2000/12/EC (adapted) 

CHAPTER 34 

SUPERVISION ⌦ AND DISCLOSURE BY COMPETENT 
AUTHORITIES ⌫ ON A CONSOLIDATED BASIS 

(cid:208) 2000/12/EC (new) 
(cid:206)1 2002/87/EC Art. 29.6 

Article 52 

Supervision on a consolidated basis of credit institutions 

1.  Every  credit  institution  which  has  a  credit  institution  or  a  financial  institution  as  a 
subsidiary or which holds a participation in such institutions shall be subject, to the extent and 
in the manner prescribed in Article 54, to supervision on the basis of its consolidated financial 
situation. Such supervision shall be exercised at least in the areas referred to in paragraphs 5 
and 6. 

2.  Every  credit  institution  the  parent  undertaking  of  which  is  a  financial  holding  company 
shall be subject, to the extent and in the manner prescribed in Article 54, to supervision on the 
basis  of  the  consolidated  financial  situation  of  that  financial  holding  company.  Such 
supervision  shall  be  exercised  at  least  in  the  areas  referred  to  in  paragraphs  5  and  6. 
(cid:206)1 Without  prejudice  to  Article  54a,  the  consolidation  of  the  financial  situation  of  the 
financial  holding  company  shall  not  in  any  way  imply  that  the  competent  authorities  are 

EN 

124 

   EN 

 
 
 
 
required  to  play  a  supervisory  role  in  relation  to  the  financial  holding  company  on  a  stand-
alone basis.  

(cid:208) 2000/12/EC Art. 52.3 

3. The Member States or the competent authorities responsible for exercising supervision on a 
consolidated  basis  pursuant  to  Article  53  may  decide  in  the  cases  listed  below  that  a  credit 
institution,  financial  institution  or  auxiliary  banking  services  undertaking  which  is  a 
subsidiary or in which a participation is held need not be included in the consolidation: 

– 

– 

– 

if the undertaking that should be included is situated in a third country where there 
are legal impediments to the transfer of the necessary information, 

if,  in  the  opinion  of  the  competent  authorities,  the  undertaking  that  should  be 
included  is  of  negligible  interest  only  with  respect  to  the  objectives  of  monitoring 
credit  institutions  and  in  all  cases  if  the  balance-sheet  total  of  the  undertaking  that 
should  be  included  is  less  than  the  smaller  of  the  following  two  amounts:  EUR 
10 million  or  1%  of  the  balance-sheet  total  of  the  parent  undertaking  or  the 
undertaking  that  holds  the  participation.  If  several  undertakings  meet  the  above 
criteria,  they  must  nevertheless  be  included  in  the  consolidation  where  collectively 
they are of non-negligible interest with respect to the aforementioned objectives, or 

if, in the opinion of the competent authorities responsible for exercising supervision 
on a consolidated basis, the consolidation of the financial situation of the undertaking 
that should be included would be inappropriate or misleading as far as the objectives 
of the supervision of credit institutions are concerned. 

(cid:208) 2000/12/EC Art. 52 (5) to (8 

5.  Supervision  of  solvency,  and  of  the  adequacy  of  own  funds  to  cover  market  risks  and 
control of large exposures shall be exercised on a consolidated basis in accordance with this 
Article  and  Articles  53  to  56.  Member  States  shall  adopt  any  measures  necessary,  where 
appropriate,  to  include  financial  holding  companies  in  consolidated  supervision,  in 
accordance with paragraph 2. 

Compliance with the limits set in Article 51(1) and (2) shall be supervised and controlled on 
the basis of the consolidated or subconsolidated financial situation of the credit institution. 

6. The competent authorities shall ensure that, in all the undertakings included in the scope of 
the  supervision  on  a  consolidated  basis  that  is  exercised  over  a  credit  institution  in 
implementation of paragraphs 1 and 2, there are adequate internal control mechanisms for the 
production  of  any  data  and  information  which  would  be  relevant  for  the  purposes  of 
supervision on a consolidated basis. 

7. Without prejudice to specific provisions contained in other directives, Member States may 
waive  application,  on  an  individual  or  subconsolidated  basis,  of  the  rules  laid  down  in 
paragraph 5 to a credit institution that, as a parent undertaking, is subject to supervision on a 
consolidated basis, and to any subsidiary of such a credit institution which is subject to their 
authorisation and supervision and is included in the supervision on a consolidated basis of the 
credit institution which is the parent company. The same exemption option shall be allowed 
where the parent undertaking is a financial holding company which has its head office in the 

EN 

125 

   EN 

 
 
 
same Member State as the credit institution, provided that it is subject to the same supervision 
as  that  exercised  over  credit  institutions,  and  in  particular  the  standards  laid  down  in 
paragraph 5. 

In  both  cases  set  out  in  the  first  subparagraph,  steps  must  be  taken  to  ensure  that  capital  is 
distributed adequately within the banking group. 

If  the  competent  authorities  apply  those  rules  individually  to  such  credit  institutions,  they 
may,  for  the  purpose  of  calculating  own  funds,  make  use  of  the  provision  in  the  last 
subparagraph of Article 3(2). 

8. Where a credit institution the parent of which is a credit institution has been authorised and 
is  situated  in  another  Member  State,  the  competent  authorities  which  granted  that 
authorisation shall apply the rules laid down in paragraph 5 to that institution on an individual 
or, when appropriate, a subconsolidated basis. 

(cid:208) 2000/12/EC Art. 52.9 (adapted) 
(cid:206)1 2004/xx/EC Art. 3.9 

9. Notwithstanding the requirements of paragraph 8, the competent authorities responsible for 
authorising  the  subsidiary  of  a  parent  undertaking  which  is  a  credit  institution  may,  by 
bilateral agreement, delegate their responsibility for supervision to the competent authorities 
which authorised and supervise the parent undertaking so that they assume responsibility for 
supervising the subsidiary in accordance with this Directive. The Commission must be kept 
informed  of  the  existence  and  content  of  such  agreements.  (cid:206)1 The  competent  authority 
concerned shall  forward such information to the competent authorities of the other Member 
States.  

(cid:216) new 

SECTION 1 - SUPERVISION 

Article 124 

1. 

2. 

3. 

4. 

Taking  into  account  the  technical  criteria  set  out  in  Annex  XI,  the  competent 
authorities  shall  review  the  arrangements,  strategies,  processes  and  mechanisms 
implemented by the credit institutions to comply with this Directive and evaluate the 
risks to which the credit institutions are or might be exposed. 

The scope of the review and evaluation referred to in paragraph 1 shall be that of the 
requirements of this Directive. 

On the basis of the review and evaluation referred to in paragraph 1, the competent 
authorities  shall  determine  whether  the  arrangements,  strategies,  processes  and 
mechanisms implemented by the credit institutions and the own funds held by these 
ensure a sound management and coverage of their risks. 

Competent  authorities  shall  establish  the  frequency  and  intensity  of  the  review  and 
evaluation  referred  to  in  paragraph  1  having  regard  to  the  systemic  importance, 

EN 

126 

   EN 

 
 
 
5. 

1. 

2. 

nature, scale and complexity of the activities of the credit institution concerned. The 
review and evaluation shall be updated at least on an annual basis. 

The  review  and  evaluation  performed  by  competent  authorities  shall  include  the 
exposure  of  credit  institutions  to  the  interest  rate  risk  arising  from  non-trading 
activities.  Measures  shall  be  required  in  the  case  of  institutions  whose  economic 
value  declines  by  more  than  20%  of  their  own  funds  as  a  result  of  a  sudden  and 
unexpected  change  in  interest  rates  the  size  of  which  shall  be  prescribed  by  the 
competent authorities and shall not differ between credit institutions. 

(cid:208) 2000/12/EC Art 53(1) and (2) 
first sub-paragraph (adapted) 
(cid:214) new 

Article 125 

Competent authorities responsible for exercising 

Where  a  parent  undertaking  is  a  (cid:214) parent    credit  institution  (cid:214) in  a  Member 
State or an EU parent credit institution , supervision on a consolidated basis shall 
be exercised by the competent authorities that authorised it under Article 4⌦ 6 ⌫. 

Where the parent of a credit institution is a (cid:214) parent  financial holding company 
(cid:214) in a Member State or an EU parent financial holding company , supervision on 
a consolidated basis shall be exercised by the competent authorities which authorised 
that credit institution under Article 4⌦ 6 ⌫. 

(cid:208) 2000/12/EC Art. 53 (2) second 
and third sub-paragraph and (3) 
(cid:214) new 

Article 126 

3.1. 

However wWhere credit institutions authorised in two or more Member States have 
as their parent the same (cid:214) parent  financial holding company (cid:214) in a Member State 
or the same EU parent financial holding company  , supervision on a consolidated 
basis  shall  be  exercised  by  the  competent  authorities  of  the  credit  institution 
authorised in the Member State in which the financial holding company was set up. 

If no credit institution subsidiary has been authorised in the Member State in which 
the financial holding company was set up, the competent authorities of the Member 
States concerned (including those of the Member State in which the financial holding 
company  was  set  up)  shall  seek  to  reach  agreement  as  to  who  amongst  them  will 
exercise  supervision  on  a  consolidated  basis.  In  the  absence  of  such  agreement, 
supervision  on  a  consolidated  basis  shall  be  exercised  by  the  competent  authorities 
that  authorised  the  credit  institution  with  the  greatest  balance-sheet  total;  if  that 
figure  is  the  same,  supervision  on  a  consolidated  basis  shall  be  exercised  by  the 
competent authorities which first gave the authorisation referred to in Article 4. 

EN 

127 

   EN 

 
 
 
3. The competent authorities concerned may by common agreement waive the rules 
laid down in the first and second subparagraph of paragraph 2. 

(cid:216) new 

Where  credit  institutions  authorised  in  two  or  more  Member  States  have  as  their 
parents  more  than  one  financial  holding  company  with  head  offices  in  different 
Member States and there is a credit institution in each of these States, supervision on 
a  consolidated  basis  shall  be  exercised  by  the  competent  authority  of  the  credit 
institution with the largest balance sheet total. 

2. 

Where more than one credit institution authorised in the Community has as its parent 
the  same  financial  holding  company  and  none  of  these  credit  institutions  has  been 
authorised in the Member State in which the financial holding company was set up, 
supervision on a consolidated basis shall be exercised by the competent authority that 
authorised  the  credit  institution  with  the  largest  balance  sheet  total,  which  shall  be 
considered, for the purposes of this Directive, as the credit institution controlled by 
an EU parent financial holding company. 

4.  The  agreements  referred  to  in  the  third  subparagraph  of  paragraph  2  and  in  paragraph  3 
shall provide for procedures for cooperation and for the transmission of information such that 
the objectives of supervision on a consolidated basis can be attained.  

(cid:208) 2000/12/EC Art 53(4) 

(cid:216) new 

3. 

In particular cases, the competent authorities may by common agreement waive the 
criteria referred to in paragraphs 1 and 2 if their application would be inappropriate, 
taking  into  account  the  credit  institutions  and  the  relative  importance  of  their 
activities  in  different  countries,  and  appoint  a  different  competent  authority  to 
exercise  supervision  on  a  consolidated  basis.  In  these  cases,  before  taking  their 
decision, the competent authorities shall give the EU parent credit institution, or EU 
parent financial holding company, or credit institution with the largest balance sheet, 
as appropriate, an opportunity to state its opinion on that decision. 

4. 

The  competent  authorities  shall  notify  the  Commission  of  any  agreement  falling 
within paragraph 3 

(cid:208) 2000/12/EC Art. 52(2) last 
sentence (adapted) 
(cid:214) new 

Article 127 

1. 

(cid:214) Member States shall adopt any measures necessary, where appropriate, to include 
financial  holding  companies  in  consolidated  supervision.  Without  prejudice  to 
Article  135,   the  consolidation  of  the  financial  situation  of  the  financial  holding 
company  shall  not  in  any  way  imply  that  the  competent  authorities  are  required  to 

EN 

128 

   EN 

 
 
 
 
 
play a supervisory role in relation to the financial holding company ⌦ on a stand-
alone basis ⌫ standing alone. 

(cid:208) 2000/12/EC Art. 52 (4) 
(adapted) 

42. 

When the competent authorities of a Member State do not include a credit institution 
subsidiary in supervision on a consolidated basis under one of the cases provided for 
in  the  second  and  third  indents  of  paragraph  3  ⌦ points  (b)  and  (c)  of  Article 
73(1) ⌫,  the  competent  authorities  of  the  Member  State  in  which  that  credit 
institution  subsidiary  is  situated  may  ask  the  parent  undertaking  for  information 
which may facilitate their supervision of that credit institution. 

(cid:208) 2000/12/EC Art. 52 (10) 
(adapted) 

103.  Member  States  shall  provide  that  their  competent  authorities  responsible  for 
exercising  supervision  on  a  consolidated  basis  may  ask  the  subsidiaries  of  a  credit 
institution or a financial holding company, which are not included within the scope 
of  supervision  on  a  consolidated  basis  for  the  information  referred  to  in  Article  55 
⌦ 137 ⌫.  In  such  a  case,  the  procedures  for  transmitting  and  verifying  the 
information laid down in that Article shall apply. 

(cid:208) 2000/12/EC Art 53(5) 

Article 128 

5Where  Member  States  have  more  than  one  competent  authority  for  the  prudential 
supervision  of  credit  institutions  and  financial  institutions,  Member  States  shall  take  the 
requisite measures to organise coordination between such authorities. 

(cid:216) new 

Article 129 

1. 

The competent authority responsible for the exercise of supervision on a consolidated 
basis of EU parent credit institutions and credit institutions controlled by EU parent 
financial holding companies shall carry out the following tasks: 

(a) 

(b) 

(c) 

supervisory overview and assessment of compliance with the requirements laid 
down in Articles 71, 72(1), 72(2) and 73(3); 

coordination  of  the  gathering  and  dissemination  of  relevant  or  essential 
information in going concern and emergency situations; 

planning and coordination of supervisory activities in going concern as well as 
in emergency situations, including in relation to the activities in Article 124, in 

EN 

129 

   EN 

 
 
 
 
 
2. 

1. 

2. 

cooperation with the competent authorities involved, and in relation to Articles 
43 and 141. 

In the case of applications for the permissions referred to in Articles 84(1), 87(9) and 
105, respectively, submitted by an EU parent credit institution and its subsidiaries, or 
jointly by the subsidiaries of an EU parent financial holding company, the competent 
authorities  shall  work  together,  in  full  consultation,  to  determine  whether  or  not  to 
grant  the  permission  sought  and  to  determine  the  terms  and  conditions,  if  any,  to 
which such permission should be subject. 

An application as referred to in the first subparagraph shall be submitted only to the 
competent authority referred to in paragraph 1.  

The competent authorities shall in a single document agree together, within no more 
than  six  months,  their  determination  on  the  application.  This  document  shall  be 
provided  to  the  applicant.  In  the  absence  of  a  determination  within  six  months,  the 
competent authority referred to in paragraph 1 shall make its own determination on 
the application. 

Article 130 

Where  an  emergency  situation  arises,  which  potentially  jeopardises  the  stability, 
including the integrity, of the financial system, the competent authorities responsible 
for  the  exercise  of  supervision  on  a  consolidated  basis  shall  alert  as  soon  as  is 
practicable,  subject  to  Title  V,  Chapter  1,  Section  2,  the  authorities  referred  to  in 
Article 49(a) and Article 50. This obligation shall apply to all competent authorities 
identified  under  Articles  125  and  126  in  relation  to  a  particular  group,  and  to  the 
competent authority identified under paragraph 1 of Article 129. 

The  competent  authority  responsible  for  supervision  on  a  consolidated  basis  shall, 
when  it  needs  information  which  has  already  been  given  to  another  competent 
authority, contact this authority whenever possible in order to prevent duplication of 
reporting to the various authorities involved in supervision. 

Article 131 

In order to facilitate and establish effective supervision, the competent authority responsible 
for supervision on a consolidated basis and the other competent authorities shall have written 
coordination and cooperation arrangements in place. 

Under  these  arrangements  additional  tasks  may  be  entrusted  to  the  competent  authority 
responsible  for  supervision  on  a  consolidated  basis  and  procedures  for  the  decision-making 
process and for cooperation with other competent authorities, may be specified. 

Notwithstanding  the  requirements  of  paragraph  8,  the  ⌦ The ⌫ competent  authorities 
responsible for authorising the subsidiary of a parent undertaking which is a credit institution 

(cid:208) 2000/12/EC Art. 52 (9) 
(adapted) 

EN 

130 

   EN 

 
 
may,  by  bilateral  agreement,  delegate  their  responsibility  for  supervision  to  the  competent 
authorities  which  authorised  and  supervise  the  parent  undertaking  so  that  they  assume 
responsibility  for  supervising  the  subsidiary  in  accordance  with  this  Directive.  The 
Commission must be kept informed of the existence and content of such agreements. It shall 
forward such information to the competent authorities of the other Member States and to the 
Banking Advisory Committee.  

(cid:216) new 

Article 132 

1. 

The competent authorities shall cooperate closely with each other. They shall provide 
one another with any information which is essential or relevant for the exercise of the 
other authorities’ supervisory tasks under this Directive. In this regard, the competent 
authorities  shall  communicate  on  request  all  relevant  information  and  shall 
communicate on their own initiative all essential information. 

In  particular,  competent  authorities  responsible  for  consolidated  supervision  of  EU 
companies shall ensure that relevant information is provided to competent authorities 
in other Member States who supervise subsidiaries of these parents. In determining 
the  extent  of  relevant  information,  the  importance  of  these  subsidiaries  within  the 
financial system in those Member States shall be taken into account. 

The  essential  information  referred  to  in  the  first  subparagraph  shall  include,  in 
particular, the following items: 

(a) 

identification of the group structure of all major credit institutions in a group, 
as well as of the competent authorities of the credit institutions in the group; 

(b)  procedures  for  the  collection  of  information  from  the  credit  institutions  in  a 

group, and the verification of that information; 

(c) 

adverse  developments  in  credit  institutions  or  in  other  entities  of  a  group, 
which could seriously affect the credit institutions; 

(d)  major  sanctions  and  exceptional  measures  taken  by  competent  authorities  in 
accordance  with  this  Directive,  including  the  imposition  of  an  additional 
capital charge under Article 136 and the imposition of any limitation on the use 
of the Advanced Measurement Approach for the calculation of the own funds 
requirements under Article 105. 

2. 

3. 

The  competent  authorities  responsible  for  the  supervision  of  credit  institutions 
controlled  by  an  EU  parent  credit  institution  shall  contact  the  competent  authority 
referred 
the 
implementation of approaches and methodologies set out in this Directive that may 
already be available to that competent authority. 

in  Article  129(1)  when 

information  regarding 

they  need 

to 

The competent authorities concerned shall, prior to their decision, consult each other 
with regard to the following items, where these decisions are of importance for other 
competent authorities’ supervisory tasks: 

EN 

131 

   EN 

 
 
(a) 

changes  in  the  shareholder,  organisational  or  management  structure  of  credit 
institutions  in  a  group,  which  require  the  approval  or  authorisation  of 
competent authorities; 

(b)  major  sanctions  or  exceptional  measures  taken  by  competent  authorities, 
including the imposition of an additional capital charge under Article 136 and 
the  imposition  of  any  limitation  on  the  use  of  the  Advances  Measurement 
Approaches  for  the  calculation  of  the  own  funds  requirements  under  Article 
105. 

For the purposes of point (b), the competent authority responsible for supervision on 
a consolidated basis shall always be consulted. 

However,  a  competent  authority  may  decide  not  to  consult  in  cases  of  urgency  or 
where  such  consultation  may  jeopardise  the  effectiveness  of  the  decisions.  In  this 
case,  the  competent  authority  shall,  without  delay,  inform  the  other  competent 
authorities. 

(cid:208) 2000/12/EC Art 54 (1) 
(adapted) 

Article 133 

Form and extent of consolidation 

1. 

The  competent  authorities  responsible  for  exercising  supervision  on  a  consolidated 
basis ⌦ shall ⌫ must, for the purposes of supervision, require full consolidation of 
all the credit institutions and financial institutions which are subsidiaries of a parent 
undertaking. 

However,  ⌦ the  competent  authorities  may 
require  only ⌫proportional 
consolidation may be prescribed where, in ⌦ their ⌫ the opinion of the competent 
authorities,  the  liability  of  a  parent  undertaking  holding  a  share  of  the  capital  is 
limited to that share of the capital ⌦ in view ⌫ because of the liability of the other 
shareholders  or  members  whose  solvency  is  satisfactory.  The  liability  of  the  other 
shareholders  and  members  must  be  clearly  established,  if  necessary  by  means  of 
formal signed commitments. 

In  the  case  where  undertakings  are  linked  by  a  relationship  within  the  meaning  of 
Article  12  (1)  of  Directive  83/349/EEC,  the  competent  authorities  shall  determine 
how consolidation is to be carried out. 

(cid:208) 2002/87/EC Art. 29(7)(a) 

2. 

The competent authorities responsible for carrying out supervision on a consolidated 
basis ⌦ shall ⌫ must, in order to do so, require the proportional consolidation of 

(cid:208) 2000/12/EC Art 54(2) & (3) 
(adapted) 

EN 

132 

   EN 

 
 
 
 
participations  in  credit  institutions  and  financial  institutions  managed  by  an 
undertaking included in the consolidation together with one or more undertakings not 
included  in  the  consolidation,  where  those  undertakings'  liability  is  limited  to  the 
share of the capital they hold. 

3. 

In the case of participations or capital ties other than those referred to in paragraphs 1 
and 2, the competent authorities shall determine whether and how consolidation is to 
be  carried  out.  In  particular,  they  may  permit  or  require  use  of  the  equity  method. 
That method shall not, however, constitute inclusion of the undertakings concerned 
in supervision on a consolidated basis. 

(cid:208) 2000/12/EC Art. 54(4) 1st 
paragraph (adapted) 

Article 134 

41.  Without  prejudice  to  ⌦ Article  133 ⌫  paragraphs  1,  2  and  3,  the  competent 
authorities shall determine whether and how consolidation is to be carried out in the following 
cases: 

(a)  where, in the opinion of the competent authorities, a credit institution exercises 
a  significant  influence  over  one  or  more  credit  institutions  or  financial 
institutions,  but  without  holding  a  participation  or  other  capital  ties  in  these 
institutions,; 

(b)  where two or more credit institutions or financial institutions are placed under 
single  management  other  than  pursuant  to  a  contract  or  clauses  of  their 
memoranda or articles of association. 

--------- 

(cid:208) 2002/87/EC Art. 29(7)(b) 

(cid:208) 2000/12/EC Art 54(4) 2nd 
paragraph 

In particular, the competent authorities may permit, or require use of, the method provided for 
in Article 12 of Directive 83/349/EEC. That method shall not, however, constitute inclusion 
of the undertakings concerned in consolidated supervision. 

(cid:208) 2000/12/EC Art 54(5) (adapted) 
(cid:214) new 

52  Where  consolidated  supervision  is  required  pursuant  to  Article  52  (1)  and  (2) 
⌦Articles  125  and  126 ⌫,  ancillary  banking  services  undertakings  (cid:214) and  asset 
management  companies  as  defined  in  Directive  2002/87/EC   shall  be  included  in 
consolidations in the cases, and in accordance with the methods, laid down in ⌦ Article 133 
and paragraphs 1 ⌫ to 4 of this Article. 

EN 

133 

   EN 

 
 
 
 
 
(cid:208) 2002/87/EC Art. 29(8) 
(adapted) 

Article 135 

Management body of financial holding companies 

The Member States shall require that persons who effectively direct the business of a financial 
holding  company  ⌦ be ⌫  of  sufficiently  good  repute  and  have  sufficient  experience  to 
perform those duties. 

(cid:216) new 

Article 136 

1. 
Competent  authorities  shall  require  any  credit  institution  that  does  not  meet  the 
requirements  of  this  Directive  to  take  the  necessary  actions  or  steps  at  an  early  stage  to 
address the situation. 

For  those  purposes,  the  measures  available  to  the  competent  authorities  shall  include  the 
following: 

(a) 

(b) 

(c) 

(d) 

(e) 

obliging  credit  institutions  to  hold  own  funds  in  excess  of  the  minimum  level  laid 
down in Article 75; 

reinforcing the arrangements and strategies implemented to comply with Articles 22 
and 123; 

requiring  credit  institutions  to  apply  a  specific  provisioning  policy  or  treatment  of 
assets in terms of own funds requirements; 

restricting or limiting the business, operations or network of credit institutions; 

reducing the risk inherent in activities, products and systems by credit institutions. 

The adoption of these measures shall be subject to Title V, Chapter 1, Section 2. 

2. 
A specific own funds requirement in excess of the minimum level laid down in Article 
75 shall be imposed by the competent authorities at least on the credit institutions which have 
in place inadequate arrangements, processes, mechanisms and strategies for the management 
and coverage of their risks, if the sole application of other measures is unlikely to reinforce 
those arrangements within an appropriate timeframe. 

(cid:208) 2000/12/EC Art 55(1) (adapted) 

Article 137 

Information to be supplied by mixed-activity holding companies and their subsidiaries 

EN 

134 

   EN 

 
 
 
 
1. 

2. 

Pending further coordination of consolidation methods, Member States shall provide 
that,  where  the  parent  undertaking  of  one  or  more  credit  institutions  is  a  mixed-
activity holding company, the competent authorities responsible for the authorisation 
and supervision of those credit institutions shall, by approaching the mixed-activity 
holding  company  and  its  subsidiaries  either  directly  or  via  credit  institution 
subsidiaries, require them to supply any information which would be relevant for the 
purpose of supervising the credit institution subsidiaries. 

(cid:208) 2000/12/EC Art. 55(2) 
(adapted) 

Member States shall provide that their competent authorities may carry out, or have 
carried  out  by  external  inspectors,  on-the-spot  inspections  to  verify  information 
received from mixed-activity holding companies and their subsidiaries. If the mixed-
activity holding company or one of its subsidiaries is an insurance undertaking, the 
procedure  laid  down  in  Article  56(4) ⌦ 140(1) ⌫  may  also  be  used.  If  a  mixed-
activity  holding  company  or  one  of  its  subsidiaries  is  situated  in  a  Member  State 
other  than  that  in  which  the  credit  institution  subsidiary  is  situated,  on-the-spot 
verification of information shall be carried out in accordance with the procedure laid 
down in Article 56(7) ⌦ 140(1) ⌫. 

(cid:208) 2002/87/EC Art. 29(9) 
(adapted) 

Article 138 

Intra-group transactions with mixed-activity holding companies 

Without  prejudice  to  the  provisions  ofTitle  V,  Chapter  2,  Section  3  ⌦ 5 ⌫,  this 
1. 
Directive,  Member  States  shall  provide  that,  where  the  parent  undertaking  of  one  or  more 
credit institutions is a mixed-activity holding company, the competent authorities responsible 
for  the  supervision  of  these  credit  institutions  shall  exercise  general  supervision  over 
transactions  between  the  credit  institution  and  the  mixed-activity  holding  company  and  its 
subsidiaries. 

2. 
Competent  authorities  shall  require  credit  institutions  to  have  in  place  adequate  risk 
management  processes  and  internal  control  mechanisms,  including  sound  reporting  and 
accounting  procedures,  in  order  to  identify,  measure,  monitor  and  control  transactions  with 
their  parent  mixed-activity  holding  company  and  its  subsidiaries  appropriately.  Competent 
authorities  shall  require  the  reporting  by  the  credit  institution  of  any  significant  transaction 
with these entities other than the one referred to in Article 48 ⌦ 110 ⌫ . These procedures 
and significant transactions shall be subject to overview by the competent authorities. 

Where  these  intra-group  transactions  are  a  threat  to  a  credit  institution's  financial 
position,  the  competent  authority  responsible  for  the  supervision  of  the  institution 
shall take appropriate measures.  

EN 

135 

   EN 

 
 
 
(cid:208) 2000/12/EC Art. 56 (1) to (3) 
(adapted) 

Article 139 

Measures to facilitate supervision on a consolidated basis 

Member  States  shall  take  the  necessary  steps  to  ensure  that  there  are  no  legal 
1. 
impediments  preventing  the  ⌦ exchange,  as  between ⌫  undertakings  included  within  the 
scope  of  supervision  on  a  consolidated  basis,  mixed-activity  holding  companies  and  their 
subsidiaries,  or  subsidiaries  of  the  kind  covered  in  Article  52(10)  ⌦ 127(3) ⌫,  ⌦ of ⌫ 
from  exchanging  amongst  themselves  any  information  which  would  be  relevant  for  the 
purposes  of  supervision  in  accordance  with  Articles  52  to  55  ⌦ 124  to  138 ⌫  and  this 
Article. 

2. 
Where a parent undertaking and any of its subsidiaries that are credit institutions are 
situated  in  different  Member  States,  the  competent  authorities  of  each  Member  State  shall 
communicate  to  each  other  all  relevant  information  which  may  allow  or  aid  the  exercise  of 
supervision on a consolidated basis. 

Where the competent authorities of the Member State in which a parent undertaking 
is situated do not themselves exercise supervision on a consolidated basis pursuant to 
Article  53  ⌦ Articles  125  and  126 ⌫  ,  they  may  be  invited  by  the  competent 
authorities responsible for exercising such supervision to ask the parent undertaking 
for  any  information  which  would  be  relevant  for  the  purposes  of  supervision  on  a 
consolidated basis and to transmit it to these authorities.  

3. 
Member States shall authorise the exchange between their competent authorities of the 
information  referred  to  in  paragraph  2,  on  the  understanding  that,  in  the  case  of  financial 
holding  companies,  financial  institutions  or  ancillary  banking  services  undertakings,  the 
collection  or  possession  of  information  shall  not  in  any  way  imply  that  the  competent 
authorities  are  required  to  play  a  supervisory  role  in  relation  to  those  institutions  or 
undertakings standing alone. 

Similarly, Member States shall authorise their competent authorities to exchange the 
information  referred  to  in  Article  55  ⌦ 137 ⌫  on  the  understanding  that  the 
collection or possession of information does not in any way imply that the competent 
authorities play a supervisory role in relation to the mixed-activity holding company 
and those of its subsidiaries which are not credit institutions, or to subsidiaries of the 
kind covered in Article 52(10) ⌦ 127(3) ⌫. 

(cid:208) 2000/12/EC Art 56(4) to (6) 
adapted (adapted) 

Article 140 

41.  Where  a  credit  institution,  financial  holding  company  or  a  mixed-activity  holding 
company  controls  one  or  more  subsidiaries  which  are  insurance  companies  or  other 

EN 

136 

   EN 

 
 
 
undertakings providing investment services which are subject to authorisation, the competent 
authorities  and  the  authorities  entrusted  with  the  public  task  of  supervising  insurance 
undertakings  or  those  other  undertakings  providing  investment  services  shall  cooperate 
closely. Without prejudice to their respective responsibilities, those authorities shall provide 
one another with any information likely to simplify their task and to allow supervision of the 
activity and overall financial situation of the undertakings they supervise. 

52. 
Information received, in the framework of supervision on a consolidated basis, and in 
particular any exchange of information between competent authorities which is provided for 
in this Directive, shall be subject to the obligation of professional secrecy defined in ⌦ Title 
V, Chapter 1, Section 2 ⌫ Article 30. 

The  competent  authorities  responsible  for  supervision  on  a  consolidated  basis  shall 
63. 
establish  lists  of  the  financial  holding  companies  referred  to  in  Article  52(2)  ⌦ 71(2) ⌫. 
Those  lists  shall  be  communicated  to  the  competent  authorities  of  the  other  Member  States 
and to the Commission. 

(cid:208) 2000/12/EC Art 56(7) (adapted) 
(cid:206)1 2002/87/EC Art. 29.10 

Article 141 

7.Where, in applying this Directive, the competent authorities of one Member State wish in 
specific  cases  to  verify  the  information  concerning  a  credit  institution,  a  financial  holding 
company, a financial institution, an ancillary banking services undertaking, a mixed-activity 
holding company, a subsidiary of the kind covered in Article 55 ⌦ 137 ⌫ or a subsidiary of 
the  kind  covered  in  Article  52(10)  ⌦ 127(3) ⌫,  situated  in  another  Member  State,  they 
⌦ shall ⌫  must  ask  the  competent  authorities  of  that  other  Member  State  to  have  that 
verification  carried  out.  The  authorities  which  receive  such  a  request  must,  within  the 
framework of their competence, act upon it either by carrying out the verification themselves, 
by allowing the authorities who made the request to carry it out, or by allowing an auditor or 
expert  to  carry  it  out.(cid:206)1 The  competent  authority  which  made  the  request  may,  if  it  so 
wishes, participate in the verification when it does not carry out the verification itself.  

(cid:208) 2000/12/EC Art 56(8) (adapted) 

Article 142 

8.Without  prejudice  to  their  provisions  of  criminal  law,  Member  States  shall  ensure  that 
penalties or measures aimed at ending observed breaches or the causes of such breaches may 
be  imposed  on  financial  holding  companies  and  mixed-activity  holding  companies,  or  their 
effective  managers,  that  infringe  laws,  regulation  or  administrative  provisions  enacted  to 
implement  Articles  52  to  55  ⌦ 124  to  141 ⌫  and  this  Article.  In  certain  cases,  such 
measures may require the intervention of the courts.  

The  competent  authorities  shall  cooperate  closely  to  ensure  that  ⌦ those ⌫  the 
abovementioned penalties or measures produce the desired results, especially when the central 
administration  or  main  establishment  of  a  financial  holding  company  or  of  a  mixed-activity 
holding company is not located at its head office. 

EN 

137 

   EN 

 
 
 
(cid:208) 2002/87/EC Art. 29(11) 
(adapted) 
(cid:206)1 2004/xx/EC Art. 3.10 

Article 143 

Third-country parent undertakings 

1. 
Where a credit institution, the parent undertaking of which is a credit institution or a 
financial holding company, the head office of which is ⌦ in a third country ⌫ outside the 
Community,  is  not  subject  to  consolidated  supervision  under  Article  52 ⌦Articles 125  and 
126 ⌫,  the  competent  authorities  shall  verify  whether  the  credit  institution  is  subject  to 
consolidated  supervision  by  a  third-country  competent  authority  which  is  equivalent  to  that 
governed by the principles laid down in Article 52 ⌦ this Directive ⌫.  

The  verification  shall  be  carried  out  by  the  competent  authority  which  would  be 
responsible for consolidated supervision if the fourth sub paragraph ⌦ 3 ⌫ were to 
apply,  at  the  request  of  the  parent  undertaking  or  of  any  of  the  regulated  entities 
authorised in the Community or on its own initiative. That competent authority shall 
consult the other competent authorities involved. 

2.  (cid:206)1 The  Commission  may  request  the  European  Banking  Committee  to   give 
general  guidance  as  to  whether  the  consolidated  supervision  arrangements  of  competent 
authorities in third countries are likely to achieve the objectives of consolidated supervision as 
defined in this Chapter, in relation to credit institutions, the parent undertaking of which has 
its head  office ⌦ in a third country ⌫ outside the Community.  The Committee shall keep 
any  such  guidance  under  review  and  take  into  account  any  changes  to  the  consolidated 
supervision arrangements applied by such competent authorities. 

The  competent  authority  carrying  out  the  verification  specified  in  the  ⌦ first ⌫ 
second  subparagraph  ⌦ of  paragraph  1 ⌫  shall  take  into  account  any  such 
guidance.  For  this  purpose  the  competent  authority  shall  consult  the  Committee 
before taking a decision. 

3. 
In  the  absence  of  such  equivalent  supervision,  Member  States  shall  apply  the 
provisions of Article 52 Ö this Directive Õ to the credit institution by analogy Ö or shall allow 
their  competent  authorities  to  apply  other  appropriate  supervisory  techniques  which  achieve 
the objectives of supervision on a consolidated basis of credit institutions ⌫. 

As  an  alternative,  Member  States  shall  allow  their  competent  authorities  to  apply  other 
appropriate  supervisory  techniques  which  achieve  the  objectives  of  the  supervision  on  a 
consolidated basis of credit institutions.  

Those ⌦ supervisory techniques ⌫ methods must ⌦ , after consultation with the 
other competent authorities involved, ⌫ be agreed upon by the competent authority 
which would be responsible for consolidated supervision, after consultation with the 
other competent authorities involved.  

Competent  authorities  may  in  particular  require  the  establishment  of  a  financial 
holding  company  which  has  its  head  office  in  the  Community,  and  apply  the 

EN 

138 

   EN 

 
 
provisions on consolidated supervision to the consolidated position of that financial 
holding company.  

The ⌦ supervisory techniques ⌫ methods must ⌦ be designed to ⌫ achieve the 
objectives of consolidated supervision as defined in this Chapter and must be notified 
to the other competent authorities involved and the Commission. 

(cid:216) new 

SECTION 2 

DISCLOSURE BY COMPETENT AUTHORITIES 

1. 

(a) 

(b) 

(c) 

(d) 

Competent authorities shall disclose the following information: 

Article 144 

the  texts  of  laws,  regulations,  administrative  rules  and  general  guidance  adopted  in 
their Member State in the field of prudential regulation; 

the  manner  of  exercise  of  the  options  and  discretions  available  in  Community 
legislation; 

the general criteria and methodologies they use in the review and evaluation referred 
to in Article 124; 

without  prejudice  to  the  provisions  laid  down  in  Title  V,  Chapter  1,  Section  2, 
aggregate  statistical  data  on  key  aspects  of  the  implementation  of  the  prudential 
framework in each Member State. 

The  disclosures  provided  for  in  the  first  subparagraph  shall  be  sufficient  to  enable  a 
meaningful  comparison  of  the  approaches  adopted  by  the  competent  authorities  of  the 
different Member States. 

CHAPTER 5 

DISCLOSURE BY CREDIT INSTITUTIONS 

Article 145 

For  the  purposes  of  this  Directive,  credit  institutions  shall  publicly  disclose  the 
1. 
information  laid  down  in  Annex  XII,  Part  2,  subject  to  the  provisions  laid  down  in  Article 
146. 

Recognition  by  the  competent  authorities  under  Chapter  2,  Section  3,  Subsections  2 
2. 
and 3 and Article 105 of the instruments and methodologies referred to in Annex XII, Part 3 

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shall  be  subject  to  the  public  disclosure  by  credit  institutions  of  the  information  laid  down 
therein. 

3. 
Credit  institutions  shall  adopt  a  formal  policy  to  comply  with  the  disclosure 
requirements  laid  down  in  paragraphs  1  and  2,  and  have  policies  for  assessing  the 
appropriateness of their disclosures, including their verification and frequency. 

Article 146 

1. 
Notwithstanding Article 145, competent authorities shall permit credit institutions not 
to make one or more disclosures listed in Annex XII, Part 2 if the credit institution concerned 
considers that the information provided by such disclosures is not, in the light of the criterion 
specified in Annex XII, Part 1, paragraph 1, to be regarded as material. 

2. 
Notwithstanding Article 145, competent authorities shall permit credit institutions not 
to publish one or more items of information included in the disclosures listed in Annex XII, 
Parts  2  and  3  if  the  credit  institution  concerned  considers  that  those  items  would  include 
information which, in the light of the criteria specified in Annex XII, Part 1, paragraphs 2 and 
3, is to be regarded as proprietary or confidential. 

3. 
In  the  exceptional  cases  referred  to  in  paragraph  2,  the  credit  institution  concerned 
shall state in its disclosures the fact that the specific items of information are not disclosed, 
the reason for non-disclosure, and publish more general information about the subject matter 
of the disclosure requirement. 

Article 147 

Credit  institutions  shall  publish  the  disclosures  required  under  Article  145  on  an 

1. 
annual basis at a minimum. Disclosures shall be published as soon as practicable. 

2. 
Credit  institutions  shall  also  determine  whether  more  frequent  publication  than  is 
provided for in paragraph 1 is necessary in the light of the criteria set out in Annex XII, Part 
1, paragraph 4. 

Article 148 

Competent  authorities  shall  permit  credit  institutions  to  determine  the  appropriate 
1. 
medium,  location  and  means  of  verification  to  comply  effectively  with  the  disclosure 
requirements  laid  down  in  Article  145.  To  the  degree  feasible,  all  disclosures  shall  be 
provided in one medium or location. 

2. 
Equivalent  disclosures  made  by  credit  institutions  under  accounting,  listing  or  other 
requirements may be deemed to constitute compliance with Article 145. If disclosures are not 
included in the financial statements, credit institutions shall indicate where they can be found. 

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Notwithstanding Articles 146 to 148, Member States shall empower the competent authorities 
to require credit institutions: 

Article 149 

to make one or more of the disclosures referred to in Annex XII, Parts 2 and 3; 

to  publish  one  or  more  disclosures  more  frequently  than  annually,  and  to  set 
deadlines for publication; 

to  use  specific  media  and  locations  for  disclosures  other  than  the  financial 
statements;  

to  use  specific  means  of  verification  for  the  disclosures  not  covered  by  statutory 
audit. 

(cid:208) 2004/xx/EC Art. 3.11 

(a) 

(b) 

(c) 

(d) 

----- 

(cid:208) 2000/12/EC  

TITLE VI 

POWERS OF EXECUTION 

(cid:208) 2000/12/EC Art. 60 (adapted) 
(cid:214) new 

Article 150 

Technical adaptations 

1. 

Without  prejudice,  regarding  own  funds,  to  the  report  referred  to  in  the  second 
subparagraph of Article 34(3) (cid:214) proposal that the Commission is to submit pursuant 
to  Article  62 ,  the  technical  adaptations  (cid:214) amendments   in  the  following  areas 
shall  be  adopted  in  accordance  with  the  procedure ⌦ referred  to ⌫  laid  down  in 
⌦ Article 151 ⌫ paragraph 2: 

(a) 

(b) 

(c) 

clarification of the definitions in order to take account, in the application 
of this Directive, of developments on financial markets; 

clarification  of  the  definitions  to  ensure  uniform  application  of  this 
Directive in the Community; 

the  alignment  of  terminology  on,  and  the  framing  of  definitions  in 
accordance  with,  subsequent  acts  on  credit  institutions  and  related 
matters; 

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the definition of «Zone A» in Article 1(14), 

the definition of «multilateral development banks» in Article 1(19), 

(d) 

amendments to the list in Article 2 

(e) 

(f) 

alteration of the amount of initial capital prescribed in Article ⌦ 9 ⌫ 5 
to take account of developments in the economic and monetary field; 

expansion  of  the  content  of  the  list  referred  to  in  Articles  ⌦ 23  and 
24 ⌫ 18 and 19 and set out in Annex I or adaptation of the terminology 
used in that list to take account of developments on financial markets; 

(g) 

the areas in which the competent authorities must exchange information 
as listed in Article ⌦ 42 ⌫ 28; 

(h)  (cid:214) amendments  to  Article  56  to  67  in  order  to  take  into  account 
developments in  accounting  standards  or  requirements  set  out  in 
Community legislation set out Community legislation;  

(i) 

amendment  of  the  ⌦ list ⌫  definitions  of  the  assets  ⌦ exposure 
classes ⌫ listed in Article 43 ⌦ Articles 79 and 86 ⌫ in order to take 
account of developments on financial markets; 

(j)  (cid:214) the amount specified in Article 79(2)(c) and in Article 86(4)(a) to take 

into account the effects of inflation;  

(k) 

the list and classification of off-balance-sheet items in Annexes II and IV 
and their treatment in the calculation of the ratio as described in Articles 
42, 43 and 44 and Annex III (cid:214) in the determination of exposure values 
for the purposes of Title V, Chapter 2, Section 3 ; 

(l)  (cid:214) adjustment  of  the  provisions  in  Annexes  V  to  XII  in  order  to  take 
account of developments on financial markets in particular new financial 
products,  or  in  accounting  standards  or  requirements  set  out  in 
Community legislation;  

⌦ 2.  The  Commission  may  adopt  the  following  implementing  measures  in  accordance 

with the procedure in Article 151. ⌫ 

(a)  (cid:214)specification  of  the  size  of  sudden  and  unexpected  changes  in  the 

interest rates referred to in Article 124(5);  

(b) 

a temporary reduction in the minimum ratio ⌦ level of own  funds laid 
down  ⌫  prescribed  in  Article  47  ⌦ 75 ⌫  the  weighting  ⌦ risk 
weights laid  down  ⌫  prescribed  in  Article  43  ⌦  Title  V,  Chapter  2, 
Section 3 ⌫ in order to take account of specific circumstances; 

(c)  (cid:214) without  prejudice  to  the  report  referred  to  in  Article  119 , 
to 

in  Article  49(5) 

for 

clarification  of  exemptions  provided 
(10) ⌦ 111(4), 113, 115 and 116 ⌫; 

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(d)  (cid:214) specification of the key aspects on which aggregate statistical data are 

to be disclosed under Article 144 (1) (d) ; 

(e)  (cid:214) specification  of  the  format,  structure,  contents  list  and  annual 

publication date of the disclosures provided for in Article 114;  

(cid:208) 2004/xx/EC Art. 3.12 (adapted) 

Article 151 

1. 

2. 

The Commission shall be assisted by the European Banking Committee instituted by 
Commission  Decision  2004/10/EC  (hereinafter  referred  to  as  "the  Committee"), 
composed of representatives of the Member States and chaired by the representative 
of the Commission. 

Where  reference  is  made  to  this  paragraph  ⌦ Article ⌫,  the  "comitology" 
procedure laid down in Article 5 of Decision 1999/468/EC shall apply, in compliance 
with Article 7 (3) and Article 8 thereof. 

The  period  provided  for  in  Article  5(6)  of  Decision  1999/468/EC  shall  be  three 
months. 

(cid:208) 2000/12/EC 

TITLE VII 

TRANSITIONAL AND FINAL PROVISIONS 

CHAPTER 1 

TRANSITIONAL PROVISIONS 

(cid:208) 2000/12/EC Art 60(2) (adapted) 

Article 61 

Transitional provisions regarding Article 36  

Denmark  may  allow  its  mortgage  credit  institutions  organised  as  cooperative  societies  or 
funds before 1 January 1990 and converted into public limited liability companies to continue 
to  include  joint  and  several  commitments  of  members,  or  of  borrowers  as  referred  to  in 
Article  36(1)  claims  on  whom  are  treated  in  the  same  way  as  such  joint  and  several 
commitments, in their own funds, subject to the following limits: 

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(a) 
the  basis  for  calculation  of  the  part  of  joint  and  several  commitments  of  borrowers 
shall be the total of the items referred to in Article 35 (2)(1) and (2), minus those referred to in 
Article 35(2)(9), (10) and (11); 

the basis for calculation on 1 January 1991 or, if converted at a later date, on the date 
b) 
on  conversion,  shall  be  the  maximum  basis  for  calculation.  The  basis  for  calculation  may 
never exceed the maximum basis for calculation 

the maximum basis for calculation shall, from 1 January 1997, be reduced by half of 
c) 
the  proceeds  from  any  issue  of  new  capital,  as  defined  in  Article  35(2)(1),  made  after  that 
date; and 

the maximum amount of joint and several commitments of borrowers to be included as 

(d) 
own funds must never exceed: 

50% in 1991 and 1992, 

45% in 1993 and 1994, 

40% in 1995 and 1996, 

35% in 1997, 

30% in 1998, 

20% in 1999, 

10% in 2000, and 

0% after 1 January 2001, of the basis for calculation. 

(cid:208) 2000/12/EC 

Article 62 

Transitional provisions regarding Article 43 

1.  Until  31  December  2006,  the  competent  authorities  of  the  Member  States  may  authorise 
their credit institutions to apply a 50% risk weighting to loans fully and completely secured to 
their satisfaction by mortgages on offices or on multi-purpose commercial premises situated 
within the territory of those Member States that allow the 50% risk weighting, subject to the 
following conditions: 

the  50%  risk  weighting  applies  to  the  part  of  the  loan  that  does  not  exceed  a  limit 

(i) 
calculated according to either (a) or (b): 

(a) 

50% of the market value of the property in question. 

The  market  value  of  the  property  must  be  calculated  by  two  independent 
valuers making independent assessments at the time the loan is made. The loan 
must be based on the lower of the two valuations. 

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The property shall be revalued at least once a year by one valuer. For loans not 
exceeding EUR 1 million and 5% of the own funds of the credit institution, the 
property shall be revalued at least every three years by one valuer; 

(b)  50% of the market value of the property or 60% of the mortgage lending value, 
whichever  is  lower,  in  those  Member  States  that  have  laid  down  rigorous 
criteria  for  the  assessment  of  the  mortgage  lending  value  in  statutory  or 
regulatory provisions. 

The  mortgage  lending  value  shall  means  the  value  of  the  property  as 
determined  by  a  valuer  making  a  prudent  assessment  of 
the  future 
marketability  of  the  property  by  taking  into  account  long-term  sustainable 
aspects of the property, the normal and local market conditions, the current use 
and alternative appropriate uses of the property. Speculative elements shall not 
be  taken  into  account  in  the  assessment  of  the  mortgage  lending  value.  The 
mortgage lending value shall be documented n a transparent and clear manner. 

At least every three years or if the market falls by more than 10% the mortgage 
lending  value  and  in  particular  the  underlying  assumptions  concerning  the 
development of the relevant market, shall be reassessed. 

In both (a) and (b) «market value» shall mean the price at which the property could be 
sold under private contract between a willing seller and an arm's-length buyer on the date of 
valuation,  it  being  assumed  that  the  property  is  publicly  exposed  to  the  market,  that  market 
conditions permit orderly disposal and that a normal period, having regard to the nature of the 
property, is available for the negotiation of the sale; 

the 100% risk weighting applies to the part of the loan that exceeds the limits set out in 

(ii) 
(i); 

(iii) 

the property must be either used or let by the owner. 

The first subparagraph shall not prevent the competent authorities of a Member State, which 
applies  a  higher  risk  weighting  in  its  territory,  from  allowing,  under  the  conditions  defined 
above,  the  50%  risk  weighting  to  apply  for  this  type  of  lending  in  the  territories  of  those 
Member States that allow the 50% risk weighting. 

The competent authorities of the Member States may allow their credit institutions to apply a 
50%  risk  weighting  to  the  loans  outstanding  on  21  July  2000  provided  that  the  conditions 
listed in this paragraph are fulfilled. In this case the property shall be valued according to the 
assessment criteria laid down above not later than 21 July 2003. 

For loans granted before 31 December 2006, the 50% risk weighting remains applicable until 
their maturity, if the credit institution is bound to observe the contractual terms. 

Until 31 December 2006, the competent authorities of the Member State may also authorise 
their  credit  institutions  to  apply  a  50%  risk  weighting  to  the  part  of  the  loans  fully  and 
completely secured to their satisfaction by shares in Finnish housing companies operating in 
accordance  with  the  Finnish  Housing  Company  Act  of  1991  or  subsequent  equivalent 
legislation, provided that the conditions laid down in this paragraph are fulfilled. 

Member States shall inform the Commission of the use they make of this paragraph. 

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2. Member States may apply a 50% risk weighting to property leasing transactions concluded 
before 31 December 2006 and concerning assets for business use situated in the country of the 
head office and governed by statutory provisions whereby the lessor retains full ownership of 
the rented asset until the tenant exercises his option to purchase. Member States shall inform 
the Commission of the use they make of this paragraph. 

3. Article 43(3) shall not affect the competent authorities' recognition of bilateral contracts for 
novation concluded concerning: 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

Belgium, before 23 April 1996, 

Denmark, before 1 June 1996, 

Germany, before 30 October 1996, 

Greece, before 27 March 1997, 

Spain, before 7 January 1997, 

France, before 30 May 1996, 

Ireland, before 27 June 1996, 

Italy, before 30 July 1996, 

Luxembourg, before 29 May 1996, 

the Netherlands, before 1 July 1996, 

Austria, before 30 December 1996, 

Portugal, before 15 January 1997, 

Finland, before 21 August 1996, 

Sweden, before 1 June 1996, and 

United Kingdom, before 30 April 1996. 

Article 63 

Transitional provisions regarding Article 47 

1.  A  credit  institution,  the  minimum  ratio  of  which  has  not  reached  the  8%  prescribed  in 
Article 47(1), by 1 January 1991, must gradually approach that level by successive stages. It 
may not allow the ratio to fall below the level reached before that objective has been attained. 
Any fluctuation should be temporary and the competent authorities should be apprised of the 
reasons for it. 

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(cid:208) 2000/12/EC, Art. 62 (2) and (3) 
(adapted) 

2. For not more than five years after 1 January 1993, the Member States may fix a weighting 
of  10%  for  the  bonds  defined  in  Article  22(4)  of  Directive  85/611/EEC  and  maintain  if  for 
credit institutions when and if they consider it necessary, to avoid grave disturbances in the 
operation of their markets. Such exceptions shall be reported to the Commission. 

3.  For  not  more  than  seven  years  after  1  January  1993,  Article  47(1)  shall  not  apply  to  the 
Agricultural  Bank  of  Greece.  However,  the  latter  must  approach  the  level  prescribed  in 
Article 47(1)  by  successive stages according to the method described in paragraph 1 of this 
Article. 

(cid:208) 2000/12/EC (adapted) 
(cid:206)1 2004/xx/EC Art. 3.13 

Article 64 

Transitional provisions regarding Article 49 

1. If, on 5 February 1993, a credit institution had already incurred an exposure or exposures 
exceeding either the large exposure limit or the aggregate large exposure limit laid down in 
Article 49, the competent authorities shall require the credit institution concerned to take steps 
to have that exposure or those exposures brought within the limits laid down in Article 49. 

2. The process of having such an exposure or exposures brought within authorised limits shall 
be  devised,  adopted,  implemented  and  completed  within  the  period  which  the  competent 
authorities consider consistent with the principle of sound administration and fair competition. 
The  competent  authorities  shall  inform  the  Commission  and  the  (cid:206)1 European  Banking 
Committee  of the schedule for the general process adopted. 

3. A credit institution may not take any measure which would cause the exposures referred to 
in paragraph 1 to exceed their level on 5 February 1993 

4.  The  period  applicable  under  paragraph  2  shall  expire  no  later  than  31  December  2001. 
Exposures  with  a  longer  maturity,  for  which  the  lending  institution  is  bound  to  observe  the 
contractual terms, may be continued until their maturity. 

(cid:208) 2000/12/EC Art. 64 (5) to (7) 
(new) 
(cid:206)1 2004/xx/EC Art. 3.13 

5. Until 31 December 1998, Member States may increase the limit laid down in Article 49(1) 
to  40%  and  the  limit  laid  down  in  Article  49(2)  to  30%.  In  such  cases  and  subject  to 
paragraphs 1 to 4, the time limit for bringing the exposures existing at the end of this period 
within the limit laid down in Article 49 shall expire on 31 December 2001. 

6. In the case of credit institutions the own funds of which do not exceed EUR 7 million and 
only in the case of such institutions, Member States may extend the time limits laid down in 

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paragraph 5 by five years. Member States that avail themselves of the option provided for in 
this  paragraph  shall  take  steps  to  prevent  distortions  of  competition  and  shall  inform  the 
Commission and the (cid:206)1 European Banking Committee  thereof. 

7.  In  the  cases  referred  to  in  paragraphs  5  and  6,  an  exposure  may  be  considered  a  large 
exposure if its value is equal to or exceeds 15% of own funds. 

(cid:208) 2000/12/EC Art. 64 (8) 
(adapted) 

8. Until 31 December 2001 Member States may substitute a frequency of at least twice a year 
for the frequency of notification of large exposures referred to in the second indent of Article 
48(2). 

(cid:208) 2000/12/EC Art. 64 (9) 

9. Member States may fully or partially exempt from the application of Article 49(1), (2) and 
(3)  exposures  incurred  by  a  credit  institution  consisting  of  mortgage  loans  as  defined  in 
Article  62(1)  concluded  before  1  January  2002  as  well  as  property  leasing  transactions  as 
defined  in  Article  62(2)  concluded  before  1  January  2002,  in  both  cases  up  to  50%  of  the 
value of the property concerned. 

The same treatment applies to loans secured, to the satisfaction of the competent authorities, 
by shares in Finnish residential housing companies, operating in accordance with the Finnish 
Housing Company Act of 1991 or subsequent equivalent legislation which are similar to the 
mortgage loans referred to in the first subparagraph. 

(cid:208) 2000/12/EC Art. 65 (adapted) 

Article 65 

Transitional provisions regarding Article 51 

Credit institutions which, on 1 January 1993, exceeded the limits laid down in Articles 51(1) 
and (2) shall have until 1 January 2003 to comply with them. 

(cid:216) new 

Article 152 

1. 
Credit  institutions  calculating  risk-weighted  exposure  amounts  in  accordance  with 
Articles 84 to 89 or using the Advanced Measurement Approaches as specified in Article 105 
for  the  calculation  of  their  capital  requirements  for  operational  risk  shall  during  the  first, 
second  and  third  twelve-month  periods  after  the  date  specified  in  Article  157  provide  own 
funds which are at all times more than or equal to the amounts indicated in paragraphs 2, 3 
and 4. 

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2. 
For the first twelve-month period referred to in paragraph 1, the amount of own funds 
shall be 95% of the total minimum amount of own funds that would be required to  be  held 
during  that  period  by  the  credit  institution  under  Article  4  of  Directive  93/6/EEC  as  that 
Directive  and  Directive  2000/12/EC  stood  prior  to  the  date  specified  in  Article  157  of  this 
Directive. 

3. 
For  the  second  twelve-month  period  referred  to  in  paragraph  1,  the  amount  of  own 
funds shall be 90% of the total minimum amount of own funds that would be required to be 
held during that period by the credit institution under Article 4 of Directive 93/6/EEC as that 
Directive  and  Directive  2000/12/EC  stood  prior  to  the  date  specified  in  Article  157  this 
Directive. 

For the third twelve-month period referred to in paragraph 1, the amount of own funds 
4. 
shall be 80% of the total minimum amount of own funds that would be required to  be  held 
during  that  period  by  the  credit  institution  under  Article  4  of  Directive  93/6/EEC  as  that 
Directive  and  Directive  2000/12/EC  stood  prior  to  the  date  specified  in  Article  157  of  this 
Directive. 

5. 
Compliance  with  the  requirements  of  paragraphs  1  to  4  shall  be  on  the  basis  of 
amounts  of  own  funds  fully  adjusted  to  reflect  differences  in  the  calculation  of  own  funds 
under  Directive  2000/12/EC  and  Directive  93/6/EEC  as  those  Directives  stood  prior  to  the 
date  specified  in  Article  157  of  this  Directive  and  the  calculation  of  own  funds  under  this 
Directive  deriving  from  the  separate  treatments  of  expected  loss  and  unexpected  loss  under 
Articles 84 to 89 of this Directive.- 

6. 

For the purposes of paragraphs 1 to 5 of this Article, Articles 68 to 73 shall apply. 

Until  31  December  2007  credit  institutions  may  treat  the  articles  constituting  the 
7. 
Standardised  Approach  set  out  in  Title  V,  Chapter  2,  Section  3,  Subsection  1  as  being 
replaced by Articles 42 to 46 of Directive 2000/12/EC as those articles stood prior to the date 
referred to in Article 157. 

Where the discretion referred to in paragraph 7 is exercised the following shall apply 

8. 
concerning the provisions of Directive 2000/12/EC: 

(a) 

(b) 

(c) 

(d) 

(e) 

the provisions of that Directive referred to in Articles 42 to 46 shall apply 
as they stood prior to the date referred to in Article 157; 

‘risk-adjusted value’ as referred to in Article 42(1) of that Directive shall 
mean ‘risk-weighted exposure amount’; 

the  figures  produced  by  Article  42(2)  of  that  Directive  shall  be 
considered risk-weighted exposure amounts; 

‘credit  derivatives’  shall  be  included  in  the  list  of  ‘Full  risk’  items  in 
Annex II of that Directive; 

the  treatment  set  out  in  Article  43(3)  of  that  Directive  shall  apply  to 
derivative instruments listed in Annex IV of that Directive whether on- or 
off-balance sheet and the figures produced by the treatment set out in that 
Annex shall be considered risk-weighted exposure amounts; 

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Where the discretion referred to in paragraph 7 is exercised the following shall apply 

9. 
in relation to the treatment of exposures for which the Standardised Approach is used: 

(a)  Title V, Chapter 2, Section 3, Subsection 3 relating to the recognition of 

credit risk mitigation shall not apply; 

(b)  Title V,  Chapter  2,  Section  3,  Subsection 4 concerning the treatment of 

securitisation may be disapplied by competent authorities; 

(b)  The  following  provisions  of  Annex  XII  setting  out  disclosure 

requirements for credit institutions shall not apply: 

(i) 

Part 2, paragraph 4(b), 

(ii)  Part 2, paragraph 6, 

(iii)  Part 2, paragraph 10. 

10.  Where the discretion referred to in paragraph 7 is exercised the capital requirement for 
operational risk under Article 75(e) shall be reduced by the percentage representing the ratio 
of  the  value  of  the  credit  institution’s  exposures  for  which  risk-weighted  exposure  amounts 
are calculated in accordance with the discretion referred to in paragraph 7 to the total value of 
its exposures. 

11.  Where  a  credit  institution  calculates  risk-weighted  exposure  amounts  for  all  of  its 
exposures  in  accordance  with  the  discretion  referred  to  in  paragraph  7,  Articles  48  to  50  of 
Directive  2000/12/EC  relating  to  large  exposures  may  apply  as  they  stood  prior  to  the  date 
referred to in Article 157;  

12. 

Where the discretion referred to in paragraph 7 is exercised, references to Articles 46 
to  52  of  this  Directive  shall  be  read  as  references  to  Articles  42  to  46  of  Directive 
2000/12/EC as those articles stood prior to the date referred to in Article 157. 

Article 153 

In  the  calculation  of  risk-weighted  exposure  amounts  for  exposures  arising  from  property 
leasing transactions concerning offices or other commercial premises situated in their territory 
and meeting the criteria set out in Annex VI, Part 1, paragraph 51, the competent authorities 
may,  until  31  December  2012  allow  a  50%  risk  weighting  to  be  applied  without  the 
application of Annex VI, Part 1, paragraphs 55 and 56. 

Until 31 December 2010, competent authorities may, for the purpose of defining the secured 
portion  of  a  past  due  loan  for  the  purposes  of  Annex  VI,  recognise  collateral  other  than 
eligible collateral as set out under Articles 90 to 93. 

1. 

The requirements in Article 84(3) and (4) shall apply from the 31 December 2009. 

Article 154 

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2. 

3. 

4. 

5. 

6. 

Until 31 December 2010 the exposure weighted average LGD for all retail exposures 
secured  by  residential  properties  and  not  benefiting  from  guarantees  from  central 
governments shall not be lower than 10%. 

Until  31  December  2017,  the  competent  authorities  of  the  Member  States  may 
exempt from the IRB treatment certain equity exposures held at 31 December 2007.  

The exempted position shall be measured as the number of shares as of that date and 
any additional arising directly as a result of owning those holdings, as long as they 
do not increase the proportional share of ownership in a portfolio company.  

If an acquisition increases the proportional share of ownership in a specific holding 
the exceeding part of the holding shall not be subject to the exemption. Nor shall the 
exemption apply to holdings that were originally subject to the exemption, but have 
been sold and then bought back.  

Equity exposures covered by this transitional provision shall be subject to the capital 
requirements  calculated  in  accordance  with  Title  V,  Chapter  2,  Section  3, 
Subsection 1. 

Until 31 December 2011, for corporate exposures the competent authorities of each 
Member State may set the number of days past due that all credit institutions in its 
jurisdiction shall abide by under the definition of default set out in Annex VII, Part 4, 
paragraph 44 for exposures to such counterparts situated within this Member State. 
The  specific  number  shall  fall  within  90-  up  to  a  figure  of  180  days  if  local 
conditions  make  it  appropriate.  For  exposures  to  such  counterparts  situated  in  the 
territories  of  other  Member  States,  the  competent  authorities  shall  set  a  number  of 
days past due which is not higher than the number set by the competent authority of 
the respective Member State. 

In respect of the observation period referred to in Annex VII, Part 4, paragraph 66, 
Member  States  may  allow  credit  institutions  which  are  not  permitted  to  use  own 
estimates  of  LGDs  or  conversion  factors  to  have,  when  they  implement  the  IRB 
Approach, but at the latest at the 31 December 2007, relevant data covering a period 
of two years. Until 31 December 2010 the period to be covered shall increase by one 
year each year. 

In respect of the observation period referred to in Annex VII, Part 4, paragraphs 71, 
85 and 94 Member States may allow credit institutions to have, when they implement 
the IRB Approach, but at the latest at the 31 December 2007, relevant data covering 
a  period  of  two  years.  Until  31  December  2010  the  period  to  be  covered  shall 
increase by one year each year. 

Article 155 

Until 31 December 2012, for credit institutions the relevant indicator for the trading and sales 
business line of which represents at least 50% of the total of the relevant indicators for all of 
its  business  lines  accordance  with  Annex  X,  Part  2,  paragraphs  1  to  8,  Member  States  may 
apply a percentage of 15% to the business line “trading and sales”. 

EN 

151 

   EN 

 
(cid:208) 2000/12/EC 

CHAPTER 2 

FINAL PROVISIONS 

(cid:216) new 

Article 156 

The  Commission,  in  cooperation  with  Member  States,  and  taking  into  account  the 
contribution of the European Central Bank, shall periodically monitor whether this Directive 
taken as a whole, together with Directive [93/6/EEC], has significant effects on the economic 
cycle and, in the light of that examination, shall consider whether any remedial measures are 
justified. 

Based on that analysis and taking into account the contribution of the European Central Bank, 
the Commission shall draw up a biennial report and submit it to the European Parliament and 
to the Council, together with any appropriate proposals. 

Article 157 

Member States shall adopt and publish, by 31 December 2006 at the latest, the laws, 
1. 
regulations and administrative provisions necessary to comply with Articles 4, 22, 57, 61, 62, 
63, 64, 66, 68 to 106, 108, 110 to 115, 117 to 119, 123 to 127, 129 to 132, 133, 136, 144 to 
149, 152 to 155 and the Annexes II, III, V to XII. They shall forthwith communicate to the 
Commission the text of those provisions and a correlation table between those provisions and 
this Directive.  

Notwithstanding  paragraph  2,  they  shall  apply  those  provisions  from  31  December 
2006.  

When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication.  They  shall  also  include  a  statement  that  references  in  existing  laws, 
regulations  and  administrative  provisions  to  the  directive[s]  repealed  by  this 
Directive  shall  be  construed  as  references  to  this  Directive.  Member  States  shall 
determine  how  such  reference  is  to  be  made  and  how  that  statement  is  to  be 
formulated.  

Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 

2. 
Member  States  shall  apply,  by  31  December  2007  at  the  latest,  and  not  earlier,  the 
laws  regulations  and  administrative  provisions  necessary  to  comply  with  Articles  87(9)  and 
105.  

EN 

152 

   EN 

 
 
 
(cid:208) 2000/12/EC Art. 66 (adapted) 

Article 66  

Commission information 

Member States shall communicate to the Commission the text of the main laws, regulations 
and administrative provisions ⌦ of national law ⌫ which they adopt in the field covered by 
this Directive. 

(cid:208) 2000/12/EC Art 67 (adapted) 

Article 158 

1.  Directives  73/183/EEC,  77/780/EEC,  89/299/EEC,  89/646/EEC,  89/647/EEC,  92/30/EEC 
and  92/121/EEC,  Directive  2000/12/EC  as  amended  by  the  Directives  set  out  in  Annex  V 
⌦ XV ⌫ , Part A, are ⌦ is ⌫ hereby repealed without prejudice to the obligations of the 
Member  States  concerning  the  deadlines  for  transposition  of  the  said  Directives  listed  in 
Annex V ⌦ XV ⌫ , Part B. 

2. References to the repealed Directives shall be construed as references to this Directive and 
should be read in accordance with the correlation table in Annex VI ⌦ XVI ⌫. 

(cid:208) 2000/12/EC Art 68 (adapted) 

Article 159 

Implementation 

This Directive shall enter into force on the 20th day following its publication in the Official 
Journal of the ⌦ Union ⌫ European Communities. 

(cid:208) 2000/12/EC Art. 69 (adapted) 

Article 160 

Addressees 

This Directive is addressed to the Member States. 

Done at Brussels, […]. 

For the European Parliament 
The President 

EN 

153 

   EN 

 
 
 
 
 
 
 
 
 
For the Council 
The President 

EN 

154 

   EN 

 
 
 
 
 
(cid:208) 2000/12/EC 

ANNEX I 

LIST OF ACTIVITIES SUBJECT TO MUTUAL RECOGNITION 

1. Acceptance of deposits and other repayable funds 

2. Lending including, inter alia: consumer credit, mortgage credit, factoring, with or without 
recourse, financing of commercial transactions (including forfeiting).33 

3. Financial leasing 

4. Money transmission services 

5.  Issuing  and  administering  means  of  payment  (e.g.  credit  cards,  travellers'  cheques  and 
bankers' drafts) 

6. Guarantees and commitments 

7. Trading for own account or for account of customers in: 

(a) 

money market instruments (cheques, bills, certificates of deposit, etc.) 

(b) 

foreign exchange; 

(c) 

financial futures and options; 

(d) 

exchange and interest-rate instruments; 

(e) 

transferable securities 

8. Participation in securities issues and the provision of services related to such issues 

9.  Advice  to  undertakings  on  capital  structure,  industrial  strategy  and  related  questions  and 
advice as well as services relating to mergers and the purchase of undertakings 

10. Money broking 

11. Portfolio management and advice 

12. Safekeeping and administration of securities 

13. Credit reference services 

14. Safe custody services 

33 

Including, inter alia: consumer credit, mortgage credit, factoring, with or without recourse, financing of 
commercial transactions (including forfeiting). 

EN 

155 

   EN 

 
 
                                                 
The  services  and  activities  provided  for  in  Section  A  and  B  of  annex  I  of  Directive 
2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in 
financial instruments34 when referring to the financial instruments provided for in Section C 
of Annex I of that Directive are subject to mutual recognition according to this Directive.  

(cid:208) 2004/39/EC Art. 68 (adapted) 

ANNEX II 

(cid:208) 2000/12/EC 

(cid:208) 2000/12/EC 
(cid:214) new 

CLASSIFICATION OF OFF-BALANCE-SHEET ITEMS 

Full risk: 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

Guarantees having the character of credit substitutes, 

(cid:214) Credit derivatives  

Acceptances, 

Endorsements on bills not bearing the name of another credit institution, 

Transactions with recourse, 

Irrevocable standby letters of credit having the character of credit substitutes, 

Assets purchased under outright forward purchase agreements, 

Forward forward deposits, 

The unpaid portion of partly-paid shares and securities, 

(cid:214) Asset  sale  and  repurchase  agreements  as  defined  in  Article  12(3)  and  (5)  of 
Directive 86/635/EEC,   

Other items also carrying full risk. 

Medium risk: 

– 

– 

Documentary credits issued and confirmed (see also medium/low risk), 

Warranties and indemnities (including tender, performance, customs and tax bonds) 
and guarantees not having the character of credit substitutes, 

34 

OJ n° L 145 of 30.04.2004, p. 1 

EN 

156 

   EN 

 
 
 
 
                                                 
– 

– 

– 

– 

– 

Asset sale and repurchase agreements as defined in Article 12(3) and (5) of Directive 
86/635/EEC, 

Irrevocable standby letters of credit not having the character of credit substitutes, 

Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees 
or acceptance facilities) with an original maturity of more than one year, 

Note issuance facilities (NIFs) and revolving underwriting facilities (RUFs), 

items  also  carrying  medium  risk  (cid:214) and  as  communicated 

Other 
Commission  . 

to 

the 

Medium/low risk: 

– 

– 

– 

Documentary credits in which underlying shipment acts as collateral and other self-
liquidating transactions, 

(cid:214) Undrawn  credit  facilities  (agreements  to  lend,  purchase  securities,  provide 
guarantees or acceptance facilities) with an original maturity of up to and including 
one year which may not be cancelled unconditionally at any time without notice or 
that  do  not  effectively  provide  for  automatic  cancellation  due  to  deterioration  in  a 
borrower’s creditworthiness,  

Other  items  also  carrying  medium/low  risk  (cid:214) and  as  communicated  to  the 
Commission  . 

Low risk: 

– 

Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees 
or acceptance facilities) with an original maturity of up to and including one year or 
which  may  be  cancelled  unconditionally  at  any  time  without  notice,(cid:214) Undrawn 
credit  facilities  (agreements  to  lend,  purchase  securities,  provide  guarantees  or 
acceptance  facilities)  which  may  be  cancelled  unconditionally  at  any  time  without 
notice, or that do effectively provide for automatic cancellation due to deterioration 
in  a  borrower’s  creditworthiness.  Retail  credit  lines  may  be  considered  as 
unconditionally cancellable if the terms permit the credit institution to cancel them to 
the full extent allowable under consumer protection and related legislation;  

– 

Other items also carrying low risk (cid:214) and as communicated to the Commission  . 

The  Member  States  undertake  to  inform  the  Commission  as  soon  as  they  have  agreed  to 
include  a  new  off-balance-sheet  item  in  any  of  the  last  indents  under  each  category  of  risk. 
Such items will be definitively classified at Community level once the procedure laid down in 
Article 59 has been completed. 

(cid:208) 2000/12/EC 

ANNEX III 

EN 

157 

   EN 

 
 
THE TREATMENT OF OFF-BALANCE-SHEET ITEMS (cid:214) DERIVATIVE 
INSTRUMENTS  

(cid:208) 2000/12/EC (adapted) 
(cid:214) new 

1. CHOICE OF THE METHOD 

To  measure the  credit  risks  associated  with  (cid:214) determine  the  exposure  value  of   the 
contracts listed in points 1 and 2 of Annex IV, credit institutions may choose, subject to the 
consent of the competent authorities, one of the methods set out ⌦ in this Annex ⌫ below. 
Credit institutions which have to comply with Article 6(1) ⌦ 33(1) and (2) ⌫ of Directive 
93/6/EEC35  must  use  method  1  set  out  ⌦ in  this  Annex ⌫  below.  To  measure  the  credit 
risks associated with (cid:214) determine the exposure value for  the contracts listed in point 3 of 
Annex IV all credit institutions must use method 1 set out ⌦ in this Annex ⌫ below. 

(cid:216) new 

Contracts traded on recognised exchanges, and foreign-exchange contracts (except contracts 
concerning  gold)  with  an  original  maturity  of  14  calendar  days  or  less  are  exempt  from  the 
application of the methods set out in this Annex and shall be attributed an exposure value of 
zero. 

Competent authorities may exempt from the application of the methods set out in this Annex 
and  attribute  an  exposure  value  of  zero  to  over-the-counter  (OTC)  contracts  cleared  by  a 
clearing  house  where  the  latter  acts  as  the  legal  counterparty  and  all  participants  fully 
collateralise  on  a  daily  basis  the  exposure  they  present  to  the  clearing  house,  thereby 
providing a protection covering both the current exposure and the potential future exposure. 

The posted collateral must: 

(a)  qualify for a 0% risk weight, or 

(b)  be cash deposits placed with the lending institution, or 

(c) 

be certificates of deposit or similar instruments issued by and lodged with 
the latter. 

The competent authorities must be satisfied that the risk of a build-up of the clearing house's 
exposures beyond the market value of posted collateral is eliminated. 

35 

Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment firms and credit 
institutions  (OJ  L  141,  11.6.1993,  p.  1).  Directive  amended  by  Directive  98/33/EC  (OJ  L  204, 
21.7.1998, p. 29). 

EN 

158 

   EN 

 
 
 
                                                 
(cid:208) 2000/12/EC (adapted) 

2. METHODS 

Method 1: the «mark to market» approach 

Step (a): 
replacement cost of all contracts with positive values is obtained. 

by  attaching  current  market  values  to  contracts  (mark  to  market),  the  current 

to obtain a figure for potential future credit exposure36, ⌦ except in the case 
Step (b): 
of  single-currency  «floating/floating»  interest  rate  swaps  in  which  only  the  current 
replacement cost will  be  calculated, ⌫ the notional principal amounts or underlying values 
are multiplied by the following percentages ⌦ in Table 1 ⌫ : 

Residual 
maturity39 

Interest-rate 
contracts 

One year or 
less 

0% 

0,5% 

TABLE 13738 

Contracts 
concerning 
foreign-
exchange 
rates and gold

Contracts 
concerning 
equities 

Contracts 
concerning 
precious 
metals except 
gold 

Contracts 
concerning 
commodities 
other than 
precious 
metals 

1% 

5% 

6% 

8% 

7% 

7% 

10% 

12% 

1,5% 

7,5% 

10% 

8% 

15% 

Over one 
year, less 
than five 
years 

Over five 
years 

For the purpose of calculating the potential future exposure in accordance with step 
(b) the competent authorities may allow credit institutions until 31 December 2006 to 
apply the following percentages instead of those prescribed in Table 1 provided that 

36 

37 

38 

39 

Except in the case of single-currency «floating/floating» interest rate swaps in which only the current 
replacement cost will be calculated. 
Contracts which do not fall within one of the five categories indicated in this table shall be treated as 
contracts concerning commodities other than precious metals. 
For contracts with multiple exchanges of principal, the percentages have to be multiplied by the number 
of remaining payments still to be made according to the contract. 
For contracts that are structured to settle outstanding exposure following specified payment dates and 
where the terms are reset such that the market value of the contract is zero on these specified dates, the 
residual  maturity  would  be  equal  to  the  time  until  the  next  reset  date.  In  the  case  of  interest-rate 
contracts that meet these criteria and have a remaining maturity of over one year, the percentage shall 
be no lower than 0,5%. 

EN 

159 

   EN 

 
 
 
                                                 
the institutions make use of the option set out in Article 11a of Directive 93/6/EEC 
for contracts within the meaning of paragraph 3(b) and (c) of Annex IV: 

TABLE 1a 

Residual maturity 

Precious metals 
(except gold) 

Base 
metals 

Agricultural 
products (softs) 

Other, including 
energy products 

One year or less 

Over one year, less 
than five years 

2% 

5% 

2,5% 

4% 

3% 

5% 

Over five years 

7,5% 

8% 

9% 

4% 

6% 

10% 

Step (c): 
the  sum  of  current  replacement  cost  and  potential  future  credit  exposure  is 
multiplied by the risk weightings allocated to the relevant counterparties in Article 43 ⌦ is 
the exposure value. ⌫ 

(cid:208) 2000/12/EC (adapted) 

Method 2: the «original exposure» approach 

Step (a): 
percentages given ⌦ in Table 2 ⌫ below: 

the  notional  principal  amount  of  each  instrument  is  multiplied  by  the 

(cid:208) 2000/12/EC (adapted) 

Original maturity40 

TABLE 2 

Interest-rate 
contracts 

Contracts concerning foreign-
exchange rates and gold 

One year or less 

More than one year but not 
exceeding two years 

Additional allowance for each 
additional year 

0,5% 

1% 

1% 

2% 

5% 

3% 

Step (b): 
allocated to the relevant counterparties in Article 43(cid:214)shall be the exposure value 

the  original  exposure  thus  obtained  is  multiplied  by  the  risk  weightings 

(cid:208) 2000/12/EC 
(cid:214) new 

40 

In the case of interest-rate contracts, credit institutions may, subject to the consent of their competent 
authorities, choose either original or residual maturity. 

EN 

160 

   EN 

 
 
 
 
                                                 
For  methods  1  and  2  the  competent  authorities  must  ensure  that  the  notional  amount  to  be 
taken into account is an appropriate yardstick for the risk inherent in the contract. Where, for 
instance, the contract provides for a multiplication of cash flows, the notional amount must be 
adjusted in order to take into account the effects of the multiplication on the risk structure of 
that contract. 

(cid:208) 2000/12/EC (adapted) 

3.  CONTRACTUAL  NETTING  (CONTRACTS  FOR  NOVATION  AND  OTHER 

NETTING AGREEMENTS) 

(a) Types of netting that competent authorities may recognise 

For  the  purpose  of  this  ⌦ section ⌫  point  3  «counterparty»  means  any  entity  (including 
natural persons) that has the power to conclude a contractual netting agreement. 

The competent authorities may recognise as risk-reducing the following types of contractual 
netting: 

(i) 

bilateral contracts for novation between a credit institution and its counterparty under 
which mutual claims and obligations are automatically amalgamated in such a way 
that  this  novation  fixes  one  single  net  amount  each  time  novation  applies  and  thus 
creates a legally binding, single new contract extinguishing former contracts; 

(ii) 

other bilateral agreements between a credit institution and its counterparty. 

(b) Conditions for recognition 

The competent authorities may recognise contractual netting as risk-reducing only under the 
following conditions: 

(i) 

(ii) 

a  credit  institution  must  have  a  contractual  netting  agreement  with  its  counterparty 
which creates a single legal obligation, covering all included transactions, such that, 
in  the  event  of  a  counterparty's  failure  to  perform  owing  to  default,  bankruptcy, 
liquidation  or  any  other  similar  circumstance,  the  credit  institution  would  have  a 
claim to receive or an obligation to pay only the net sum of the positive and negative 
mark-to-market values of included individual transactions; 

a credit institution must have made available to the competent authorities written and 
reasoned  legal  opinions  to  the  effect  that,  in  the  event  of  a  legal  challenge,  the 
relevant courts and administrative authorities would, in the cases described under (i), 
find  that  the  credit  institution's  claims  and  obligations  would  be  limited  to  the  net 
sum, as described in (i), under: 

– 

the  law  of  the  jurisdiction  in  which  the  counterparty  is  incorporated  and,  if  a 
foreign  branch  of  an  undertaking  is  involved,  also  under  the  law  of  the 
jurisdiction in which the branch is located; 

– 

the law that governs the individual transactions included; , and 

EN 

161 

   EN 

 
 
– 

the  law  that  governs  any  contract  or  agreement  necessary  to  effect  the 
contractual netting; 

(iii) 

a credit institution must have procedures in place to ensure that the legal validity of 
its  contractual  netting  is  kept  under  review  in  the  light  of  possible  changes  in  the 
relevant laws. 

The competent authorities must be satisfied, if necessary after consulting the other competent 
authorities concerned, that the contractual netting is legally valid under the law of each of the 
relevant jurisdictions. If any of the competent authorities are not satisfied in that respect, the 
contractual  netting  agreement  will  not  be  recognised  as  risk-reducing  for  either  of  the 
counterparties. 

The  competent  authorities  may  accept  reasoned  legal  opinions  drawn  up  by  types  of 
contractual netting. 

No  contract  containing  a  provision  which  permits  a  non-defaulting  counterparty  to  make 
limited  payments  only,  or  no  payments  at  all,  to  the  estate  of  the  defaulter,  even  if  the 
defaulter is a net creditor (a «walkaway» clause), may be recognised as risk-reducing. 

The  competent  authorities  may  recognise  as  risk-reducing  contractual-netting  agreements 
covering  foreign-exchange  contracts  with  an  original  maturity  of  14  calendar  days  or  less 
written options or similar off-balance-sheet items to which this Annex does not apply because 
they bear only a negligible or no credit risk. If, depending on the positive or negative market 
value of these contracts, their inclusion in another netting agreement can result in an increase 
or  decrease  of  the  capital  requirements,  competent  authorities  must  oblige  their  credit 
institution to use a consistent treatment. 

(c) Effects of recognition 

(i) Contracts for novation 

The  single  net  amounts  fixed  by  contracts  for  novation,  rather  than  the  gross  amounts 
involved, may be weighted. Thus, in the application of method 1, in 

– 

– 

step (a): the current replacement cost, and in 

step (b): the notional principal amounts or underlying values 

may be obtained taking account of the contract for novation. In the application of method 2, in 
step  (a)  the  notional  principal  amount  may  be  calculated  taking  account  of  the  contract  for 
novation; the percentages of Table 2 must apply. 

(ii) Other netting agreements 

In application of method 1: 

– 

in  step  (a)  the  current  replacement  cost  for  the  contracts  included  in  a  netting 
agreement  may  be  obtained  by  taking  account  of  the  actual  hypothetical  net 
replacement cost which results from the agreement; in the case where netting leads to 
a  net  obligation  for  the  credit  institution  calculating  the  net  replacement  cost,  the 
current replacement cost is calculated as «0», 

EN 

162 

   EN 

 
– 

in step (b) the figure for potential future credit exposure for all contracts included in 
a  netting  agreement  may  be  reduced  according  to  the  following  equation:  PCEred  = 
0.4 * PCEgross + 0.6 * NGR * PCEgross 

where: 

—  PCEred 

= 

—  PCEgross 

= 

the reduced figure for potential future credit exposure for all 
contracts with a given counterparty included in a legally valid 
bilateral netting agreement 

the sum of the figures for potential future credit exposure for all 
contracts with a given counterparty which are included in a legally 
valid bilateral netting agreement and are calculated by multiplying 
their notional principal amounts by the percentages set out in Table 1

—  NGR 

= 

«net-to-gross  ratio»:  at  the  discretion  of  the  competent  authorities 
either: 

(i) 

(ii) 

separate  calculation:  the  quotient  of  the  net  replacement 
cost  for  all  contracts  included  in  a  legally  valid  bilateral 
netting  agreement  with  a  given  counterparty  (numerator) 
and the gross replacement cost for all contracts included in 
a  legally  valid  bilateral  netting  agreement  with  that 
counterparty (denominator), or 

aggregate  calculation:  the  quotient  of  the  sum  of  the  net 
replacement  cost  calculated  on  a  bilateral  basis  for  all 
counterparties taking into account the contracts included in 
legally  valid  netting  agreements  (numerator)  and  the  gross 
replacement  cost  for  all  contracts  included  in  legally  valid 
netting agreements (denominator). 

If  Member  States  permit  credit  institutions  a  choice  of 
methods, the method chosen is to be used consistently. 

For  the  calculation  of  the  potential  future  credit  exposure  according  to  the  above  formula 
perfectly matching contracts included in the netting agreement may be taken into account as a 
single  contract  with  a  notional  principal  equivalent  to  the  net  receipts.  Perfectly  matching 
contracts  are  forward  foreign-exchange  contracts  or  similar  contracts  in  which  a  notional 
principal is equivalent to cash flows if the cash flows fall due on the same value date and fully 
or partly in the same currency. 

In the application of method 2, in step (a) 

– 

– 

EN 

perfectly  matching  contracts  included  in  the  netting  agreement  may  be  taken  into 
account as a single contract with a notional principal equivalent to the net receipts, 
the notional principal amounts are multiplied by the percentages given in Table 2, 

for  all  other  contracts  included  in  a  netting  agreement,  the  percentages  applicable 
may be reduced as indicated in Table 3:  

163 

   EN 

 
 
 
TABLE 3 

Original maturity41 

Interest-rate 
contracts 

Foreign-exchange 
contracts 

One year or less 

More than one year but not more than two 
years 

0.35% 

0.75% 

Additional allowance for each additional 
year 

0.75% 

ANNEX IV 

1.50% 

3.75% 

2.25% 

(cid:208) 2000/12/EC 

(cid:208) 2000/12/EC 
(cid:214) new 

TYPES OF OFF-BALANCE-SHEET ITEMS (cid:214) DERIVATIVES  

(cid:208) 2000/12/EC (adapted) 

1. Interest-rate contracts: 

(a) 

single-currency interest rate swaps; 

(b) 

basis-swaps; 

(c) 

forward rate agreements; 

(d) 

interest-rate futures; 

(e) 

interest-rate options purchased; 

(f) 

other contracts of similar nature. 

2. Foreign-exchange contracts and contracts concerning gold: 

(a) 

cross-currency interest-rate swaps; 

(b) 

forward foreign-exchange contracts; 

(c) 

currency futures; 

(d) 

currency options purchased; 

41 

In the case of interest-rate contracts, credit institutions may, subject to the consent of their competent 
authorities, choose either original or residual maturity. 

EN 

164 

   EN 

 
 
 
 
                                                 
(e) 

other contracts of a similar nature; 

(f) 

contracts concerning gold of a nature similar to (a) to (e). 

3. Contracts of a nature similar to those in points 1(a) to (e) and 2(a) to (d) concerning other 
reference items or indices concerning: 

(a) 

equities; 

(b) 

precious metals except gold; 

(c) 

commodities other than precious metals; 

(d) 
other contracts of a similar nature. Step (b):  to  obtain  a  figure  for  potential  future 
credit  exposure42,  the  notional  principal  amounts  or  underlying  values  are  multiplied  by  the 
following percentages: 

(cid:207) 

42 

Except in the case of single-currency «floating/floating» interest rate swaps in which only the current 
replacement cost will be calculated. 

EN 

165 

   EN 

 
 
                                                 
(cid:216) new 

(cid:216) new 

ANNEX V TO XII 

ANNEX XIII 

TOGETHER  WITH 

THEIR 

SUCCESSIVE 

[OMISSIS] 

PART A 

REPEALED  DIRECTIVES 
AMENDMENTS 

(referred to in Article 158) 

Directive  2000/12/EC  of  the  European  Parliament  and  of  the  Council  of  20  March  2000 
relating to the taking up and pursuit of the business of credit institutions 

Directive 2000/28/EC of the European Parliament and of the Council of 18 September 2000 
amending Directive 2000/12/EC relating to the taking up and pursuit of the business of credit 
institutions 

Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 
on  the  supplementary  supervision  of  credit  institutions,  insurance  undertakings  and 
investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 
79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 
2000/12/EC of the European Parliament and of the Council, 

Only Art. 29.1(a)(b), Art. 29.2,, Art. 29.4(a)(b), Art. 29.5, Art. 29.6, Art. 29.7 (a) (b), 
Art. 29.8, Art. 29.9, Art. 29.10, Art. 29.11 

Directive  2004/39/EC  of  the  European  Parliament  and  of  the  Council  of  21  April  2004  on 
markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and 
Directive 2000/12/EC of the European Parliament and of the Council and repealing Council 
Directive 93/22/EEC 

Only Art. 68 

Commission Directive 2004/69/EC of 27 April 2004 amending Directive 2000/12/EC of the 
European Parliament and of the Council as regards the definition of "multilateral development 
banks" (Text with EEA relevance) 

Directive  2004/39/EC  of  the  European  Parliament  and  of  the  Council  of  21  April  2004  on 
amending Council Directives 73/239/EEC, 85/611/EEC, 91/675/EEC, 92/49/EEC, 93/6/EEC 
and  94/19/EC  and  Directives  98/78/EC,  2000/12/EC,  2001/34/EC,  2002/83/EC  and 
2002/87/EC, in order to establish a new financial services committee organisational structure. 

Only Article 3 

EN 

166 

   EN 

 
 
 
NON-REPEALED MODIFICATIONS 

Act of accession 2003 

PART B 

DEADLINES FOR IMPLEMENTATION 

(referred to in Article 158) 

Directive 

Deadline for implementation 

Directive 2000/12/EC 

Directive 2000/28/EC 

Directive 2002/87/EC,  

Directive 2004/39/EC 

Directive 2004/69/EC 

Directive 2004/xx/EC 

----- 

27.4.2002 

11.8.2004 

Not yet available 

30.6.2004 

Not yet available 

EN 

167 

   EN 

 
 
 
 
 
 
 
 
ANΝΕΧ XIV 

CORRELATION TABLE 

This Directive 

Directive 
2000/12/EC 

Directive 
2000/28/EC 

Directive 
2001/87/EC 

Directive 
2004/69/EC 

Directive 
2004/xx/EC 

Article 3.2 

Article  1(2)  to 
(5) 

Article  1(6)  to 
(8) 

Article 29.1 (a) 

Article 29.1 (b) 

Article 1 

Article  2(1)  and 
(2) 

Article 2(1) 

Article 2(3) 

Act 
Accession 

of 

Article 2(2) 

Article 2(4) 

Article 3 

Article  2(5)  and 
(6) 

Article  3  (1)  final 
sentence 

Article 4.1 (1) 

Article 1(1) 

Article  4.1  (2)  to 
(5) 

Article  4.1  (7)  to 
(9) 

Article 4 .1 (10) 

Article 4.1 (11) to 
(14) 

Article  1  (10), 
(12) and (13) 

Article  4.1  (21) 
and (22) 

Article 4.1 (23) 

Article 1 (23) 

Article  4.1  (45  to 
(47) 

Article  1  (25  to 
(27) 

Article 4 .2 

Article 
second 
paragraph 

1(1) 
sub-

Article 5 

Article 3 

Article 6 

Article 4 

Article 7 

Article 8 

Article 8 

Article 9 

Article 9 (1) 

Article  5(1)  and 
1(11) 

Article 9 (2) 

Article 5(2) 

EN 

168 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Article 10 

Article  5  (3)  to 
(7) 

Article 11 

Article 6 

Article 12 

Article 7 

Article 13 

Article 10 

Article 14 

Article 11 

Article 15 (1) 

Article 12 

Article 15 (2) and 
(3) 

Article 16 

Article 13 

Article 17 

Article 14 

Article 18 

Article 15 

Article 19 (1) 

Article 16 (1) 

Article 29.2 

Article 19 (2) 

Article 29.3 

Article 20 

Article 16(3) 

Article 21 

Article  16  (4)  to 
(6) 

Article 22 

Article 17 

Article 23 

Article 18 

Article 24 (1) 

Article 24 (2) 

Article 24 (3)  

Article  25  (1)  to 
(3) 

Article 25 (3) 

Article 25 (4) 

Article 26 

Article 27 

Article 
paragraphs 
to (3)  

19 
(1) 

Article 
paragraph (6)  

19 

Article 
paragraph (4) 

19 

Article  20  (1)  to 
(3)  1  and  2  sub-
paragraph 

Article 
paragraph (5) 

19 

Article  20  (3)  3 
sub-paragraph 

Article  20  (4)  to 
(7) 

Article  1 
final clause 

(3) 

Article 28 

Article 21 

EN 

169 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Article 3.8 

Article 29 

Article 22 

Article 30 

Article  22  (2)  to 
(4) 

Article 31 

Article 22 (5) 

Article 32 

Article 22 (6) 

Article 33 

Article 22 (7) 

Article 34 

Article 22 (8) 

Article 35 

Article 22 (9) 

Article 36 

Article 22 (10) 

Article 37 

Article 22 (11) 

Article 38 

Article 24 

Article 39 (1) and 
(2) 

Article 25 

Article 39 (2) 

Article 40 

Article 26 

Article 41 

Article 27 

Article 42 

Article 28 

Article 43 

Article 29 

Article 44 

Article  30(1)  to 
(3) 

Article 45 

Article 30(4) 

Article 46 

Article 30(3) 

Article 47 

Article 30(5) 

Article 48 

Article 
and (7) 

30(6) 

Article 49 

Article 30(8) 

Article 50 

Article 51 

Article  30(9)  1 
and 
2 
paragraphs 

Article  30(9)  3 
paragraph 

Article 52 

Article 30(10) 

Article 53 

Article 31 

Article 54 

Article 32 

Article 55 

Article 33 

EN 

170 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Article 29.4(a) 

Article 29.4 (b) 

Article 29.4 (b) 

Article 29.4 (b) 

Article 56 

Article 34(1) 

Article 57 

Article 58 

Article 59 

Article 60 

Article 61 

Article  34(2)  1 
paragraph 

Article 
point  2 
sentence 

34(1) 
final 

Article 
and (4) 

34(3) 

Article 63 

Article 35 

Article 64 

Article 36 

Article 65 

Article 37 

Article 66 (1) and 
(2) 

Article  38 
and (2) 

(1) 

Article 67 

Article 39 

Article 73 

Article 52(3) 

Article 106 

Article 1(24) 

Article 107 

Article  1(1)  3 
sub-paragraph 

Article 108 

Article 48(1) 

Article 109 

Article 110 

Article 111 

Article  48  (4)  1 
paragraph 

Article  48(2)  to 
sub-
(4)2 
paragraph 

Article  49  (1)  to 
(5) 

Article  113  (1)  to 
(3) 

Article  49 
(6) and (7) 

(4) 

Article  115 
and (2) 

(1) 

Article 
and (9) 

49(8) 

Article 116 

Article 49(10) 

Article 117 

Article 49(11) 

Article 118 

Article 50 

Article 120 

Article 
51(1)(2)(5) 

EN 

171 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Article 121 

Article 51(4) 

Article  122 
and (2) 

Article 125 

(1) 

Art. 51 (6) 

Article 29(5) 

Article 
and (2) 

53(1) 

Article 126 

Article 53 (3) 

Article 128 

Article 53(5) 

Article 133 (1) 

Article 54(1) 

Article 29(7)(a) 

Article  133 
and (3) 

(2) 

Article  54 
and (3) 

(2) 

Article 134(1) 

Article 134 (2) 

Article 135 

Article 137 

Article 138 

Article 139 

Article 140 

Article 
first paragraph 

54(4) 

54(4) 

Article 
second 
paragraph 

Article 
and (2) 

55(1) 

Article  56(1)  to 
(3) 

Article  56(4)  to 
(6) 

Article 29(8) 

Article 29(9) 

Article 141 

Article 56 (7) 

Article 29(10) 

Article 142 

Article 56(8) 

Article 143 

Article 29(11) 

Art. 3.10 

Article 150 

Article 60(1) 

Article 151 

Article 60(2) 

Article 158 

Art. 67 

Article 159 

Art. 68 

Article 160 

Article 69 

Annex I 

Annex I 

Annex 
clause 

I 

final 

Annex II 

Annex II 

Annex III 

Annex III 

Art. 3.10 

Article 68 

EN 

172 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annex IV 

Annex IV 

EN 

173 

   EN 

 
 
 
 
 
EN 

174 

   EN