Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms and amending Directive 2002/87/EC of the European Parliament and of the Council on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate
Date: 2011-07-20
Institutions: European Commission
Subjects: banking, credit control, credit institution, investment company

EUROPEAN COMMISSION 

Brussels, 20.7.2011 
COM(2011) 453 final 

2011/0203 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on the access to the activity of credit institutions and the prudential supervision of credit 
institutions and investment firms and amending Directive 2002/87/EC of the European 
Parliament and of the Council on the supplementary supervision of credit institutions, 
insurance undertakings and investment firms in a financial conglomerate  

(Text with EEA relevance) 

{SEC(2011) 953 final} 
{SEC(2011) 954 final} 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSED ACT 

Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating 
to the taking up and pursuit of the business of credit institutions contains provisions closely 
related  to  the  coordination  of  national  provisions  concerning  the  access  to  the  activity  of 
credit  institutions  and  their  supervisory  framework  (such  as  provisions  governing  the 
authorisation of the business, the the exercise of the freedom of establishment, the powers of 
supervisory  authorities  of  home  and  host  Member  States  in  this  regard,  and  the  supervisory 
review of credit institutions). However, that Directive, Directive 2006/49/EC and in particular 
their  annexes  also  set  out  prudential  rules.  In  order  to  approximate  further  the  legislative 
provisions  that  result  from  the  transposition  of  Directives  2006/48/EC  and  2006/49/EC  into 
national  law  and  in  order  to  ensure  that  the  same  prudential  rules  directly  apply  to  them, 
which is essential for the functioning of the internal market, these prudential rules are subject 
of the proposal for a Regulation [inserted by OP], with which this proposal forms a package. 

This  proposal  contains  the  following  new  elements:  Provisions  on  sanctions,  effective 
corporate  governance  and  provisions  preventing  the  overreliance  on  external  credit  ratings. 
This  memorandum  will  therefore  deal  exclusively  with  these  new  elements.  The  other 
elements  of  this  Directive  repeat  existing  legislation  or  are  adaptations  to  the  proposed 
Regulation. For sake of clarity, this proposal also unifies provisions on credit institutions and 
investment  firms,  the  latter  of  which  are  dealt  with  by  Directive  2006/49/EC.  This  is 
described in more detail in chapter 5 below. Changes related to the 'Basel III' agreement are 
dealt with by the proposal for a Regulation except for the provisions on capital buffers that are 
part  of  this  proposal  for  a  Directive.  Therefore,  only  the  objectives  and  legal  elements 
concerning the capital buffers are part of this explanatory memorandum.The general context 
of Basel III including the results of impact assessment and public consultations is explained in 
detail in the proposal for a Regulation. 

1.1. 

Reasons for and objectives of the proposal 

1.1.1. 

Sanctions 

Effective,  proportionate  and  dissuasive  sanctioning  regimes  are  key  to  ensure  compliance 
with  EU  banking  rules,  protect  users  of  banking  services  and  ensure  safety,  stability  and 
integrity of banking markets. 

The  analysis  of  national  sanctioning  regimes  in  the  areas  covered  by  this  Directive  and  the 
Regulation  has  revealed  divergences  and  weaknesses  in  the  legal  framework  of  sanctioning 
powers and the investigative powers available to national authorities. 

Sanctions  which  are  divergent  and  too  weak  risk  being  insufficient  to  effectively  prevent 
violations  of  this  Directive  and  the  Regulation  to  ensure  effective  supervision  and  the 
development  of  a  level  playing  field.  The  Commission  therefore  proposes  to  reinforce  and 
approximate  Member  States'  legal  framework  concerning  administrative  sanctions  and 
measures by providing for sufficiently deterrent administrative sanctions applicable to the key 
violations of this Directive and the Regulation, appropriate personal scope of administrative 
sanctions, publication of sanctions and mechanisms encouraging the reporting of violations. 

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1.1.2.  Corporate Governance 

The collapse of financial markets in autumn 2008 and the credit crunch that followed can be 
attributed to multiple, often inter-related, factors at both macro- and micro-economic levels, 
as  identified  in  the  Report  of  the  High-Level  Group  on  Financial  Supervision  in  the  EU 
published on 25 February 2009, and in particular to the accumulation of excessive risk in the 
financial  system.  This  excessive  accumulation  of  risk  was  in  part  due  to  the  weaknesses  in 
corporate  governance  of  financial  institutions,  especially  in  banks.  Whilst  not  all  banks 
suffered  from  systemic  weaknesses  of  governance  arrangements,  the  Basel  Committee  on 
Banking  Supervision  (BCBS)  referred  to  "a  number  of  corporate  governance  failures  and 
lapses". 

The need for change in this area has been widely recognised. Firms, competent authorities and 
international bodies (OECD, Financial Stability Board (FSB) and the BCBS) have reviewed 
their existing practices and guidelines or are in process of doing so. Strengthening corporate 
governance is a priority for the Commission, especially in the context of its financial markets 
reform and crisis prevention programme.  

1.1.3.  Overreliance on external ratings 

Overreliance  on  external  credit  ratings  occurs  when  financial  institutions  and  institutional 
investors  rely  solely  or  mechanistically  on  ratings  issued  by  credit  rating  agencies  while 
neglecting their own due diligence and internal risk management obligations. Overreliance on 
credit  ratings  may  lead  to  herding  behaviour  of  financial  actors,  e.g.  parallel  selling-off  of 
debt  instruments  after  that  instrument  has  been  downgraded  below  investment  grade,  which 
may affect financial stability – in particular when the few big rating agencies err collectively 
in their assessments. 

1.1.4.  Pro-cyclicality of institution lending 

Pro-cyclicalityeffects are defined as those which tend to follow the direction and amplify the 
economic cycle. One feauture of current-risk based capital requirements is that they vary over 
the  economic  cycle.  Provided  that  credit  institutions  could  meet  them  there  is  no  explicit 
regulatory constraint on the amount of risk they can take on, and then on their leverage.  

1.2. 

General context 

1.2.1. 

Sanctions 

In  its  2010  Communication  "Reinforcing  sanctioning  regimes  in  the  financial  sector"1  the 
Commission  has  envisaged  EU  legislative  action  to  set  minimum  common  standards  on 
certain  key  issues  of  sanctioning  regimes,  to  be  adapted  to  the  specifics  of  the  different 
sectors.  

First, sanctions applicable for key violations of the CRD, such as authorisation requirements, 
prudential obligations and reporting obligations, vary across Member States and do not seem 
always appropriate to ensure sanctions are sufficiently effective, proportionate and dissuasive.  

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COM(2010)716 final. 

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Second,  a  certain  divergence  exists  in  the  level  of  application  of  sanctions  in  different 
Member States, including those having banking sectors of similar size and in some Member 
States no sanctions have been applied for more than one year, which could be symptomatic of 
a weak enforcement of EU rules.  

1.2.2.  Corporate Governance 

In its Communication of 4 March 20092, the European Commission announced that it would 
(i) examine corporate governance rules and practice within financial institutions in the light of 
the financial crisis, and (ii) where appropriate, make recommendations, or propose regulatory 
measures,  in  order  to  remedy  any  weaknesses  in  the  corporate  governance  system  in  this 
important sector of the economy.  

In June 2010, the Commission published a Green Paper on corporate governance in financial 
institutions and remuneration policies3 and an accompanying staff working document4 which 
analysed  the  deficiencies  in  corporate  governance  arrangements  in  the  financial  services 
industry and proposed possible ways forward.  

The  results  of  this  public  consultation  demonstrated  a  broad  consensus  on  the  deficiencies 
identified,  receiving  support  from  different  public  authorities  and  Member  States.  The 
European  Parliament  has  also  recognised  the  importance  of  strengthening  corporate 
governance standards and practices in financial institutions in its Report on remuneration of 
directors  of  listed  companies  and  remuneration  policies  in  the  financial  services  sector5. 
Economic and Social Committee in its opinion on the Green Paper - Corporate governance in 
financial institutions and remuneration policies6 welcomes the Commission Green Paper and 
supports the proposed action. 

1.2.3.  Overreliance on external ratings 

At  the  international  level,  the  FSB  recently  issued  principles  to  reduce  authorities’  and 
financial  institutions’  reliance  on  external  ratings7.  The  principles  call  for  removing  or 
replacing  references  to  such  ratings  in  legislation  where  suitable  alternative  standards  of 
creditworthiness are available and for requiring banks to make their own credit assessments. 
The proposed provisions are in line with the FSB principles. 

1.2.4.  Capital buffers:  

Capital  conservation  and  most  especially  countercyclical  buffers  are  meant  to  attenuate  the 
risk of pro-cyclicality and the risk of excessive leverage referred to in 1.1.4 above. 

1.3. 

Existing Community provisions in this area 

Directive  2006/48/EC  relating  to  the  taking  up  and  pursuit  of  the  business  of  credit 
institutions  requires  credit  institutions  to  have  robust  governance  arrangements.  However,  it 
did not specify what the governance arrangements should look like in detail.  

2 
3 
4 
5 
6 
7 

COM (2009) 114 final. 
COM(2010)284 final.  
SEC(2010)669 final. 
2010/2009(INI). 
INT/527. 
http://www.financialstabilityboard.org/publications/r_101027.pdf. 

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In order to reduce reliance on external ratings, an obligation for banks to undertake own due 
diligence regarding the underlying assets of securitisation exposures has been introduced into 
Directive 2006/48/EC. 

1.4. 

Consistency with other policies 

In  the  context  of  the  reform  of  the  European  supervisory  architecture,  the  enhancement  of 
capital requirements and crisis management and resolution, the proposed reform of corporate 
governance  in  credit  institutions  is  an  integral  part  of  an  overall  reform  of  the  financial 
services sector. Corporate governance reform should also be seen in the context of the recent 
Commission  Communication  on  reinforcing  sanctioning  regimes  in  the  financial  services 
sector.  

The  Commission  has  launched  a  horizontal  initiative  to  encourage  industry  to  increase  the 
representation of women on boards, that after one year it will assess whether self-regulatory 
initiatives have had the desired effect and if not it will consider legislative approaches. Given 
that  the  impact  assessment  shows  that  this  issue  is  pertinent  for  the  banking  sector,  the 
approach taken at this stage is consistent with a bottom up approach. However, if the wider 
evaluation in one year finds that there is a need to legislate, then the approach taken in this 
sector will need to be adapted. 

2. 

RESULTS  OF  THE  CONSULTATIONS  WITH  THE  INTERESTED  PARTIES  AND  OF  THE 
IMPACT ASSESSMENTS 

2.1. 

Consultation with interested parties 

2.1.1. 

Sanctions 

The  Commission  carried  out  a  public  consultation  ending  on  19  February  2011  on  the 
measures envisaged to reinforce and approximate sanctioning regimes in the financial sector8, 
including  on  the  issues  relevant  in  the  banking  sector,  as  identified  on  the  basis  of  a  study 
carried  out  by  the  European  Committee  of  Banking  Supervisors  on  national  sanctioning 
regimes in this sector9.  

The  Commission  received  comments  from  a  variety  of  respondents,  including  a  significant 
number  of  stakeholders  in  the  banking  sector  (supervisory  authorities,  central  banks,  banks 
and  associations  of  bankers),  which  provided  comments  on  the  need  for  EU  action  in  this 
field, the level of harmonisation warranted, the specific actions suggested and their potential 
benefits or disadvantages.  

The actions envisaged to approximate and reinforce sanctioning regimes were also discussed 
with Member States in the meeting of the Financial Services Committee held on 17 January 
2011. 

8 
9 

http://ec.europa.eu/internal_market/consultations/2010/sanctions_en.htm 
CEBS:  "Mapping  of  supervisory  objectives,  including  early  intervention  measures  and  sanctioning 
powers",  March  2009/47,  available  on  http://www.c-ebs.org/home.aspx.  Information  contained  in  this 
report has been subsequently updated on the basis of the contributions received from member States. 

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2.1.2.  Corporate Governance 

The initiative and impact assessment is the result of an extensive and continuous dialogue and 
consultation  with  all  major  stakeholders,  including  securities  regulators,  market  participants 
(issuers, intermediaries and investors), and consumers.  

Questionnaires on their corporate governance practices were sent to a diverse cross-section of 
10 major listed banks or insurance companies established in the EU. The questionnaires were 
augmented  by  30  follow-up  interviews  with  Board  members,  company  secretaries,  chief 
financial officers, chief risk officers, internal controllers. 

A  questionnaire  on  their  views  and  role  regarding  corporate  governance  of  financial 
institutions  was  also  sent  to the  European  banking  supervisors.  Similarly,  a  cross-section  of 
major European institutional investors and shareholders' associations received a questionnaire 
on their practices and expectations regarding corporate governance of financial institutions. A 
follow-up meeting with about 30 investors was held on 2 February 2010. 

The  Green  Paper  finally  launched  a  public  consultation  from  2  June  2010  to  1st  September 
2010 on the possible ways forward to deal with failures in corporate governance in financial 
institutions. The responses and their analysis can be consulted on the Commission website10.  

2.1.3.  Overreliance on external ratings 

The Commission conducted a public consultation on issues concerning external ratings which 
also covered overreliance on them. The consultation closed on 7 January 2011 and attracted 
93  responses.  Several  options  were  proposed,  ranging  from  incentivising  the  use  of  internal 
models to requiring firms to carry out their own risk management without relying exclusively 
or mechanistically on external ratings. The responses and their analysis can be consulted on 
the Commission website11.  

2.1.4.  Capital Buffers 

Capital  Buffers  are  part  of  the  BCBS  2010  agreement  and  as  such  they  were  consulted 
extensively  both  within  the  Basel  framework  and  in  the  framework  of  the  Commission's 
specific consultations 

2.2. 

Collection and use of expertise 

2.2.1. 

Sanctions 

The study carried out by the European Committee of Banking Supervisors in 200812 provided 
information concerning the administrative sanctions laid down in national legislation and the 
actual  use  of  sanctions  by  banking  supervisors.  In  2011,  additional  information  has  been 

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http://ec.europa.eu/internal_market/company/modern/corporate_governance_in_financial_insti

tutions_en.htm#consultation2010  

http://circa.europa.eu/Public/irc/markt/markt_consultations/library?l=/financial_services/credit

_agencies_2011&vm=detailed&sb=Title  
See reference in footnote 9 

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collected  by  the  Commission  on  sanctions  provided  for  in  national  legislation  for  key 
violations of the CRD. 

The  measures  proposed  are  based  on  this  information  and  the  responses  to  the  public 
consultation. 

2.2.2.  Corporate Governance 

As part of the consultation process, and in the course of preparation of the Green Paper, the 
Commission  services  also  organised  on  12  October  2009  a  public  conference,  a  number  of 
stakeholders  participated.  Discussion  focused  on  the  role  and  competence  of  the  Board  of 
directors,  governance  issues  related  to  internal  control  and  risk  management,  the  respective 
role of shareholders, supervisors and statutory auditors. 

The Green Paper is also based on the analysis and studies that have been performed or are still 
carried  out  by  public  or  private  organisations,  at  the  international  level  as  well  as  the 
European and national levels. In their work, the Commission staff benefited from the advice 
of the European Corporate Governance Forum (ECGF) and of the ad hoc advisory group on 
corporate  governance  composed  of  some  members  of  the  ECGF  and  other  renowned 
corporate governance specialists.  

2.2.3.  Overreliance on external ratings 

The  Commission  is  actively  participating  in  the  work  of  the  FSB  referred  to  above. 
Furthermore, it participates in the BCBS that is also undertaking work to reduce reliance on 
ratings in its Working Groups on Liquidity and on Ratings and Securitisation.  

2.2.4.  Capital Buffers 

Sub-groups  of  the  Capital  Requirements  Directive  Working  Group,  whose  members  are 
nominated  by  the  European  Banking  Committee,  have  also  conducted  work  at  a  technical 
level concerning capital buffers. 

2.3. 

Impact assessment 

2.3.1. 

Sanctions 

The  Communication  on  "Reinforcing  sanctioning  regimes  in  the  financial  sector"  was 
accompanied  by  an  impact  assessment  analysing  the  main  policy  options  for  approximating 
and  strengthening  sanctioning  regimes  for  violations  of  financial  services  rules  including  in 
the  banking  sector.  A  second  impact  assessment  accompanies  this  proposal,  examining  the 
specific problems in the capital requirements area in more detail. 

The main objective of the measures proposed is to ensure better compliance with EU banking 
rules  by  increasing  effectiveness  and  dissuasiveness  of  national  sanctioning  regimes.  This 
requires the achievement of the following operational objectives: 

•  Reinforcement  and  approximation  of  the  legal  framework  concerning  sanctions  by 

ensuring  

–  Appropriate administrative sanctions for the key violations of CRD 

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–  Appropriate personal scope of administrative sanctions 

–  Publication of sanctions 

•  Reinforcement and approximation of the mechanisms facilitating detection of violations by 

ensuring 

–  Effective mechanisms encouraging the reporting of misconducts 

2.3.2.  Corporate Governance 

The overarching goal of this initiative is to ensure that the effectiveness of risk governance in 
European  credit  institutions  and  investment  firms  is  strengthened.  The  measures  envisaged 
should  help  avoid  excessive  risk-taking  by  individual  credit  institutions  and  ultimately  the 
accumulation  of  excessive  risk  in  the  financial  system.  In  order  to  achieve  this  goal,  this 
initiative focuses on the following operational objectives: 

–  increasing the effectiveness of risk oversight by Boards; 

–  improving the status of the risk management function; and 

–  ensuring effective monitoring by supervisors of risk governance.  

To  achieve  these  objectives,  the  Commission  has  chosen  to  improve  the  existing  legal 
framework. 

The requirements regarding Board composition and selection of Board members will ensure 
more  appropriate  behaviours,  competencies,  time  commitment  and  increased  accountability. 
Well-informed,  competent  Boards  and  a  strong  risk  management  function  will  increase  the 
ability of credit institutions to identify and manage emerging risks thereby reducing excessive 
risk-taking.  Disclosure  requirements  will  support  increased  transparency,  leading  to  a  more 
informed market and improved market discipline. 

Opening the Board to more diverse candidates might give opportunity to people who were for 
the time being absent from Board rooms to become members of the Board. It would enlarge 
the pool of suitable candidates for board membership and improve expertise. Therefore, any 
potential  negative  impact  on  the  pool  of  suitable  candidates  of  the  proposal  should  not  be 
significant.  

More  stringent  requirements  at  European  level  could  have  a  negative  impact  on  the 
competitiveness  of  European  credit  institutions  at  international  level.  However,  the  possible 
decrease  in  competitiveness  due  to  more  stringent  requirements  should  be  mitigated  by  a 
positive  impact  on  investors,  depositors  and  other  stakeholders.  Improved  risk  governance 
would contribute to the resilience of the banking sector. 

The proposal would neither entail significant costs for credit institutions nor have a significant 
impact on lending activities. 

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2.3.3.  Overreliance on external ratings 

A  general  part  on  overreliance  covering  the  proposed  elements  will  be  included  in  the 
forthcoming  impact  Assessment  on  the  new  initiative  on  credit  rating  agencies  (expected 
beginning of July 2011). 

2.3.4.  Capital Buffers 

As Capital Buffers are part of the Basel agreement their impact assessment is made together 
with all the other measures and detailed in the Regulation accompanied this Directive.  

3. 

BUDGETARY IMPLICATIONS 

The proposal has no implications for the EU budget. 

4. 

LEGAL ELEMENTS OF THE PROPOSAL 

4.1. 

Legal basis 

The  legal  basis  for  this  proposal  is  Article  53(1)  TFEU.  Directives  2006/48/EC  and 
2006/49/EC, which would be replaced by this Directive and the proposed regulation [inserted 
by OP], constitute an essential instrument for the achievement of the Internal Market from the 
point  of  view  of  both  the  freedom  of  establishment  and  the  freedom  to  provide  financial 
services,  in  the  field  of  credit  institutions  and  investment  firms.  This  proposal  replaces 
Directives 2006/48/EC and 2006/49/EC with regard to the coordination of national provisions 
governing  the  authorisation  of  the  business,  the  acquisition  of  qualifying  holdings,  the 
exercise of the freedom of establishment and of the freedom to provide services, the powers 
of supervisory authorities of home and host Member States in this regard and the provisions 
governing the initial capital and the supervisory review of credit institutions and investment 
firms.  The  main  objective  and  subject-matter  of  this  proposal  is  to  coordinate  national 
provisions concerning the access to the activity of credit institutions and investment firms, the 
modalities  for  their  governance,  and  their  supervisory  framework.  The  proposal  is  therefore 
based on Article 53(1) TFEU. 

This  proposal  is  complementary  to  the  proposed  regulation  [inserted  by  OP],  establishing 
uniform and directly applicable prudential requirements for credit institutions and investment 
firms,  since  such  requirements  are  closely  related  to  the  functioning  of  financial  markets  in 
respect of a number of assets held by credit institutions and investment firms, and is based on 
Article 114 TFEU. 

4.2. 

Subsidiarity  

In  accordance  with  the  principles  of  subsidiarity  and  proportionality  set  out  in  Article  5 
TFEU, the objectives of the proposed action cannot be sufficiently achieved by the Member 
States and can therefore be better achieved by the EU. Its provisions do not go beyond what is 
necessary to achieve the objectives pursued. Only EU action can ensure that credit institutions 
and  investment  firms  operating  in  more  than  one  Member  State  are  subject  to  the  same 
requirements  and  thereby  ensure  a  level  playing  field,  reduce  regulatory  complexity,  avoid 
unwarranted  compliance  costs  for  cross-border  activities,  promote  further  integration  in  the 

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EU market and contribute to the elimination of regulatory arbitrage opportunities. EU action 
also ensures a high level of financial stability in the EU. 

4.3. 

Compliance with Articles 290 and 291 TFEU 

On 23 September 2009, the Commission adopted proposals for Regulations establishing EBA, 
EIOPA,  and  ESMA13.  In  this  respect  the  Commission  wishes  to  recall  the  Statements  in 
relation to Articles 290 and 291 TFEU it made at the adoption of the Regulations establishing 
the  European  Supervisory  Authorities  according  to  which:  "As  regards  the  process  for  the 
adoption  of  regulatory  standards,  the  Commission  emphasises  the  unique  character  of  the 
financial services sector, following from the Lamfalussy structure and explicitly recognised in 
Declaration  39  to  the  TFEU.  However,  the  Commission  has  serious  doubts  whether  the 
restrictions  on  its  role  when  adopting  delegated  acts  and  implementing  measures  are  in  line 
with Articles 290 and 291 TFEU." 

5. 

DETAILED EXPLANATION 

5.1. 

Interaction and consistency between elements of the package 

This Directive forms a package with the proposed Regulation [inserted by OP]. This package 
would  replace  Directives  2006/48/EC  and  2006/49/EC.  This  means  that  both  the  Directive 
and  the  Regulation  would  each  deal  with  both  credit  institutions  and  investment  firms. 
Currently, the latter are merely 'annexed' to Directive 2006/48/EC by Directive 2006/49/EC. 
A  large  part  of  it  merely  contains  references  to  Directive  2006/48/EC.  Joining  provisions 
applicable  to  both  businesses  in  the  package  would  therefore  improve  the  readability  of 
provisions  governing  them.  Moreover,  the  extensive  annexes  of  both  Directives  would  be 
integrated into the enacting terms, hereby further simplifying their application. 

Prudential  regulations  directly  applicable  to  banks  and  investment  firms  are  set  out  in  the 
proposal  for  a  Regulation.  In  the  proposal  for  a  Directive  remain  provisions  concerning  the 
authorisation  of  credit  institutions  and  the  exercise  of  the  freedom  of  establishment  and  the 
free  movement  of  services.  This  would  not  concern  investment  firms,  as  the  corresponding 
rights and obligations are regulated by Directive 2004/39/EC ('MiFiD'). General principles of 
the  supervision  of  credit  institutions  and  investment  firms,  which  are  addressed  to  Member 
States and their competent authorities, would also remain in the Directive. This encompasses 
in  particular  the  exchange  of  information,  the  distribution  of  tasks  between  home  and  host 
country  supervisors  and  the  exercise  of  sanctioning  powers  (which  would  be  newly 
introduced).  The  Directive  would  still  contain  the  provisions  governing  the  supervisory 
review of credit institutions and investment firms by the competent authorities of the Member 
States.  These  provisions  supplement  the  general  prudential  requirements  set  out  in  the 
Regulation  for  credit  institutions  and  investment  firms  by  individual  arrangements  that  are 
decided by the competent authorities as a result of their ongoing supervisory review of each 
individual credit institution and investment firm. The range of such supervisory arrangements 
would be set out in the Directive since the competent authorities should be able to exert their 
judgment as to which arrangements should be imposed. This includes the internal processes 
within a credit institution or investment firm notably concerning the management of risks and 
the corporate governance requirements that are newly introduced.  

13 

COM(2009) 501, COM(2009) 502, COM(2009) 503. 

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5.2. 

Sanctions 

Member States should provide that appropriate administrative sanctions and measures can be 
applied to breaches of the banking legislation. To this end, the Directive will require them to 
comply with the following minimum rules. 

First,  administrative  sanctions  and  measures  should  apply  to  those  natural  or  legal  to  credit 
institutions and to individuals responsible for a breach. This would include credit institutions, 
investment firms and individuals, where appropriate. 

Second,  in  the  case  of  a  breach  of  key  provisions  of  this  Directive  and  the  Regulation,  a 
minimum  set  of  administrative  sanctions  and  measures  should  be  available  to  competent 
authorities.  This  includes  withdrawal  of  authorisation,  cease  and  desist  orders,  public 
statement, dismissal of management, administrative pecuniary sanctions. 

Third,  the  maximum  level  of  administrative  pecuniary  sanctions  laid  down  in  national 
legislation  should  exceed  the  benefits  derived  from  the  violation  if  they  can  be  determined 
and, in any case, should not be lower than the level provided for by the Directive (10% of the 
total  annual  turnover  of  the  institution  concerned  in  the  case  of  a  legal  person,  5  millions 
euros or 10% of the annual income of an individual in the case of a natural person). 

Fourth,  the  criteria  taken  into  account  by  competent  authorities  when  determining  the  type 
and level of the sanction to be applied in a particular case should include at least the criteria 
set  out  in  the  Directive  (eg.  benefits  derived  from  the  violation  or  losses  caused  to  third 
parties, cooperative behaviour of the responsible person, etc). 

Fifth, sanctions and measures applied should be published, as provided in this Directive. 

Finally,  appropriate  mechanism  should  be  put  in  place  to  encourage  reporting  of  breaches 
within credit institutions and investment firms. 

Criminal sanctions are not covered by this proposal. 

5.3. 

Corporate Governance 

The management body of a credit institution or investment firm as a whole should at all times 
commit sufficient time and possess adequate knowledge, skills and experience to be able to 
understand the business of the credit institution and its main risk exposures. All members of 
the management body should be of sufficiently good repute and possess individual qualities 
and  independence  of  mind  which  enable  them  to  constructively  challenge  and  oversee  the 
decisions  of  the  management.  To  avoid  group  think  and  facilitate  critical  challenge, 
management boards of credit institutions should be sufficiently diverse as regards age, gender, 
geographical  provenance,  educational  and  professional  background  to  present  a  variety  of 
views  and  experiences.  Gender  balance  is  of  particular  importance  to  ensure  adequate 
representation of demographical reality. 

In  order  to  have  an  effective  risk  oversight  and  control,  the  management  body  should  be 
responsible and accountable for the overall risk strategy of the credit institution or investment 
firm  and  for  the  adequacy  of  the  risk  management  systems,  taking  into  account  the  credit 
institution's risk profile. Given the importance of sound risk management in credit institutions, 
the management body in its supervisory function should set up a separate risk committee to 
deal specifically with risk issues and prepare management body decisions on risk issues. The 

EN 

11 

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risk  committee  should  assist  the  management  body  in  its  risk  oversight  role  but  the 
management body should remain finally accountable for risk strategy. 

In  order  to  provide  a  complete  view  on  risk  to  senior  management  and  to  the  management 
body,  credit  institutions  and  investment  firms  should  have  an  independent  risk  management 
function  which  should  be  able  to  form  an  effective  and  holistic  view  of  the  whole  range  of 
risks  in  a  credit  institution.  Risk  management  function  should  possess  sufficient  stature  and 
authority  to  influence  strategic  risk-management  decisions  and  have  direct  access  to  the 
management body. 

5.4. 

Overreliance on external ratings 

Credit institutions and investment firms are required to have their own sound credit granting 
criteria and credit decision processes in place. This applies irrespective of whether institutions 
grant loans to customers or whether they incur securitisation exposures. External credit ratings 
may  be  used  as  one  factor  among  others  in  this  process  but  shall  not  prevail.  In  particular, 
internal methodologies shall not rely solely or mechanistically on external ratings. 

For  the  specific  purposes  of  calculating  regulatory  bank  capital  requirements,  rating  agency 
assessments are, in certain instances, applied as a basis for differentiating capital requirements 
according  to  risks  and  not  for  determining  the  minimum  required  quantum  of  capital  itself. 
The CRD framework as a whole provides banks with an incentive to use internal rather than 
external credit ratings even for purposes of calculating regulatory capital requirements. 

The proposed provision would require credit institutions and investment firms with material 
credit  risk  exposure  or  a  significant  number  of  counterparties  to  develop  and  use  internal 
models rather than the standardized approach which is relying on external ratings. 

In addition, it is proposed that EBA publicly discloses, on an annual basis, information on the 
steps  taken  by  institutions  and  by  supervisory  authorities  to  reduce  overreliance  on  external 
ratings and reports on the degree of supervisory convergence in this regard. 

5.5. 

Capital buffers 

On  the  basis  of  Basel  III,  this  proposal  introduces  two  capital  buffers  on  top  of  the 
requirements: a Capital Conservation Buffer and a countercyclical capital buffer.  

The Capital Conservation Buffer amounts to 2,5% of risk weighted assets, applies at all times 
and has to be met with capital of highest quality.  

It is aimed at ensuring institutions' capacity to absorb losses in stressed periods that may span 
a number of years. Institutions would be expected to build up such capital in good economic 
times.  Those  credit  institutions  that  fall  below  the  buffer  target  will  face  constraints  on 
discretionary distributions of earnings until the target is reached. 

The Countercyclical Capital buffer is intended to achieve the broader macro-prudential goal 
of protecting the banking sector and the real economy from the system-wide risks stemming 
from the boom-bust evolution in aggregate credit growth and more generally from any other 
structural  variables  and  from  the  exposure  of  the  banking  sector  to  any  other  risk  factors 
related to risks to financial stability. It will be applied by adjusting the size of the buffer range 
established by the conservation buffer by up to additional 2.5%. 

EN 

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The Countercyclical Capital Buffer is set by national authorities for loans provided to natural 
and  legal  persons  within  their  Member  State.  It  can  be  set  between  0%  and  2.5%  of  risk 
weighted  assets  and  has  to  be  met  by  capital  of  highest  quality  likewise.  If  justified, 
authorities  can  even  set  a  buffer  beyond  2.5%.  The  Countercyclical  Capital  Buffer  will  be 
required  during  periods  of  excessive  credit  growth  and  released  in  a  downturn.  The  ESRB 
could issue recommendations for the buffer settings by national authorities and its monitoring, 
including  instances  where  the  buffer  exceeds  2.5%.  So  long  as  the  Countercyclical  Capital 
Buffer  is  set  below  2.5%,  Member  States  have  to  mutually  recognise  and  apply  the  capital 
charge to banks in their Member State. For parts of the buffer exceeding 2.5%, authorities can 
choose if they accept the judgement of their peers and apply the higher rate or leave it at 2.5% 
for institutions authorised in their Member State. 

Credit institutions and investment firms whose capital falls below the buffers will be subject 
to  restrictions  on  the  distribution  of  profits,  payments  on  Additional  Tier  1  instruments  and 
the  award  of  variable  remuneration  and  discretionary  pension  benefits.  In  addition,  these 
institutions  will  have  to  submit  capital  conservation  plans  to  the  supervisory  authorities  to 
ensure a swift replenishment of the buffers. 

EN 

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2011/0203 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on the access to the activity of credit institutions and the prudential supervision of credit 
institutions and investment firms and amending Directive 2002/87/EC of the European 
Parliament and of the Council on the supplementary supervision of credit institutions, 
insurance undertakings and investment firms in a financial conglomerate  

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 53(1) thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national Parliaments, 

Having regard to the opinion of the European Central Bank14,  

Having regard to the opinion of the European Data Protection Supervisor15,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

Directive  2006/48/EC  of  the  European  Parliament  and  of  the  Council  of  14  June 
200616  relating  to  the  taking  up  and  pursuit  of  the  business  of  credit  institutions  and 
Directive  2006/49/EC  of  the  European  Parliament  and  of  the  Council  of  14  June 
200617  on  the  capital  adequacy  of  investment  firms  and  credit  institutions 
("institutions")  have  been  significantly  amended  on  several  occasions.  Many 
provisions  of  Directives  2006/48/EC  and  2006/49/EC  are  applicable  to  both  credit 
institutions  and  investment  firms.  For  the  sake  of  clarity  and  in  order  to  ensure  a 
coherent  application  of  those  provisions,  it  would  be  desirable  to  merge  these 
provisions  into  new  legislation  applicable  to  both  credit  institutions  and  investment 
firms.  For  greater  accessibility,  the  provisions  of  the  Annexes  to  those  Directives 
should be integrated into the enacting terms of this new legislation.  

14 
15 
16 
17 

OJ C , , p. . 
OJ C , , p. . 
OJ L 177, 30.6.2006, p. 1. 
OJ L 177, 30.6.2006, p. 201. 

EN 

14 

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(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

18 
19 

The  new  legislation  should  consist  of  two  different  legal  instruments.  This  Directive 
should  contain  the  provisions  governing  the  authorisation  of  the  business,  the 
acquisition of qualifying holdings, the exercise of the freedom of establishment and of 
the  freedom  to  provide  services,  the  powers  of  supervisory  authorities  of  home  and 
host Member States in this regard and the provisions governing the initial capital and 
the supervisory review of credit institutions and investment firms. The main objective 
and subject-matter of this Directive is to coordinate national provisions concerning the 
access  to  the  activity  of  credit  institutions  and  investment  firms,  the  modalities  for 
their  governance,  and  their  supervisory  framework.  Apart  from  these  provisions, 
Directives  2006/48/EC  and  2006/49/EC  also  contained  prudential  requirements  for 
credit institutions and investment firms. These requirements should be provided for in 
a Regulation establishing uniform and directly applicable prudential requirements for 
credit institutions and investment firms, since such requirements are closely related to 
the  functioning  of  financial  markets  in  respect  of  a  number  of  assets  held  by  credit 
institutions  and  investment  firms.  This  Directive  should  therefore  be  read  together 
with that Regulation. Both legal instruments together should form the legal framework 
governing  banking  activities  and  the  prudential  rules  for  credit  institutions  and 
investment firms. 

The  general  prudential  requirements  laid  down  in  Regulation  [inserted  by  OP]  are 
supplemented by individual arrangements to be decided by the competent authorities 
as a result of their ongoing supervisory review of each individual credit institution and 
investment firm. The range of such supervisory arrangements should be set out in this 
Directive  and  the  competent  authorities  should  be  able  to  exert  their  judgment  as  to 
which arrangements should be imposed. With regard to such individual arrangements 
concerning liquidity, competent authorities should take into account the principles set 
out  in  the  guidelines  on  liquidity  published  by  the  Committee  of  European  Banking 
Supervisors18. 

Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 
on  markets  in  financial  instruments19  allows  investment  firms  authorised  by  the 
competent  authorities  of  their  home  Member  State  and  supervised  by  the  same 
authorities  to  establish  branches  and  provide  services  freely  in  other  Member  States. 
That  Directive  accordingly  provides  for  the  coordination  of  the  rules  governing  the 
authorisation  and  pursuit  of  the  business  of  investment  firms.  It  does  not,  however, 
establish the amounts of the initial capital of such firms or a common framework for 
monitoring the risks incurred by them, which should be provided by this Directive. 

This  Directive  should  constitute  the  essential  instrument  for  the  achievement  of  the 
internal market from the point of view of both the freedom of establishment and the 
freedom to provide financial services in the field of credit institutions.  

The smooth operation of the internal market requires not only legal rules but also close 
and  regular  cooperation  and  significantly  enhanced  convergence  of  regulatory  and 
supervisory practices between the competent authorities of the Member States. 

Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 
November  2010  establishing  a  European  Supervisory  Authority  (European  Banking 

Guidelines on Liquidity Cost Benefit Allocation of 27 October 2010 (http://www.eba.europa.eu). 
OJ L 145, 30.4.2004, p. 1. 

EN 

15 

   EN 

                                                 
Authority),20  established  EBA.  This  Directive  should  take  into  account  the  role  and 
function  of  EBA  set  out  in  that  Regulation  and  the  procedures  to  be  followed  when 
conferring tasks to EBA. 

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

(9) 

The  scope  of  measures  should  therefore  be  as  broad  as  possible,  covering  all 
institutions whose business is to receive repayable funds from the public, whether in 
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 should be 
provided for in the case of certain credit institutions to which this Directive does not 
apply.  The  provisions  of  this  Directive  should  not  affect  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. 

(10) 

It is appropriate to effect harmonisation which is 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  Union  and  the 
application of the principle of home Member State prudential supervision. 

(11)  The principles of mutual recognition and home Member State supervision require that 
Member  States'  competent  authorities  should  not  grant  or  should  withdraw  an 
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. 
Where  there  is  no  such  clear  indication,  but  the  majority  of  the  total  assets  of  the 
entities  in  a  banking  group  are  located  in  another  Member  State,  the  competent 
authorities of which are responsible for exercising supervision on a consolidated basis, 
responsibility  for  exercising  supervision  on  a  consolidated  basis  should  be  changed 
only with the agreement of those competent authorities. 

(12)  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 should also satisfy the competent 
authorities in respect of those close links. 

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

20 

OJ L 331 , 15.12.2010, p. 12. 

EN 

16 

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(14)  Credit institutions authorised in their home Member States should be allowed to carry 
on, throughout the Union, any or all of the activities listed in Annex I to this Directive 
by establishing branches or by providing services. 

(15) 

It is appropriate to extend mutual recognition to the activities listed in Annex I to this 
Directive when they are carried out 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. 

(16)  The host Member State 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 to this Directive provided that, on the one hand, such 
provisions  are  not  already  covered  by  Regulation  [inserted  by  OP],  are  compatible 
with  Union  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. 

(17)  Beyond  Regulation  [inserted  by  OP]  that  establishes  directly  applicable  prudential 
rules  for  credit  institutions  and  investment  firms,  Member  States  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. 

(18)  The rules governing branches of credit institutions having their head office outside the 
Union should be analogous in all Member States. It is important to provide that such 
rules  may  not  be  more  favourable  than  those for branches  of  credit  institutions from 
another  Member  State.  The  Union  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.  The  branches  of  credit  institutions  authorised  in 
third  countries  should  not  enjoy  the  freedom  to  provide  services  or  the  freedom  of 
establishment in Member States other than those in which they are established. 

(19)  Agreement should be reached, between the Union and third countries with a view to 
allowing  the  practical  exercise  of  consolidated  supervision  over  the  largest  possible 
geographical area. 

(20)  Responsibility  for  supervising  the  financial  soundness  of  a  credit  institution,  and  in 
particular  its  solvency  should  lie  with  its  home  Member  State.  The  supervision  of 
market  risk  should  be  the  subject  of  close  cooperation  between  the  competent 
authorities of the home and host Member States. 

(21)  Host Member State authorities should obtain information about activities carried out in 
their  territories.  Supervisory  measures  should  be  taken  by  the  home  Member  State 
authorities unless the host authorities have to take precautionary emergency measures.  

(22)  The smooth operation of the internal banking market requires not only legal rules but 
also  close  and  regular  cooperation  and  significantly  enhanced  convergence  of 
regulatory and supervisory practices between the competent authorities of the Member 
States. To this end, consideration of problems concerning individual credit institutions 
and the mutual exchange of information should take place through EBA. That mutual 

EN 

17 

   EN 

information  procedure  should  in  no  case  replace  bilateral  cooperation.  Competent 
authorities of the host Member States should always be able, in an emergency, on their 
own initiative or following the initiative of the competent authorities of home Member 
State,  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. 

(23) 

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 should remain within strict 
limits. 

(24)  Certain  behaviour,  such  as  fraud  or  insider  trading  offences,  is  liable  to  affect  the 
stability, including the integrity, of the financial system. It is necessary to specify the 
conditions under which exchange of information in such cases is authorised. 

(25)  Where  it  is  stipulated  that  information  may  be  disclosed  only  with  the  express 
agreement of the competent authorities, these should be able to make their agreement 
subject to compliance with strict conditions. 

(26)  Exchanges  of  information  between,  the  competent  authorities  and  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  and  departments  of  central  government  administrations  should  also  be 
authorised. 

(27)  For  the  purposes  of  strengthening  the  prudential  supervision  of  institutions  and  the 
protection  of  clients  of  credit  institutions,  auditors  should  have  a  duty  to  report 
promptly to the competent authorities, wherever, during the performance of their tasks, 
they  become  aware  of  certain  facts  which  are  liable  to  have  a  serious  effect  on  the 
financial situation or the administrative and accounting organisation of an institution. 
For that same reason Member States should also provide that such a duty 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  an  institution  which  they  discover  during  the 
performance  of  their  tasks  in  a  non-financial  undertaking  should  not  in  itself  change 
the  nature  of  their  tasks  in  that  undertaking  nor  the  manner  in  which  they  should 
perform those tasks in that undertaking. 

(28) 

In  order  to  ensure  compliance  by  institutions,  those  who  effectively  control  their 
business  and  the  members  of  the  institutions'  management  body  with  the  obligations 
deriving from this Directive and from Regulation [inserted by OP] and to ensure that 
they  are  subject  to  similar  treatment  across  the  Union,  Member  States  should  be 
required  to  provide  for  administrative  sanctions  and  measures  which  are  effective, 
proportionate and dissuasive. Therefore, administrative sanctions and measures set out 
by  Member  States  should  satisfy  certain  essential  requirements  in  relation  to 
addressees,  criteria  to  be  taken  into  account  when  applying  a  sanction  or  measure, 
publication  of  sanctions  or  measures,  key  sanctioning  powers  and  levels  of 
administrative pecuniary sanctions.  

EN 

18 

   EN 

(29) 

(30) 

(31) 

(32) 

In  particular,  competent  authorities  should  be  empowered  to  impose  pecuniary 
sanctions which are sufficiently high to offset the benefits that can be expected and to 
be dissuasive even for larger institutions and their managers.  

In  order  to  ensure  a  consistent  application  of  sanctions  across  Member  States,  when 
determining  the  type  of  administrative  sanctions  or  measures  and  the  level  of 
administrative  pecuniary  sanctions,  Member  States  should  be  required  to  ensure  that 
the competent authorities take into account all relevant circumstances. 

In order to ensure sanctions have a dissuasive effect on the public at large, sanctions 
should normally be published, except in certain well-defined circumstances.  

In order to detect potential breaches, competent authorities should have the necessary 
investigatory  powers,  and  should  establish  effective  mechanisms  to  encourage 
reporting  of  potential  or  actual  breaches.  These  mechanisms  should  be  without 
prejudice to adequate safeguards for accused persons. 

(33)  This Directive should refer to both administrative sanctions and measures in order to 
cover  all  actions  applied  after  a  violation  is  committed,  and  which  are  intended  to 
prevent  further  infringements,  irrespective  of  their  qualification  as  a  sanction  or  a 
measure under national law. 

(34)  This  Directive  should  be  without  prejudice  to  any  provisions  in  the  law  of  Member 

States relating to criminal sanctions. 

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

(36)  Competent authorities should be entrusted with ensuring that institutions have a good 
organisation  and  adequate  own  funds,  having  regard  to  the  risks  to  which  the 
institutions are or might be exposed. In this context, competent authorities of Member 
States may also take into account the risks to which part of the balance sheets of the 
institutions is exposed, in order to set the adequate own funds. 

(37)  To  ensure  that  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  as  regards  authorisation  and  supervision,  it  is 
essential  to  significantly  enhance  the  cooperation  between  competent  authorities.  In 
this  context,  the  role  of  the  consolidating  supervisor  should  be  strengthened.  EBA 
should support and enhance such cooperation. 

(38) 

In order to ensure comprehensive market discipline across the Union, it is appropriate 
that  competent  authorities  publish  information  concerning  the  carrying  on  of  the 
business  of  credit  instititions  and  investment  firms.  Such  information  should  be 
sufficient to enable a comparison of the approaches adopted by the different competent 
authorities  of  the  Member  States  and  complement  requirements  found  in  the 
Regulation regarding disclosure of technical information by institutions. 

EN 

19 

   EN 

(39)  Supervision  of  institutions  on  a  consolidated  basis  aims  at  protecting  the  interests  of 
the depositors and investors of institutions and at ensuring the stability of the financial 
system. In order to be effective, supervision on a consolidated basis should therefore 
be applied to all banking groups, including those the parent undertakings of which are 
not  credit  institutions  or  investment  firms.  Member  States  should  provide  competent 
authorities  with  the  necessary  legal  instruments  to  enable  them  to  exercise  such 
supervision. 

(40) 

In the case of groups with diversified activities where  parent undertakings control at 
least  one  subsidiary,  the  competent  authorities  should  be  able  to  assess  the  financial 
situation  of  a  credit  institution  or  investment  firm  in  such  a  group.  The  competent 
authorities 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 
should  be  established  in  the  case  of  groups  of  undertakings  carrying  on  a  range  of 
financial activities.  

(41)  The Member States should be able to refuse or withdraw a banking authorisation in the 
case  of  certain  group  structures  considered  inappropriate  for  carrying  on  banking 
activities, because such structures cannot be supervised effectively. In this respect the 
competent  authorities  should  have  the  necessary  powers  to  ensure  the  sound  and 
prudent management of credit institutions. 

(42)  The  mandates  of  competent  authorities  should  take  into  account,  in  an  appropriate 
way, the Union  dimension.  Competent authorities should therefore duly consider the 
effect  of  their  decisions  on  the  stability  of  the  financial  system  in  all  other  Member 
States  concerned.  Subject  to  national  law,  that  principle  should  serve  to  promote 
financial stability across the Union and should not legally bind competent authorities 
to achieve a specific result. 

(43)  Weaknesses  in  corporate  governance  in  a  number  of  institutions  have  contributed  to 
excessive and imprudent risk-taking in the banking sector which led to the failure of 
individual institutions and systemic problems in Member States and globally. The very 
general  provisions  on  governance  of  institutions  and  the  non-binding  nature  of  a 
substantial part of the corporate governance framework, based essentially on voluntary 
codes  of  conduct,  did  not  facilitate  the  effective  implementation  of  sound  corporate 
governance  practices  by  institutions.  The  absence  of  effective  checks  and  balances 
within  institutions  resulted  in  a  lack  of  effective  oversight  of  management  decision-
making,  which  exacerbated  short-term  and  excessively  risky  management  strategies. 
The  unclear  role  of  the  competent  authorities  in  overseeing  corporate  governance 
systems in institutions did not allow for sufficient supervision of the effectiveness of 
the internal governance processes.  

(44) 

In  order  to  address  the  potentially  detrimental  effect  of  poorly  designed  corporate 
governance  arrangements  on  the  sound  management  of  risk,  Member  States  should 
introduce  principles  and  standards  to  ensure  effective  oversight  by  the  management 
body,  promote  a  sound  risk  culture  at  all  levels  of  credit  institutions  and  investment 
firms and enable competent authorities to monitor the adequacy of internal governance 
arrangements.  These  principles  and  standards  should  apply  taking  into  account  the 
nature, scale and complexity of institutions' activities.  

EN 

20 

   EN 

(45) 

In  order  to  effectively  monitor  management  actions  and  decisions,  the  management 
body of an institution should commit sufficient time to perform its functions and to be 
able  to  understand  the  business  of  the  institution,  its  main  risk  exposures  and  the 
implications  of  the  business  and  the  risk  strategy.  Combining  a  too  high  number  of 
directorships at the same time would preclude a member of the management body to 
spend  adequate  time  for  the  performance  of  this  oversight  role.  Therefore,  it  is 
necessary to limit the number of mandates a member of the management body of an 
institution may hold at the same time in different entities. 

(46)  The  lack  of  monitoring  by  boards  of  management  decisions  is  partly  due  to  the 
phenomenon of group think. This phenomenon is, among other reasons, caused by a 
lack of diversity in boards' composition. To facilitate independent opinions and critical 
challenge, management bodies of institutions should therefore be sufficiently diverse 
as  regards  age,  gender,  geographical  provenance,  educational  and  professional 
background  to  present  a  variety  of  views  and  experiences.  Gender  balance  is  of 
particular  importance  to  ensure  adequate  representation  of  population.  More  diverse 
boards  should  more  effectively  monitor  management  and  therefore  contribute  to 
improved  risk  oversight  and  resilience  of  institutions.  Therefore,  diversity  should  be 
one of the criteria of board composition. 

(47)  Remuneration  policies  which  encourage  excessive  risk-taking  behaviour  can 
undermine sound and effective risk management of credit institutions and investment 
firms.  G-20  committed  to  implement  the  Financial  Stability  Board  (FSB)  Principles 
for  Sound  Compensation  Practices  and  Implementing  Standards  (the  FSB  principles 
and  standards)  which  address  the  potentially  detrimental  effect  of  poorly  designed 
remuneration  structures  on  the  sound  management  of  risk  and  control  of  risk-taking 
behaviour by individuals. This Directive aims at implementing international principles 
and  standards  at  European  level  by  introducing  an  express  obligation  for  credit 
institutions  and  investment  firms  to  establish  and  maintain,  for  categories  of  staff 
whose  professional  activities  have  a  material  impact  on  the  risk  profile  of  credit 
institutions  and  investment  firms,  remuneration  policies  and  practices  that  are 
consistent with effective risk management. 

(48) 

In  order  to  ensure  that  credit  institutions  and  investment  firms  have  in  place  sound 
remuneration policies, it is appropriate to specify clear principles on governance and 
on  the  structure  of  remuneration  policies.  In  particular,  remuneration  policies  should 
be aligned with the risk appetite, values and long-term interests of the credit institution 
or  investment  firm.  For  this  purpose,  the  assessment  of  the  performance-based 
components  of  remuneration  should  be  based  on  longer-term  performance  and  take 
into account the current and future risks associated with that performance. In order to 
ensure that the design of remuneration policies is integrated in the risk management of 
the credit institution, the management body, in its supervisory function, should adopt 
and  periodically  review  the  remuneration  policies  in  place.  The  provisions  on 
remuneration  reflect  differences  between  different  types  of  credit  institutions  and 
investment  firms  in  a  proportionate  manner,  according  to  their  size,  internal 
organisation and the nature, scope and complexity of their activities and, in particular, 
it could not be proportionate for certain types of investment firms to comply with all 
of the principles.  

(49)  Since  poorly  designed  remuneration  policies  and  incentive  schemes  are  capable  of 
increasing  to  an  unacceptable  extent  the  risks  to  which  credit  institutions  and 

EN 

21 

   EN 

investment  firms  are  exposed,  prompt  remedial  action  and,  if  necessary,  appropriate 
corrective  measures  should  be  taken.  Consequently,  it  is  appropriate  to  ensure  that 
competent  authorities  have  the  power  to  impose  qualitative  or  quantitative  measures 
on the relevant entities that are designed to address problems that have been identified 
in relation to remuneration policies in the supervisory review.  

(50)  The  provisions  on  remuneration  should  be  without  prejudice  to  the  full  exercise  of 
fundamental  rights  guaranteed  by  Article  153(5)  of  the  TFEU,  general  principles  of 
national  contract  and  labour  law,  legislation  regarding  shareholders’  rights  and 
involvement  and  the  general  responsibilities  of  the  management  bodies  of  the 
institution concerned, as well as the rights, where applicable, of the social partners to 
conclude  and  enforce  collective  agreements,  in  accordance  with  national  law  and 
customs.  

(51)  Capital requirements for credit risk and market risk should be based on external credit 
ratings only to the extent necessary. Where credit risk is material, institutions should 
therefore  generally  seek  to  implement  internal  ratings  based  approaches  or  internal 
models. However, standardised approaches that rely on external ratings could be used 
where  credit  risk  is  less  material,  which  is  typically  the  case  for  less  sophisticated 
institutions,  for  immaterial  exposure  classes,  or  in  situations  where  using  internal 
approaches would be overly burdensome. 

(52)  With  respect  to  the  supervision  of  liquidity,  responsibility  should  lie  with  home 
Member  States  as  soon  as  detailed  criteria  for  the  liquidity  coverage  requirement 
apply.  It  is  therefore  necessary  to  accomplish  the  coordination  of  supervision  in  this 
field  in  order  to  introduce  supervision  by  the  home  Member  State  by  that  time.  In 
order to ensure effective supervision, home and host country authorities should further 
cooperate in the field of liquidity. 

(53)  Where within a group liquid assets in one institution will under stress circumstances 
match liquidity needs of another member of that group, competent authorities should 
exempt  an  institution  from  liquidity  coverage  requirements  and  should  apply  those 
requirements on a consolidated basis instead. 

(54)  Measures taken according to Directive 2001/24/EC of the European Parliament and of 
the  Council  of  4  April  2001  on  the  reorganisation  and  winding  up  of  credit 
institutions21  should  not  conflict  with  measures  taken  on  the  basis  of  this  Directive. 
Supervisory measures should not lead to discrimination among creditors from different 
Member States.  

(55) 

In the light of the financial crisis and the pro-cyclical mechanisms that contributed to 
its  origin  and  aggravated  its  effect,  the  FSB,  the  BCBS,  and  the  G20  made 
recommendations  to  mitigate  the  pro-cyclical  effects  of  financial  regulation.  In 
December  2010,  BCBS  issued  new  global  regulatory  standards  on  bank  capital 
adequacy,  including  rules  requiring  the  maintenance  of  capital  conservation  and 
countercyclical capital buffers. 

(56) 

It is therefore appropriate to require credit institutions and investment firms to hold, in 
addition  to  other  own  fund  requirements,  a  Capital  Conservation  Buffer  and  a 

21 

OJ L 125, 5.5.2001, p. 15. 

EN 

22 

   EN 

                                                 
(57) 

(58) 

(59) 

(60) 

Countercyclical Capital Buffer to ensure that credit institutions and investment firms 
accumulate  during  periods  of  economic  growth  a  sufficient  capital  base  to  absorb 
losses in stressed periods. The Countercyclical Capital Buffer would be built up when 
aggregate credit growth is judged to be associated with a build-up of system-wide risk, 
and drawn down during stressed periods. 

In order to ensure that countercyclical buffers properly reflect the risk to the banking 
sector  of  excessive  credit  growth,  credit  institutions  and  investment  firms  should 
calculate their institution specific buffers as a weighted average of the counter-cyclical 
buffer rates that apply for the countries where their credit exposures are located. Every 
Member State should therefore designate an authority responsible for quarterly setting 
the  level  of  the  Countercyclical  Capital  Buffer  rate  for  exposures  located  in  that 
Member State. That buffer rate should take into account the growth of credit levels and 
changes  to  the  ratio  of  credit  to  GDP  in  that  Member  State,  and  any  other  variables 
relevant to the risks to financial stability. 

In order to promote international consistency in setting Countercyclical Capital Buffer 
rates,  BCBS  has  developed  a  methodology  on  the  basis  of  the  ratio  between  credits 
and GDP. This should serve as a common starting point for decisions on buffer rates 
by  the  relevant  national  authorities,  but  should  not  give  rise  to  an  automatic  buffer 
setting or bind the designated authority. In particular, designated authorities could also 
take  into  account  structural  variables  and  the  exposure  of  the  banking  sector  to  any 
other risk factors related to risks to financial stability. 

In  order  to  achieve  coherent  application  and  to  assure  macro-prudential  oversight 
across  the  Union,  it  is  appropriate  that  the  European  Systemic  Risk  Board  (ESRB) 
develops principles tailored for the Union economy and is responsible for monitoring 
their application. This Directive should not prevent the ESRB from taking any actions 
it deems necessary under Regulation (EU) No 1092/2010 of the European Parliament 
and  of  the  Council  of  24 November  2010  on  European  Union  macro-prudential 
oversight of the financial system and establishing a European Systemic Risk Board.22 

It  is  appropriate  that  decisions  of  Member  States  on  countercyclical  buffer  rates  are 
coordinated  as  far  as  possible.  In  this  regard,  the  ESRB,  if  requested  by  national 
authorities,  could  facilitate  discussions  among  them  about  their  proposed  buffer 
settings. In order to promote a consistent approach to the factors on which designated 
authorities base those decisions, and to ensure that the setting of countercyclical buffer 
rates  is  consistent  with  the  fundamental  principles  of  the  internal  market,  designated 
authorities  should  also  be  required  to  notify  the  ESRB  and  the  EBA  whenever  they 
take into account variables other than the deviation of the ratio of credit-to-GDP from 
its long term trend and related guidance from  the  ESRB,  and  as  a  result  set  a  buffer 
rate that is higher than it would have been if those variables had not been taken into 
account.  The  purpose  of  such  notification  should  be  for  the  ESRB  and  the  EBA  to 
assess the nature of those variables and the consistency of the setting of the buffer rate 
with the internal market principles. 

(61)  Where a credit institution or investment firm fails to meet in full the requirements for a 
Capital  Conservation  Buffer  and  any  additional  countercyclical  buffer,  it  should  be 

22 

OJ L 331, 15.12.2010, p. 1. 

EN 

23 

   EN 

                                                 
subject  to  measures  designed  to  ensure  that  it  restores  its  levels  of  own  funds  in  a 
timely manner. In order to conserve capital, it is appropriate to impose proportionate 
restrictions on discretionary distributions of profits, including dividend payments and 
payments of variable remuneration. So as to ensure that such institutions or firms have 
a credible strategy to restore levels of own funds, they should be required to draw up 
and agree with the competent authorities a capital conservation plan that sets out how 
the restrictions on distributions will be applied and other measures that the institution 
or firm intends to take to ensure compliance with the full buffer requirements. 

(62)  Technical  standards  in  financial  services should  ensure  consistent  harmonisation  and 
adequate  protection  of  depositors,  investors  and  consumers  across  the  Union.  As  a 
body with highly specialised expertise, it would be efficient and appropriate to entrust 
EBA  with  the  elaboration  of  draft  regulatory  and  implementing  technical  standards 
which do not involve policy choices, for submission to the Commission. 

(63)  The  Commission  should  adopt  the  draft  regulatory  technical  standards  developed  by 
EBA in the areas of authorisation of and acquisitions of significant holdings in credit 
institutions,  information  exchange  between  competent  authorities,  exercise  of  the 
freedom  of  establishment  and  the  freedom  of  services,  supervisory  collaboration, 
governance,  remuneration  policies  and  internal  control  mechanisms  of  credit 
institutions and investment firms, Supervision of mixed financial holding companies, 
and supervisory review by means of delegated acts pursuant to Article 290 TFEU and 
in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. 

(64)  The  Commission  should  also  be  empowered  to  adopt  implementing  technical 
standards  in  the  areas  of  authorisation  of  and  acquisitions  of  significant  holdings  in 
credit  institutions,  information  exchange  between  competent  authorities,  supervisory 
collaboration,  specific  prudential  requirements,  and  disclosure  of  information  by 
supervisory authorities by means of implementing acts pursuant to Article 291 TFEU 
and in accordance with Article 15 of Regulation (EU) No 1093/2010. EBA should be 
entrusted  with  drafting  implementing  technical  standards  for  submission  to  the 
Commission. 

(65) 

(66) 

In  order  to  ensure  uniform  conditions  for  the  implementation  of  this  Directive, 
implementing powers should be conferred on the Commission. Those powers should 
be  exercised  in  accordance  with  Regulation  (EU)  No  182/2011  of  the  European 
Parliament  and  of  the  Council  on  laying  down  the  rules  and  general  principles 
concerning  mechanisms  for  control  by  the  Member  States  of  the  Commission's 
exercise of implementing powers23. 

In order to specify the requirements set out in this Directive, the power to adopt acts in 
accordance with Article 290 of the TFEU should be delegated to the Commission in 
respect  of  clarifying  the  definitions  and  the  terminology  used  in  this  Directive, 
expanding the list of activities subject to mutual recognition in the Annex, improving 
the exchange of information concerning branches of credit institutions, and adjusting 
the provisions dealing with their internal arrangements, processes and mechanisms. It 
is  of  particular  importance  that  the  Commission  carry  out  appropriate  consultations 
during its preparatory work, including at expert level. 

23 

OJ L 55, 28.2.2011, p. 13. 

EN 

24 

   EN 

                                                 
(67)  The  Commission,  when  preparing  and  drawing  up  delegated  acts,  should  ensure  a 
simultaneous,  timely  and  appropriate  transmission  of  relevant  documents  to  the 
European Parliament and Council. 

(68)  Directive  2009/138/EC  of  the  European  Parliament  and  of  the  Council  of  25 
November  2009  on  the  taking-up  and  pursuit  of  the  business  of  Insurance  and 
Reinsurance (Solvency II)24 is relevant when qualifying holdings in a credit institution 
are acquired; 

(69)  References in existing national laws, regulations and administrative provisions to the 
Directives  repealed  by  this  Directive  should  be  construed  as  references  to  this 
Directive. 

(70)  Directive 2007/64/EC of the European Parliament and of the Council of 13 November 
2007  on  payment  services  in  the  internal  market  amending  Directives  97/7/EC, 
2002/65/EC,  2005/60/EC  and  2006/48/EC  and  repealing  Directive  97/5/EC25, 
Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 
on  the  coordination  of  laws,  regulations  and  administrative  provisions  relating  to 
undertakings for collective investment in transferable securities (UCITS)26, Directive 
2009/110/EC of the European Parliament and of the Council of 16 September 2009 on 
the taking up, pursuit and prudential supervision of the business of electronic money 
institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 
2000/46/EC27, 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  conglomerate28,  and  Directive 
[AIFMD]  of  the  European  Parliament  and  of  the  Council  on  Alternative  Investment 
Fund  Managers  and  amending  directives  2003/41/EC  and  2009/65/EC  refer  to 
provisions  of  Directives  2006/48/EC  and  2006/49/EC  that  deal  with  own  funds 
requirements  and  are  now  set  out  in  Regulation  [inserted  by  OP].  Consequently, 
references  in  those  Directives  to  Directives  2006/48/EC  and  2006/49/EC  should  be 
construed  as  references  to  the  provisions  governing  own  funds  requirements  in  that 
Regulation. 

(71) 

(72) 

In  order  to  allow  for  technical  standards  to  be  developed  in  order  to  ensure  that 
institutions that are part of a financial conglomerate apply the appropriate calculation 
methods  for  the  determination  of  required  capital  on  a  consolidated  basis,  Directive 
2002/87/EC needs to be amended accordingly. 

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

24 
25 
26 
27 
28 

OJ L 335, 17.12.2009, p. 1. 
OJ L 319, 5.12.2007, p. 1. 
OJ L 302, 17.11.2009, p. 32. 
OJ L 267, 10.10.2009, p. 7. 
OJ L 35, 11.2.2003, p. 1. 

EN 

25 

   EN 

                                                 
(73)  With  respect  to  the  supervision  of  liquidity,  there  should  be  a  period  of  time  within 
which  Member  States  effect  transition  towards  the  regulatory  regime  under  which 
detailed criteria for the liquidity coverage requirement apply.  

(74)  Directive 95/46 of the European Parliament and of the Council of 24 October 1995 on 
the protection of individuals with regard to the processing of personal data and on the 
free  movement  of  such  data29  and  Regulation  (EU)  No  45/2001  of  the  European 
Parliament and of the Council of 18 December 2000 on the protection of individuals 
with regard to the processing of personal data by the EU institutions and bodies and 
and on the free movement of such data30, should be fully applicable to the processing 
of personal data for the purposes of this Directive. 

(75)  Since the objectives of this Directive, namely the introduction of rules concerning the 
access  to  the  activity  of  the  business  of  credit  institutions,  and  the  prudential 
supervision of credit institutions and investment firms, cannot be sufficiently achieved 
by the Member States and can therefore, by reason of the scale and the effects of the 
proposed action, be better achieved at European Union (hereinafter Union) level, the 
Union may adopt measures, in accordance with the principle of subsidiarity as set out 
in Article 5 of the Treaty on the European Union. In accordance with the principle of 
proportionality,  as  set  out  in  that  Article,  this  Directive  does  not  go  beyond  what  is 
necessary in order to achieve those objectives. 

(76)  The obligation to transpose this Directive into national law should be confined to those 

provisions which represent a substantive change as compared with earlier Directives.  

(77)  Directive  2006/48/EC  relating  to  the  taking  up  and  pursuit  of  the  business  of  credit 
institutions and Directive 2006/49/EC of the European Parliament and of the Council 
of 14 June 2006, should therefore be repealed, 

HAVE ADOPTED THIS DIRECTIVE: 

29 
30 

OJ L 281, 23.11.1995, p. 31. 
OJ L 8, 12.1.2001, p. 1. 

EN 

26 

   EN 

                                                 
TABLE OF CONTENTS 

Title I Subject matter, scope and definitions............................................................................ 29 

Title II Competent authorities .................................................................................................. 32 

Title III Requirements for access to the activity of the business of credit institutions ............ 34 

Chapter 1 General requirements for access to activity of the business of credit institutions... 34 

Chapter 2 Qualifying holding in a credit institution ................................................................ 39 

Title IV Initial capital of investment firms............................................................................... 45 

Title V Provisions concerning the freedom of establishment and the freedom to provide 
services ..................................................................................................................................... 48 

Chapter 1 General Principles.................................................................................................... 48 

Chapter 2 The right of establishment of credit institutions...................................................... 49 

Chapter 3 Exercise of the freedom to provide services............................................................ 52 

Chapter 4 Powers of the competent authorities of the host Member State .............................. 53 

Title VI Relations with third countries..................................................................................... 56 

Title VII Prudential supervision............................................................................................... 58 

Chapter 1 Principles of prudential supervision ........................................................................ 58 

Section I Competence of home and host Member State .......................................................... 58 

Section II Exchange of information and professional secrecy................................................. 63 

Section III Duty of persons responsible for the legal control of annual and consolidated 
accounts.................................................................................................................................... 68 

Section IV Supervisory powers, power of sanction and right of appeal .................................. 69 

Chapter 2 Review Processes .................................................................................................... 75 

Section I Internal capital adequacy assessment process........................................................... 75 

Section II Arrangements, processes and mechanisms of institutions....................................... 75 

Sub-Section 1 General principles............................................................................................. 75 

EN 

27 

   EN 

Sub-Section 2 Technical criteria concerning the organisation and treatment of risks ............. 77 

Sub-Section 3 Governance ....................................................................................................... 83 

Section III Supervisory review and evaluation process ........................................................... 89 

Section IV Supervisory measures ............................................................................................ 95 

Section V Level of application................................................................................................. 97 

Chapter 3 Supervision on a consolidated basis ........................................................................ 99 

Section I Principles for conducting supervision on a consolidated basis................................. 99 

Section II Financial holding companies and mixed financial holding companies ................. 108 

Chapter 4 Capital Buffers....................................................................................................... 112 

Section I Capital Conservation and Countercyclical Capital Buffers .................................... 112 

Section II Setting and calculating Countercyclical Capital Buffers....................................... 113 

Section III Capital conservation measures ............................................................................. 120 

Title VIII Disclosure by competent authorities...................................................................... 125 

Title IX Powers of Execution................................................................................................. 128 

Title X Amendments of Directive 2002/87/EC...................................................................... 130 

Title XI Transitional and final provisions .............................................................................. 131 

Chapter 1 Transitional provisions on the supervision of credit institutions exercising the 
freedom of establishment and the freedom to provide services ............................................. 131 

Chapter 2 Transitional provision on capital buffers............................................................... 135 

Chapter 3 Final provisions ..................................................................................................... 137 

Annex I List of activities subject to mutual recognition ........................................................ 139 

Annex II Correlation Table .................................................................................................... 141 

EN 

28 

   EN 

Title I 

Subject matter, scope and definitions 

Article 1 

Subject matter 

This  Directive  lays  down  rules  requiring  Member  States  to  achieve  common  results  in  the 
following areas: 

(a) 

(b) 

(c) 

(d) 

1. 

2. 

access to the activity of credit institutions and investment firms (hereinafter referred 
to as institutions); 

supervisory  powers  and  tools  for  the  prudential  supervision  of  institutions  by 
competent authorities; 

the prudential supervision of institutions by competent authorities in relation to risks 
not addressed by the uniform rules set out in Regulation [inserted by OP]. 

publication  requirements  for  competent  authorities  in  the  field  of  prudential 
regulation and supervision of institutions. 

Article 2 

Scope 

Article 34 and Title VII, Chapter 3 shall apply to financial holding companies, mixed 
financial holding companies and mixed-activity holding companies which have their 
head offices in the Union; 

The  institutions  to  which  this  Directive  does  not  apply  pursuant  to  Paragraph  3  of 
this  Article,  with  the  exception,  however,  of  the  central  banks,  shall  be  treated  as 
financial institutions for the purposes of Article 34 and Title VII, Chapter 3. 

3. 

This Directive shall not apply to the following: 

(1) 

access  to  the  activity  of    investment  firms  in  so  far  as  it  is  regulated  by 
Directive 2004/39/EC; 

(2) 

central banks, 

(3)  post office giro institutions, 

(4) 

in  Belgium,  the  ‘Institut  de  Réescompte  et  de  Garantie/Herdiscontering-  en 
Waarborginstituut’, 

EN 

29 

   EN 

 
 
 
(5) 

(6) 

in Denmark, the ‘Dansk Eksportfinansieringsfond’, the ‘Danmarks Skibskredit 
A/S’ and the ‘KommuneKredit’, 

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, 

(7) 

in Greece, the ‘Ταµείο Παρακαταθηκών και ∆ανείων’ (Tamio Parakatathikon 
kai Danion), 

(8) 

in Spain, the ‘Instituto de Crédito Oficial’, 

(9) 

in France, the ‘Caisse des dépôts et consignations’, 

(10)  in Ireland, credit unions and the friendly societies, 

(11)  in Italy, the ‘Cassa depositi e prestiti’, 

(12)  in Latvia, the ‘krājaizdevu sabiedrības’, undertakings that are recognised under 
the  ‘krājaizdevu  sabiedrību  likums’  as  cooperative  undertakings  rendering 
financial services solely to their members, 

(13)  in Lithuania, the ‘kredito unijos’ other than the ‘Centrinė kredito unija’, 

(14)  in Hungary, the ‘Magyar Fejlesztési Bank Rt.’ and the ‘Magyar Export-Import 

Bank Rt.’, 

(15)  in 

the  Netherlands, 

voor 
Ontwikkelingslanden  NV’,  the  ‘NV  Noordelijke  Ontwikkelingsmaatschappij’, 
the ‘NV Industriebank Limburgs Instituut voor Ontwikkeling en Financiering’ 
and the ‘Overijsselse Ontwikkelingsmaatschappij NV’, 

Investeringsbank 

‘Nederlandse 

the 

(16)  in  Austria,  undertakings  recognised  as  housing  associations  in  the  public 

interest and the ‘Österreichische Kontrollbank AG’, 

(17)  in  Poland,  the  ‘Spółdzielcze  Kasy  Oszczędnościowo  —  Kreditowe’  and  the 

‘Bank Gospodarstwa Krajowego’, 

(18)  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’, 

(19)  in  Finland,  the  ‘Teollisen  yhteistyön  rahasto  Oy/Fonden  för  industriellt 

samarbete AB’, and the ‘Finnvera Oyj/Finnvera Abp’, 

(20)  in Sweden, the ‘Svenska Skeppshypotekskassan’, 

(21)  in  the  United  Kingdom,  the  National  Savings  Bank,  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; 

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30 

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(22)  in Slovenia, the “SID-Slovenska izvozna in razvojna banka, d.d. Ljubljana”. 

Article 3 

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

1. 

2. 

1. 

2. 

(a) 

(b) 

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. 

Paragraph 1  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 Union legislation, provided that those activities are 
subject  to  regulations  and  controls  intended  to  protect  depositors  and  investors  and 
applicable to those cases. 

Article 4 

Definitions 

The definitions referred to in Article 4 of Regulation [inserted by OP] shall apply. 

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

‘ancillary services undertaking’ 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; 

'risk  of  excessive  leverage’  means  the  risk  resulting  from  an  institution’s 
vulnerability  due  to  leverage  or  contingent  leverage  that  may  require  unintended 
corrective measures to its business plan, including distressed selling of assets which 
might result in losses or in valuation adjustments to its remaining assets; 

(c) 

'internal approaches' means the approaches referred to in Articles 138 (1), , 216, 220, 
301 (2), 277, 352, and 254 (3) of Regulation [inserted by OP]. 

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Title II 

Competent authorities 

1. 

2. 

3. 

4. 

5. 

6. 

Article 5 

Designation and powers of the competent authorities 

Member  States  shall  designate  competent  authorities  that  carry  out  the  duties 
provided for in this Directive. They shall inform the Commission and EBA thereof, 
indicating any division of duties. 

Member  States  shall  ensure  that  the  competent  authorities  monitor  the  activities  of 
institutions  so  as  to  assess  compliance  with  the  requirements  of  this  Directive  and 
Regulation [inserted by OP].  

Member States shall ensure that the appropriate measures are in place to enable the 
competent  authorities  to  obtain  the  information  needed  to  assess  the  compliance  of 
institutions with those obligations. 

Member  States  shall  ensure  that  the  competent  authorities  have  the  expertise, 
resources,  operational  capacity  and  independence  necessary  to  carry  out  the 
supervisory  and  investigative  functions  set  out  in  this  Directive  and  Regulation 
[inserted  by  OP].  Competent  authorities  shall  be  given  all  supervisory  and 
investigatory powers that are necessary for the exercise of their functions. 

Member  States  shall  require  that  institutions  provide  the  competent  authorities  of 
their home Member States with all the information necessary for the assessment of 
their  compliance  with  the  rules  adopted  in  accordance  with  this  Directive  and 
Regulation  [inserted  by  OP].  Member  States  shall  also  ensure  that  internal  control 
mechanisms and administrative and accounting procedures of the institutions permit 
the verification of their compliance with such rules at all times. 

Member  States  shall  ensure  that  institutions  shall  register  all  their  transactions  and 
document systems and processes, which are subject to this Directive and Regulation 
[inserted  by  OP]  in  such  a  manner  that  the  competent  authorities  are  able  to  verify 
compliance with the requirements of this Directive and Regulation [inserted by OP] 
at all times. 

Article 6 

Coordination within Member States 

Where Member States have more than one competent authority for the prudential supervision 
of credit institutions, investment firms and financial institutions, Member States shall take the 
requisite measures to organise coordination between such authorities. 

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Article 7 

Cooperation with EBA 

In  the  exercise  of  their  duties,  the  competent  authorities  shall  take  into  account  the 
convergence in respect of supervisory tools and supervisory practices in the application of the 
laws, regulations and administrative requirements adopted pursuant to this Directive. For that 
purpose, Member States shall ensure that: 

(a) 

(b) 

(c) 

the competent authorities participate in the activities of EBA; 

competent  authorities  make  every  effort  to  comply  with  those  guidelines  and 
recommendations issued by EBA in accordance with Article 16 of Regulation (EU) 
No. 1093/2010;  

national  mandates  conferred  on  the  competent  authorities  do  not  inhibit  the 
performance  of  their  duties  as  members  of  EBA  or  under  this  Directive  and 
Regulation [inserted by OP]. 

Article 8 

European dimension of supervision 

The competent authorities in one Member State shall, in the exercise of their general duties, 
duly consider the potential impact of their decisions on the stability of the financial system in 
all other Member States concerned and, in particular, in emergency  situations, based on the 
information available at the relevant time. 

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Title III 

Requirements for access to the activity of credit 
institutions 

Chapter 1 

General requirements for access to the activity of credit 
institutions 

Article 9 

Authorisation  

1. 

Member  States  shall  require  credit  institutions  to  obtain  authorisation  before 
commencing  their  activities.  Without  prejudice  to  Articles  10  to  14,  they  shall  lay 
down the requirements for such authorisation and notify EBA.  

2. 

EBA shall develop draft regulatory technical standards on the following: 

(a) 

specifying  the  information  to  be  provided  to  the  competent  authorities  in  the 
application for the authorisation of credit institutions, including the programme 
of operations provided for in Article 10; 

(b) 

specifying the conditions to comply with the requirement set out in Article 13; 

(c) 

(d) 

specifying  the  requirements  applicable  to  shareholders  and  members  with 
qualifying holdings; 

specifying  obstacles  which  may  prevent  effective  exercise  of  the  supervisory 
functions of the competent authority, as provided for in Article 14. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred  to  in  points  (a)  to  (d)  of  the  first  subparagraph  in  accordance  with  the 
procedure laid down in Articles 10 to 14 of Regulation (EU) No 1093/2010. 

3. 

EBA  shall  develop  draft  implementing  technical  standards  on  standard  forms, 
templates and procedures for such provision of information.  

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) 
No 1093/2010. 

4. 

EBA shall submit the draft technical standards referred to in paragraphs 2 and 3 to 
the Commission by 31 December 2015. 

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34 

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Article 10 

Programme of operations and structural organisation 

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

Article 11 

Economic needs 

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

Article 12 

Initial capital 

1. 

2. 

3. 

4. 

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. 

Initial capital shall comprise capital and reserves as referred to in Article  24  (a) to 
(e) of Regulation [inserted by OP]. 

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 13(1). 

Member  States  may,  subject  to  the  following  conditions,  grant  authorisation  to 
particular categories of credit institutions the initial capital of which is less than that 
specified in paragraph 1: 

(a) 

the initial capital shall be no less than EUR 1 million; 

(b) 

the  Member  States  concerned  shall  notify  the  Commission  and  EBA  of  their 
reasons for exercising that option. 

Article 13 

Effective direction of the business and place of the head office 

1. 

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. 

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35 

   EN 

 
 
 
 
They shall not grant authorisation if these persons are not of sufficiently good repute 
or lack sufficient knowledge, skills and experience to perform such duties. 

2. 

Each Member State shall require that: 

(a) 

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;  

(b) 

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

Article 14 

Shareholders and members 

1. 

The competent authorities shall not grant authorisation for commencing the activity 
of  credit  institutions  unless  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 whether the criteria for a qualifying holding are fulfilled, the voting 
rights  referred  to  in  Articles  9  and  10  of  Directive  2004/109/EC31,  as  well  as  the 
conditions  regarding  aggregation  thereof  laid  down  in  Article  12(4)  and  (5)  of  that 
Directive shall be taken into account. 

Member States shall not take into account voting rights or shares which investment 
firms  or  credit  institutions  may  hold  as  a  result  of  providing  the  underwriting  of 
financial instruments or placing of financial instruments on a firm commitment basis 
included under point 6 of Section A of Annex I to Directive 2004/39/EC, provided 
that those rights are not exercised or otherwise used to intervene in the management 
of the issuer, and disposed of within one year of acquisition. 

The  competent  authorities  shall  not  grant  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 shareholders or members. 

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 not grant authorisation where the laws, regulations or 
administrative provisions  of a  third country governing one or more natural or legal 
persons  with  which  the  credit  institution  has  close  links,  or  difficulties  involved  in 
the enforcement of those laws, regulations or administrative provisions, prevent the 
effective exercise of their supervisory functions. 

2. 

3. 

31 

Directive  2004/109/EC  of  the  European  Parliament  and  of  the  Council  of  15  December  2004  on  the 
harmonisation of transparency requirements in relation to information about issuers whose securities are 
admitted to trading on a regulated market (OJ L 390, 31.12.2004, p. 38). 

EN 

36 

   EN 

 
                                                 
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. 

Article 15 

Refusal of the authorisation  

Where a competent authority decides not to grant an authorisation, it shall notify the applicant 
of  the  decision  and  the  reasons  thereof  within  six  months  of  receipt  of  the  application  or, 
should  the  application  be  incomplete,  within  six  months  of  the  applicant  sending  the 
information required for the decision. 

A decision shall, in any case, be taken within 12 months of the receipt of the application. 

Article 16 

Prior consultation with the competent authorities of other Member States 

1. 

The  competent  authority  shall,  before  granting  authorisation  to  a  credit  institution, 
consult  the  competent  authorities  of  the  other  Member  State  involved  in  the 
following cases: 

(a) 

(b) 

(c) 

the credit institution concerned is a subsidiary of a credit institution authorised 
in another Member State; 

the  credit  institution  concerned  is  a  subsidiary  of  the  parent  undertaking  of  a 
credit institution authorised in another Member State;  

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

2. 

The  competent  authority  shall,  before  granting  authorisation  to  a  credit  institution, 
consult  the  competent  authority  of  a  Member  State  involved,  responsible  for  the 
supervision of insurance undertakings or investment firms in the following cases: 

(a) 

(b) 

(c) 

the credit institution concerned is a subsidiary of an insurance undertaking or 
investment firm authorised in the Union; 

the credit institution concerned is a subsidiary of the parent undertaking of an 
insurance undertaking or investment firm authorised in the Union;  

the  credit  institution  concerned  is  controlled  by  the  same  person,  whether 
natural  or  legal,  as  controls  an  insurance  undertaking  or  investment  firm 
authorised in the Union. 

3. 

The  relevant  competent  authorities  referred  to  in  paragraphs  1  and  2  shall  in 
particular  consult  each  other  when  assessing  the  suitability  of  the  shareholders  and 
the reputation and experience of members of the management body involved in the 

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management  of  another  entity  of  the  same  group.  They  shall  exchange  any 
information  regarding  the  suitability  of  shareholders  and  the  reputation  and 
experience  of  members  of  the  management  body  which  is  of  relevance  for  the 
granting  of  an  authorisation  as  well  as  for  the  ongoing  assessment  of  compliance 
with operating conditions. 

Article 17 

Branches of credit institutions authorised in another Member State 

Host  Member  States  shall  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 35, 36(1)-(3), 37, 40 to 46 and 49, 
73 and 74. 

Article 18 

Withdrawal of authorisation 

The competent authorities may only withdraw the authorisation granted to a credit institution 
in any of the following cases where such an institution: 

(a) 

(b) 

(c) 

(d) 

(e) 

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; 

has obtained the authorisation through false statements or any other irregular means; 

no longer fulfils the conditions under which authorisation was granted; 

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; 

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

(f) 

commits one of the breaches referred to in Article 67(1). 

Article 19 

Name of credit institutions 

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, use throughout the territory of the Union the same name that they use in 
the Member State in which their head office is situated. In the event of there being any danger 

EN 

38 

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of  confusion,  the  host  Member  State  may,  for  the  purposes  of  clarification,  require  that  the 
name be accompanied by certain explanatory particulars. 

1. 

2. 

3. 

4. 

5. 

1. 

2. 

Article 20 

Notification of the authorisation and withdrawal of authorisation to EBA 

Competent authorities shall notify to EBA every authorisation granted under Article 
9. 

A list containing the name of each credit institution to which authorisation has been 
granted shall be published on EBA's website and updated regularly. 

The consolidating supervisor shall provide the competent authorities concerned and 
EBA  with  all  information  regarding  the  group  of  institutions  in  accordance  with 
Articles 14(3), 73(1) and 104(2), in particular regarding the legal and organisational 
structure of the group and its governance. 

The name of each credit institution that does not have the capital specified in Article 
12(1) shall be mentioned to that effect in the list. 

The  competent  authorities  shall  notify  each  withdrawal  of  authorisation  to  EBA 
together with the reasons for such a decision. 

Article 21  

Exemptions for credit institutions permanently affiliated to a central body 

Competent authorities may exempt a credit institution that meets the conditions laid 
down in  Article 9  of Regulation  [inserted  by  OP]  from  Article 10, 12 and 13(1) of 
this Directive, under the conditions set out in Article 9 of that Regulation.  

In  case  of  exemptions  exercised  by  the  competent  authorities  in  accordance  with 
Article 9 of Regulation [inserted by OP], Articles 17, 33, 34, 35, 36(1)-(3) and 39-46 
of this Directive shall apply to the whole as constituted by the central body together 
with its affiliated institutions. 

Chapter 2 

Qualifying holding in a credit institution  

Article 22 

Notification and assessment of proposed acquisitions 

1. 

Member  States  shall  require  any  natural  or  legal  person  or  such  persons  acting  in 
concert (hereinafter referred to as the proposed acquirer), who have taken a decision 
either to acquire, directly or indirectly, a qualifying holding in a credit institution or 

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to  further  increase,  directly  or  indirectly,  such  a  qualifying  holding  in  a  credit 
institution  as  a  result  of  which  the  proportion  of  the  voting  rights  or  of  the  capital 
held  would  reach  or  exceed  20  %,  30  %  or  50  %  or  so  that  the  credit  institution 
would  become  its  subsidiary  (hereinafter  referred  to  as  the  proposed  acquisition), 
first  to  notify  in  writing  the  competent  authorities  of  the  credit  institution  in  which 
they are seeking to acquire or increase a qualifying holding, indicating the size of the 
intended  holding  and  relevant  information,  as  referred  to  in  Article  23(4).  Member 
States need not apply the 30 % threshold where, in accordance with Article 9(3)(a) of 
Directive 2004/109/EC, they apply a threshold of one-third. 

2. 

The competent authorities shall, promptly and in any event within two working days 
following  receipt  of  the  notification,  as  well  as  following  the  possible  subsequent 
receipt of the information referred to in paragraph 3, acknowledge receipt thereof in 
writing to the proposed acquirer. 

The competent authorities shall have a maximum of sixty working days as from the 
date of the written acknowledgement of receipt of the notification and all documents 
required by the Member State to be attached to the notification on the basis of the list 
referred to in Article 23(4) (hereinafter referred to as the assessment period), to carry 
out  the  assessment  provided  for  in  Article  23(1)  (hereinafter  referred  to  as  the 
assessment). 

The  competent  authorities  shall  inform  the  proposed  acquirer  of  the  date  of  the 
expiry of the assessment period at the time of acknowledging receipt. 

The  competent  authorities  may,  during  the  assessment  period,  if  necessary,  and  no 
later  than  on  the  fiftieth  working  day  of  the  assessment  period,  request  any  further 
information that is necessary to complete the assessment. Such request shall be made 
in writing and shall specify the additional information needed. 

For  the  period  between  the  date  of  request  for  information  by  the  competent 
authorities  and  the  receipt  of  a  response  thereto  by  the  proposed  acquirer,  the 
assessment  period  shall  be  interrupted.  The  interruption  shall  not  exceed  twenty 
working  days.  Any  further  requests  by  the  competent  authorities  for  completion  or 
clarification  of  the  information  shall  be  at  their  discretion  but  may  not  result  in  an 
interruption of the assessment period. 

The  competent  authorities  may  extend  the  interruption  referred  to  in  the  second 
subparagraph  of  paragraph  3  up  to  thirty  working  days  if  the  proposed  acquirer  is 
situated  or  regulated  outside  the  Union  or  a  natural  or  legal  person  not  subject  to 
supervision  under  this  Directive  or  Directives  2009/65/EC,  2009/138EC,  or 
2004/39/EC . 

If the competent authorities, upon completion of the assessment, decide to oppose the 
proposed  acquisition,  they  shall,  within  two  working  days,  and  not  exceeding  the 
assessment period, inform the proposed acquirer in writing and provide the reasons 
for that decision. Subject to national law, an appropriate statement of the reasons for 
the  decision  may  be  made  accessible  to  the  public  at  the  request  of  the  proposed 
acquirer.  This  shall  not  prevent  a  Member  State  from  allowing  the  competent 
authority  to  publish  such  information  in  the  absence  of  a  request  by  the  proposed 
acquirer. 

3. 

4. 

5. 

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40 

   EN 

6. 

7. 

8. 

9. 

If  the  competent  authorities  do  not  oppose  the  proposed  acquisition  within  the 
assessment period in writing, it shall be deemed to be approved. 

The  competent  authorities  may  fix  a  maximum  period  for  concluding  the  proposed 
acquisition and extend it where appropriate. 

Member States may not impose requirements for notification to and approval by the 
competent authorities of direct or indirect acquisitions of voting rights or capital that 
are more stringent than those set out in this Directive. 

EBA shall develop draft regulatory technical standards to establish an exhaustive list 
of information, referred to in Article 23(4), to be included by proposed acquirers in 
their notification, without prejudice to paragraph 3 of this Article. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred  to  in  the  first  subparagraph  in  accordance  with  Articles  10  to  14  of 
Regulation (EU) No 1093/2010. 

10. 

EBA  shall  develop  draft  implementing  technical  standards  to  establish  common 
procedures,  forms  and  templates  for  the  consultation  process  between  the  relevant 
competent authorities as referred to in Article 24. 

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) 
No 1093/2010. 

11. 

EBA shall submit the draft technical standards referred to in paragraphs 9 and 10 to 
the Commission by 31 December 2015. 

Article 23 

Assessment criteria 

1. 

In  assessing  the  notification  provided  for  in  Article  22(1)  and  the  information 
referred  to  in  Article  22(3),  the  competent  authorities  shall,  in  order  to  ensure  the 
sound  and  prudent  management  of  the  credit  institution  in  which  an  acquisition  is 
proposed, and having regard to the likely influence of the proposed acquirer on the 
credit  institution,  assess  the  suitability  of  the  proposed  acquirer  and  the  financial 
soundness of the proposed acquisition according to the following criteria: 

(a) 

the reputation of the proposed acquirer; 

(b) 

(c) 

the reputation and experience of any person who will direct the business of the 
credit institution as a result of the proposed acquisition; 

the financial soundness of the proposed acquirer, in particular in relation to the 
type  of  business  pursued  and  envisaged  in  the  credit  institution  in  which  the 
acquisition is proposed; 

(d)  whether  the  credit  institution  will  be  able  to  comply  and  continue  to  comply 
with  the  prudential  requirements  based  on  this  Directive  and  Regulation 

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41 

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[inserted  by  OP],  and  where  applicable,  other  Directives,  notably,  Directives 
2009/110/EC and 2002/87/EC, in particular, whether the group of which it will 
become  a  part  has  a  structure  that  makes  it  possible  to  exercise  effective 
supervision, effectively exchange information among the competent authorities 
and  determine  the  allocation  of  responsibilities  among  the  competent 
authorities; 

(e)  whether  there  are  reasonable  grounds  to  suspect  that,  in  connection  with  the 
proposed  acquisition,  money  laundering  or  terrorist  financing  within  the 
meaning of Article 1 of Directive 2005/60/EC32 is being or has been committed 
or attempted, or that the proposed acquisition could increase the risk thereof. 

The  competent  authorities  may  oppose  the  proposed  acquisition  only  if  there  are 
reasonable grounds for doing so on the basis of the criteria set out in paragraph 1 or 
if the information provided by the proposed acquirer is incomplete. 

Member  States  shall  neither  impose  any  prior  conditions  in  respect  of  the  level  of 
holding  that  must  be  acquired  nor  allow  their competent authorities to examine  the 
proposed acquisition in terms of the economic needs of the market. 

Member  States  shall  publish  a  list  specifying  the  information  that  is  necessary  to 
carry out the assessment and that must be provided to the competent authorities at the 
time  of  notification  referred  to  in  Article  22(1).  The  information  required  shall  be 
proportionate  and  adapted  to  the  nature  of  the  proposed  acquirer  and  the  proposed 
acquisition.  Member  States  shall  not  require  information  that  is  not  relevant  for  a 
prudential assessment. 

Notwithstanding Article 22(2), (3) and (4), where two or more proposals to acquire 
or increase qualifying holdings in the same credit institution have been notified to the 
competent  authority,  the  latter  shall  treat  the  proposed  acquirers  in  a  non-
discriminatory manner. 

2. 

3. 

4. 

5. 

Article 24 

Cooperation between competent authorities 

1. 

The  relevant  competent  authorities  shall  work  in  full  consultation  with  each  other 
when carrying out the assessment if the proposed acquirer is one of the following: 

(a) 

a  credit  institution,  assurance  undertaking,  insurance  undertaking,  reinsurance 
undertaking, investment firm or management company within the meaning of 
Article  2(1),  point  b  of  Directive  2009/65/EC  (hereinafter  referred  to  as  the 
UCITS  management  company)  authorised  in  another  Member  State  or  in  a 
sector other than that in which the acquisition is proposed; 

32 

Directive  2005/60/EC  of  the  European  Parliament  and  of  the  Council  of  26  October  2005  on  the 
prevention of the use of financial system for the purpose of money laundering and terrorist financing 
(OJ L 309, 25.11.2005, p. 15). 

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(b) 

(c) 

the parent undertaking of a credit institution, assurance undertaking, insurance 
undertaking, reinsurance undertaking, investment firm or UCITS management 
company authorised in another Member State or in a sector other than that in 
which the acquisition is proposed;  

a natural or legal person controlling a credit institution, assurance undertaking, 
insurance  undertaking,  reinsurance  undertaking,  investment  firm  or  UCITS 
management company authorised in another Member State or in a sector other 
than that in which the acquisition is proposed. 

2. 

The  competent  authorities  shall,  without  undue  delay,  provide  each  other  with  any 
information  which  is  essential  or  relevant  for  the  assessment.  In  this  regard,  the 
competent  authorities  shall  communicate  to  each  other  upon  request  all  relevant 
information and shall communicate on their own initiative all essential information. 
A  decision  by  the  competent  authority  that  has  authorised  the  credit  institution  in 
which the acquisition is proposed shall indicate any views or reservations expressed 
by the competent authority responsible for the proposed acquirer. 

Article 25 

Notification in case of divestiture 

The  Member  States  shall  require  any  natural  or  legal  person  who  has  taken  a  decision  to 
dispose, directly or indirectly, of a qualifying holding in a credit institution first to notify in 
writing the competent authorities, indicating the size of his intended holding. Such a person 
shall  likewise  notify  the  competent  authorities  if  he  has  taken  a  decision  to  reduce  his 
qualifying holding so that the proportion of the voting rights or of the capital held would fall 
below 20 %, 30 % or 50 % or so that the credit institution would cease to be his subsidiary. 
Member States need not apply the 30 % threshold where, in accordance with Article 9(3)(a) 
of Directive 2004/109/EC, they apply a threshold of one-third. 

Article 26 

Information obligations and sanctions 

1. 

Credit  institutions  shall,  on  becoming  aware  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  22(1)  and  Article  25,  inform  the  competent 
authorities of those acquisitions or disposals. 

Credit  institutions  listed  on  a  regulated  market  as  referred  to  in  the  list  to  be 
published  by  the  European  Securities  and  Markets  Authority  (ESMA)  according  to 
Article 47 of Directive 2004/39/EC shall, at least once a year, inform the competent 
authorities 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. 

2. 

The Member States shall require that, where the influence exercised by the persons 
referred  to  in  Article  22(1)  is  likely  to  operate  to  the  detriment  of  the  prudent  and 

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sound management of the institution, the competent authorities shall take appropriate 
measures to put an end to that situation. Such measures may consist in injunctions, 
sanctions,  subject  to  Articles  65  to  69,  against  members    of  the  management  body 
and managers, or the suspension of the exercise of the voting rights attaching to the 
shares held by the shareholders or members of the credit institution in question. 

Similar measures shall apply to natural or legal persons who fail to comply with the 
obligation to provide prior information, as laid down in Article 22(1) and subject to 
Articles 65 to 69. 

If  a  holding  is  acquired  despite  the  opposition  of  the  competent  authorities,  the 
Member States shall, regardless of any other sanctions 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. 

Article 27 

Criteria for qualifying holdings 

In determining whether the criteria for a qualifying holding in the context of Articles 22, 25 
and  26  are  fulfilled,  the  voting  rights  referred  to  in  Articles  9  and  10  of  Directive 
2004/109/EC,  as  well  as  the  conditions  regarding  aggregation  thereof  laid  down  in  Article 
12(4) and (5) of that Directive, shall be taken into account. 

In  determining  whether  the  criteria  for  a  qualifying  holding  referred  to  in  Article  26  are 
fulfilled, Member States shall not take into account voting rights or shares which investment 
firms  or  credit  institutions  may  hold  as  a  result  of  providing  the  underwriting  of  financial 
instruments  and/or  placing  of  financial  instruments  on  a  firm  commitment  basis  included 
under point 6 of Section A of Annex I to Directive 2004/39/EC, provided that those rights are, 
on the one hand, not exercised or otherwise used to intervene in the management of the issuer 
and, on the other, disposed of within one year of acquisition. 

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Title IV 

Initial capital of investment firms 

Article 28 

Initial capital of investment firms 

1. 

2. 

1. 

Initial capital of investment firms shall only comprise the items referred to in points 
(a) to (e) of Article 24 of Regulation [inserted by OP]. 

All investment firms other than those referred to in Articles 29 to 31 shall have initial 
capital of EUR 730 000. 

Article 29 

Initial capital of particular types of investment firms 

An  investment  firm  that  does  not  deal  in  any  financial  instruments  for  its  own 
account  or  underwrite  issues  of  financial  instruments  on  a  firm  commitment  basis, 
but  which  holds  clients'  money  or  securities  and  which  offers  one  or  more  of  the 
following services, shall have initial capital of EUR 125 000: 

(a) 

the reception and transmission of investors' orders for financial instruments; 

(b) 

the execution of investors' orders for financial instruments;  

(c) 

the  management  of 
instruments. 

individual  portfolios  of 

investments 

in  financial 

2. 

The  competent  authorities  may  allow  an  investment  firm  which  executes  investors' 
orders  for  financial  instruments  to  hold  such  instruments  for  its  own  account  if  the 
following conditions are met: 

(a) 

(b) 

(c) 

(d) 

such  positions  arise  only  as  a  result  of  the  firm's  failure  to  match  investors' 
orders precisely; 

the total market value of all such positions is subject to a ceiling of 15 % of the 
firm's initial capital; 

the firm meets the requirements laid down in Articles 87 to 90 and Part Four of 
Regulation [inserted by OP];  

such positions are incidental and provisional in nature and strictly limited to the 
time required to carry out the transaction in question. 

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3. 

4. 

Member  States  may  reduce  the  amount  referred  to  in  paragraph 1  to  EUR 50 000 
where a firm is not authorised to hold clients' money or securities, to deal for its own 
account, or to underwrite issues on a firm commitment basis. 

The holding of non-trading-book positions in financial instruments in order to invest 
own  funds  shall  not  be  considered  as  dealing  in  relation  to  the  services  set  out  in 
paragraph 1 or for the purposes of paragraph 3. 

Article 30 

Initial capital of local firms 

Local firms shall have initial capital of EUR 50 000 insofar as they benefit from the freedom 
of  establishment  or 
in  Articles 31  and  32  of 
Directive 2004/39/EC. 

to  provide 

specified 

services 

Article 31 

Firms that do not hold money or securities belonging to their clients  

1. 

Coverage for the firms referred to in point (c) of Article 4(8) of Regulation [inserted 
by OP] shall take one of the following forms: 

(a) 

initial capital of EUR 50 000; 

(b)  professional indemnity insurance covering the whole territory of the Union or 
some  other  comparable  guarantee  against  liability  arising  from  professional 
negligence, representing at least EUR 1 000 000 applying to each claim and in 
aggregate EUR 1 500 000 per year for all claims;  

(c) 

a combination of initial capital and professional indemnity insurance in a form 
resulting in a level of coverage equivalent to that referred to in points (a) or (b). 

The amounts referred to in the first sub-paragraph shall be periodically reviewed by 
the  Commission  in  order  to  take  account  of  changes  in  the  European  Index  of 
Consumer Prices as published by Eurostat, in line with and at the same time as the 
adjustments  made  under  Article 4(7)  of  Directive 2002/92/EC  of  the  European 
Parliament and of the Council of 9 December 2002 on insurance mediation33. 

If a firm referred to in point (c) of Article 4(8) of Regulation [inserted by OP] is also 
registered  under  Directive 2002/92/EC34,  it  shall  comply  with  Article 4(3)  of  that 
Directive and have coverage in one of the following forms: 

(a) 

initial capital of EUR 25 000; 

OJ L 9, 15.1.2003, p. 3. 
Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance 
mediation, OJ L 9, 15.1.2003, p. 3. 

2. 

33 
34 

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46 

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(b)  professional indemnity insurance covering the whole territory of the Union or 
some  other  comparable  guarantee  against  liability  arising  from  professional 
negligence,  representing  at  least  EUR 500  000  applying  to  each  claim  and  in 
aggregate EUR 750 000 per year for all claims;  

(c) 

a combination of initial capital and professional indemnity insurance in a form 
resulting in a level of coverage equivalent to that referred to in points (a) or (b). 

Article 32 

Grandfathering clause 

1. 

2. 

By way of derogation from Articles 28(2), 29(1), 29(3) and 30, Member States may 
continue an authorisation of investment firms and firms covered by Article 30 which 
was  in  existence  before  31 December  1995,  the  own  funds  of  which  firms  or 
investment  firms  are  less  than  the  initial  capital  levels  specified  for  them  in 
Articles 28(2), 29(1), 29(3), and 30. 

The  own  funds  of  such  firms  or  investment  firms  shall  not  fall  below  the  highest 
reference  level  calculated  after  23  March  1993.  That  reference  level  shall  be  the 
average  daily  level  of  own  funds  calculated  over  a  six-month  period  preceding  the 
date  of  calculation.  It  shall  be  calculated  every  six  months  in  respect  of  the 
corresponding preceding period. 

If control of a firm covered by paragraph 1 is taken by a natural or legal person other 
than the person who controlled it previously, the own funds of that firm shall attain at 
least the level specified for them in Articles 28(2), 29(1), 29(3), and 30, except in the 
case  of  a  first  transfer  by  inheritance  made  after  31 December  1995,  subject  to  the 
competent authorities' approval and for a period of not more than 10 years from the 
date of that transfer. 

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Title V 

Provisions concerning the freedom of establishment and 
the freedom to provide services 

Chapter 1 

General Principles 

Article 33 

Credit institutions 

The Member States shall provide that the activities listed in Annex I to this Directive may be 
carried  on  within  their  territories,  in  accordance  with  Article  35,  Article  36(1),  (2)  and  (3), 
Article 39(1) and (2) and Articles 40 to 46 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. 

Article 34 

Financial institutions 

1. 

The Member States shall provide that the activities listed in Annex I to this Directive 
may  be  carried  on  within  their  territories,  in  accordance  with  Article  35,  Article 
36(1),  (2)  and  (3),  Article  39(1)  and  (2)  and  Articles  40  to  46,  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 
Articles of association of which permit the carrying on of those activities and which 
fulfils each of the following conditions: 

(a) 

(b) 

(c) 

(d) 

the parent undertaking or undertakings shall be authorised as credit institutions 
in the Member State by the law of which the financial institution is governed; 

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

the parent undertaking or undertakings shall hold 90 % or more of the voting 
rights attaching to shares in the capital of the financial institution; 

the  parent  undertaking  or  undertakings  shall  satisfy  the  competent  authorities 
regarding  the  prudent  management  of  the  financial  institution  and  shall  have 
declared,  with  the  consent  of  the  relevant  home  Member  State  competent 

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authorities, that they jointly and severally guarantee the commitments entered 
into by the financial institution;  

(e) 

in 

in  particular, 

the  consolidated  supervision  of 

the  financial  institution  shall  be  effectively  included,  for  the  activities  in 
question 
the  parent 
undertaking,  or  of  each  of  the  parent  undertakings,  in  accordance  with  Title 
VII, Chapter 3 of this Directive and Part One, Title II, Chapter 2 of Regulation 
[inserted by OP](prudential consolidation), in particular for the purposes of the 
own funds requirements set out in Article 87 of Regulation [inserted  by OP], 
for the control of large exposures provided for in Part Four of that Regulation 
and for purposes of the limitation of holdings provided for in Articles 84 and 
85 of that Regulation. 

Compliance  with  these  conditions  shall  be  verified  by  the  competent  authorities  of 
the  home  Member  State  and  the  latter  shall  supply  the  financial  institution  with  a 
certificate  of  compliance  which  shall  form  part  of  the  notification  referred  to  in 
Articles 35 and 39. 

2. 

3. 

1. 

2. 

If a financial institution as referred to in the first subparagraph of paragraph 1 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. 

Paragraphs 1 and 2 shall apply accordingly to subsidiaries of a financial institution as 
referred to in the first subparagraph of paragraph 1. 

Chapter 2 

The right of establishment of credit institutions 

Article 35 

Notification requirement and interaction between competent authorities 

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. 

Member States shall require every credit institution wishing to establish a branch in 
another  Member  State  to  provide  all  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; 

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(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. 

3. 

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's competent authorities shall also communicate the amount 
and composition of own funds and the sum of the own funds requirements under 87 
of Regulation [inserted by OP]of the credit institution. 

By way of derogation from the second subparagraph, in the case referred to in Article 
34,  the  home  Member  State's  competent  authorities  shall  communicate  the  amount 
and composition of own funds of the financial institution and the total risk exposure 
amounts  under  Article  87  of  Regulation  [inserted  by  OP]of  the  credit  institution 
which is its parent undertaking. 

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. 

5. 

EBA shall develop draft regulatory technical standards to specify the information to 
be notified in accordance with this Article. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

6. 

EBA  shall  develop  draft  implementing  technical  standards  to  establish  standard 
forms, templates and procedures for such notification. 

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) 
No 1093/2010. 

7. 

EBA shall submit the draft technical standards referred to in paragraphs 5 and 6 to 
the Commission by 1 January 2014. 

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Article 36 

Commencement of activities 

1. 

2. 

3. 

4. 

5. 

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  in  Article  35,  prepare  for  the  supervision  of  the  credit 
institution  in  accordance  with  Chapter  4  and  if  necessary  indicate  the  conditions 
under which, in the interest of the general good, those activities shall 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 1 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  35(2),  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 35 and 
the competent authorities of the host Member State to take a decision setting out the 
conditions for the change pursuant to paragraph 1 of this Article. 

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 35 and in paragraphs 1 and 2 
of this Article. They shall be governed, from 1 January 1993, by paragraph 3 of this 
Article and by Articles 33, Article 53 and Chapter 4. 

EBA shall develop draft regulatory technical standards to specify the information to 
be notified in accordance with this Article. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

6. 

EBA  shall  develop  draft  implementing  technical  standards  to  establish  standard 
forms, templates and procedures for such notification. 

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) 
No 1093/2010. 

7. 

EBA shall submit the draft technical standards referred to in paragraphs 5 and 6 to 
the Commission by 1 January 2014. 

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Article 37 

Information about refusals 

The Member States shall inform the Commission and EBA of the number and type of cases in 
which there has been a refusal pursuant to Article 35 and Article 36(1), (2) and (3) . 

Article 38 

Aggregation of branches 

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. 

Chapter 3 

Exercise of the freedom to provide services 

Article 39 

Notification procedure 

1. 

2. 

3. 

4. 

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 to this Directive 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  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. 

EBA shall develop draft regulatory technical standards to specify the information to 
be notified in accordance with this Article. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred  to  in  the  first  subparagraph  in  accordance  with  Articles  10  to  14  of 
Regulation (EU) No 1093/2010. 

5. 

EBA  shall  develop  draft  implementing  technical  standards  to  establish  standard 
forms, templates and procedures for such notification. 

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) 
No 1093/2010. 

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6. 

EBA shall submit the draft technical standards referred to in paragraphs 4 and 5 to 
the Commission by 1 January 2014. 

Chapter 4 

Powers of the competent authorities of the host Member State 

Article 40 

Reporting requirements 

The  competent  authorities  of  the  host  Member  States  may  require  that  all  credit  institutions 
having branches within their territories shall report to them periodically on their activities in 
those host Member States.  

Such reports may only be required for information purposes and for the application of Article 
52(1). 

The  competent  authorities  of  the  host  Member  States  may  in  particular  require  information 
from  the  credit  institutions  referred  to  in  the  first  subparagraph  in  order  to  allow  those 
competent authorities to assess whether a branch is significant according to Article 52(1). 

Article 41 

Measures taken by the competent authorities of the home Member State in relation to 
activities carried out in the host Member State  

1. 

Where  the  competent  authorities  of  the  host  Member  State  ascertain  that  a  credit 
institution having a branch or providing services within its territory fulfils one of the 
following  conditions  in  relation  to  the  activities  carried  out  in  that  host  Member 
State, they shall inform the competent authorities of the home Member State: 

(a)  The  credit 

institution  does  not  comply  with 
implementing this Directive or with Regulation [inserted by OP]; 

the  national  provisions 

(b)  The  credit  institution  is  expected  not  to  comply  with  the  national  provisions 

implementing this Directive or with Regulation [inserted by OP]. 

The  competent  authorities  of  the  home  Member  State  shall,  without  undue  delay, 
take all appropriate measures to ensure that the credit institution concerned puts an 
end to that irregular situation or takes measures to avert the risk of non-compliance. 
Those  measures  shall  be  communicated  to  the  competent  authorities  of  the  host 
Member State.  

2. 

Where the competent authorities of the host Member State allege that the competent 
authorities of the home Member State have not fulfilled their obligations or will not 
fulfill their obligation pursuant to paragraph 1, they may refer the matter to EBA and 
request  its  assistance  in  accordance  with  Article  19  of  Regulation  (EU)  No 

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1093/2010. In that case, EBA may act in accordance with the powers conferred on it 
by that Article. EBA shall take any decision under Article 19(3) of Regulation (EU) 
No 1093/2010 within 24 hours. 

Article 42 

Justification 

Any measure taken pursuant to Articles 41(1), 43 or 44 involving penalties or restrictions on 
the  exercise  of  the  freedom  to  provide  services  or  the  freedom  of  establishment  shall  be 
properly justified and communicated to the credit institution concerned.  

Article 43  

Precautionary measures 

1. 

2. 

3. 

4. 

5. 

Before  following  the  procedure  in  Article  41,  the  competent  authorities  of  the  host 
Member  State  may,  in  emergency  situations,  pending  measures  by  the  competent 
authorities  of  the  home  Member  State  or  reorganisation  measures  referred  to  in 
Article  2  of  Directive  2001/24/EC,  take  any  precautionary  measures  necessary  to 
protect the collective interests of depositors, investors and clients in the host Member 
State. 

Precautionary  measures  shall  be  proportionate  to  their  purpose,  which  is  to 
precautionarily  protect  against  a  detrimental  impact  on  the  collective  interests  of 
depositors, investors and clients in the host Member State. Measures may include a 
suspension of payment. They shall not result in a preference for the creditors of the 
credit institution in the host Member State over creditors in other Member States.  

Precautionary measures may only be taken before a reorganisation measure referred 
to in Article 2 of Directive 2001/24/EC has been taken. Any precautionary measure 
shall cease to have effect when the administrative or judicial authorities of the home 
Member  State  take  reorganisation  measures  within  the  meaning  of  Article  2  of 
Directive 2001/24/EC. 

The  competent  authorities  of  the  host  Member  State  shall  terminate  precautionary 
measures  where  they  have  become  obsolete  under  Article  41  unless  they  cease  to 
have effect according to paragraph 3. 

The  Commission,  EBA  and  the  competent  authorities  of  the  other  Member  States 
concerned shall be informed of precautionary measures without undue delay. 

Where  competent  authorities  of  the  home  Member  State  have  objections  against 
measures  taken  by  the  competent  authorities  of  the  host  Member  State,  they  may 
refer the matter to EBA and request its assistance in accordance with Article 19 of 
Regulation  (EU)  No  1093/2010.  In  that  case,  EBA  may  act  in  accordance  with  the 
powers  conferred  on  it  by  that  Article.  Where  it  acts,  EBA  shall  take  any  decision 
under Article 19(3) of Regulation (EU) No 1093/2010 within 24 hours. 

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6. 

The  Commission  may,  after  consulting  the  competent  authorities  of  the  Member 
States concerned and EBA, decide that the Member State in question shall amend or 
abolish precautionary measures.  

Article 44 

Powers of host Member States 

Host Member States may, without being affected by Articles 40 and 41, exercise the powers 
conferred on them under this Directive to take appropriate measures to prevent or to punish 
irregularities committed within their territories which are contrary to the legal rules they have 
adopted pursuant to this Directive or in the interests of the general good. This shall include the 
possibility  of  preventing  offending  credit  institutions  from  initiating  further  transactions 
within their territories. 

Article 45 

Measures following the withdrawal of authorisation 

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. 

Article 46 

Advertising 

Nothing  in  this  Chapter  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. 

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Title VI 

Relations with third countries 

Article 47 

1. 

2. 

3. 

1. 

Notification in relation to third countries' branches and conditions of access for credit 
institutions having those branches 

Member  States  shall  not  apply  to  branches  of  credit  institutions  having  their  head 
office outside the Union, 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 Union. 

The  competent  authorities  shall  notify  the  Commission,  EBA  and  the  European 
Banking  Committee  of  all  authorisations  for  branches  granted  to  credit  institutions 
having their head office in a third country. 

The  Union  may,  through  agreements  concluded  with  one  or  more  third  countries, 
agree to apply provisions which accord to branches of a credit institution having its 
head  office  outside  the  Union  identical  treatment  throughout  the  territory  of  the 
Union. 

Article 48 

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

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

(a) 

(b) 

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

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

2. 

The  agreements  referred  to  in  paragraph  1  shall,  in  particular,  seek  to  ensure  all  of 
the following: 

(a) 

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,  financial  holding  companies  mixed 
financial  holding  companies  situated  in  the  Union  and  which  have  as 

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subsidiaries  credit  institutions  or  financial  institutions  situated  outside  the 
Union, or holding participation in such institutions; 

(b) 

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; 

(c) 

that  EBA  is  able  to  obtain  the  information  from  the  competent  authorities  of 
the  Member  States  received  from  national  authorities  of  third  countries  in 
accordance with Article 35 of Regulation (EU) No 1093/2010. 

3. 

4. 

Without  prejudice  to  Article  218  of  the  Treaty,  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. 

EBA shall assist the Commission for the purposes of this Article in accordance with 
Article 33 of Regulation (EU) No 1093/2010. 

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Title VII 

Prudential supervision 

Chapter 1 

Principles of prudential supervision 

SECTION I 

COMPETENCE OF HOME AND HOST MEMBER STATE 

Article 49 

Competence of control of the home Member State 

1. 

The prudential supervision of an institution, including that of the activities it carries 
on in accordance with Articles 33 and 34, 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 competent authorities of the host Member 
State. 

2. 

Paragraph 1 shall not prevent supervision on a consolidated basis. 

Article 50 

Competence of the host Member State 

Measures  taken  by  the  host  Member  State  may  not  provide  for  discriminatory  or  restrictive 
treatment based on the fact that an institution is authorised in another Member State. 

Article 51 

Collaboration concerning supervision 

1. 

The competent authorities of the Member States concerned shall collaborate closely 
in  order  to  supervise  the  activities  of  institutions  operating,  in  particular  through  a 
branch, 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  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 institutions, in particular with regard 

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liquidity,  solvency,  deposit  guarantee, 

to 
administrative and accounting procedures and internal control mechanisms. 

limiting  of 

the 

large  exposures, 

2. 

3. 

4. 

5. 

6. 

7. 

The  competent  authorities  of  the  home  Member  State  shall  provide  the  competent 
authorities  of  host  Member  States  immediately  with  any  information  and  findings 
pertaining  to  liquidity  supervision  in  accordance  with  Part  Six  of  Regulation 
[inserted by OP]and Title VII, Chapter 3 of this Directive of the activities performed 
by the institution through the branch, to the extent that such information is relevant 
for the protection of depositors or investors in the host Member State. 

The  competent  authorities  of  the  home  Member  State  shall  inform  the  competent 
authorities  of  all  host  Member  States  immediately  where  liquidity  stress  occurs  or 
can reasonably be expected to occur. This information shall also include details about 
the  planning  and  implementation  of  a  recovery  plan  and  about  any  prudential 
measures taken in that context. 

The competent authorities of the home Member State shall communicate and explain 
upon request to the competent authorities of the host Member State how information 
and findings provided by the latter have been taken into account. Where, following 
communication  of  information  and  findings,  the  competent  authorities  of  the  host 
Member  State  maintains  that  no  appropriate  measures  have  been  taken  by  the 
competent  authorities  of  the  home  Member  State,  the  competent  authorities  of  the 
host  Member  State  may  refer  the  matter  to  EBA  in  accordance  with  Article  19  of 
Regulation  (EU)  No  1093/2010.  In  that  case,  EBA  may  act  in  accordance  with  the 
powers  conferred  on  it  by  that  Article.  Where  it  acts,  EBA  shall  take  any  decision 
within one month.  

The  competent  authorities  may  refer  to  EBA  situations  where  a  request  for 
collaboration,  in  particular  to  exchange  information,  has  been  rejected  or  has  not 
been  acted  upon  within  a  reasonable  time.  Without  prejudice  to  Article  258  of  the 
Treaty, EBA may, in those situations, act in accordance with the powers conferred on 
it under Article 19 of Regulation (EU) No 1093/2010. 

EBA  shall  develop  draft  regulatory  technical  standards  to  specify  the  information 
contained in this Article. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

EBA  shall  develop  draft  implementing  technical  standards  to  establish  standard 
forms, templates and procedures for the information sharing requirements which are 
likely to facilitate the monitoring of institutions. 

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) 
No 1093/2010. 

8. 

EBA shall submit the draft technical standards referred to in paragraphs 6 and 7 to 
the Commission by 1 January 2014. 

. 

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Article 52 

Significant branches 

1. 

The  competent  authorities  of  a  host  Member  State  may  make  a  request  to  the 
consolidating supervisor where Article 107(1) applies or to the competent authorities 
of  the  home  Member  State,  for  a  branch  of  an  institution  that  does  not  fulfil  the 
criteria  set  out  in  Articles  90  of  Regulation  [inserted  by  OP]  to  be  considered  as 
significant. 

That request shall provide reasons for considering the branch to be significant with 
particular regard to the following: 

(a)  whether  the  market  share  of  the  branch  of  an  institution  in  terms  of  deposit 

exceeds 2 % in the host Member State; 

(b) 

the likely impact of a suspension or closure of the operations of the institution 
on market liquidity and the payment and clearing and settlement systems in the 
host Member State; 

(c) 

the size and the importance of the branch in terms of number of clients within 
the context of the banking or financial system of the host Member State. 

The  competent  authorities  of  the  home  and  host  Member  States,  and  the 
consolidating supervisor where Article 108 applies, shall do everything within their 
power to reach a joint decision on the designation of a branch as being significant. 

If  no  joint  decision  is  reached  within  two  months  of  receipt  of  a  request  under  the 
first  subparagraph,  the  competent  authorities  of  the  host  Member  State  shall  take 
their  own  decision  within  a  further  period  of  two  months  on  whether  the  branch  is 
significant.  In  taking  their  decision,  the  competent  authorities  of  the  host  Member 
State  shall  take  into  account  any  views  and  reservations  of  the  consolidating 
supervisor or the competent authorities of the home Member State. 

If,  at  the  end  of  the  initial  two-month  period  any  of  the  competent  authorities 
concerned  has  referred  the  matter  to  EBA  in  accordance  with  Article  19  of 
Regulation (EU) No 1093/2010, the competent authorities of the host Member State 
shall  defer  their  decision  and  await  the  decision  that  EBA  may  take  in  accordance 
with Article 19(3) of that Regulation. The competent authorities of the host Member 
State shall take their decision in conformity with that of EBA. The two-month period 
shall be deemed to be the conciliation phase within the meaning of Article 19 of that 
Regulation.  EBA  shall  take  its  decision  within  1  month.  The  matter  shall  not  be 
referred to EBA after the end of the initial two month period or after a joint decision 
has been reached. 

The  decisions  referred  to  in  the  third  subparagraph  shall  be  set  out  in  a  document 
containing  the  fully  reasoned  decision  and  transmitted  to  the  competent  authorities 
concerned, and shall be binding on the competent authorities in the Member States 
concerned. 

The  designation  of  a  branch  as  being  significant  shall  not  affect  the  rights  and 
responsibilities of the competent authorities under this Directive. 

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2. 

The  competent  authorities  of  the  home  Member  State  shall  communicate  to  the 
competent  authorities  of  a  host  Member  State  where  a  significant  branch  is 
established the information referred to in Article 112(1)(c) and (d) and carry out the 
tasks referred to in Article 107(1)(c) in cooperation with the competent authorities of 
the host Member State. 

If a competent authority of a home Member State becomes aware of an emergency 
situation  within  an  institution  as  referred  to  in  Article 109(1),  it  shall  alert  without 
undue delay the authorities referred to in the fourth paragraph of Articles 59(4) and 
60. 

The  competent  authorities  of  the  home  Member  State  shall  communicate  to  the 
competent  authorities  of  the  host  Member  States  where  significant  branches  are 
established  the  results  of  the  risk  assessments  of  institutions  with  such  branches 
referred  to  in  Article  92  and,  where  applicable,  Article  108(2)(a).  They  shall  also 
communicate decisions under Articles 64, 98 and 99 in so far as those assessments 
and decisions are relevant to those branches. 

The  competent  authorities  of  the  home  Member  States  shall  consult  the  competent 
authorities  of  the  host  Member  States  where  significant  branches  are  established 
about operational steps required by Article 84(10), where this is relevant for liquidity 
risks in the host Member State's currency. 

Where the competent authorities of the home Member State have not consulted the 
competent authorities of the host Member State, or where operational steps referred 
to in Article 84(10) taken by the competent authorities of the home Member State are 
not  adequate,  the  competent  authorities  of  the  host  Member  State  may  refer  the 
matter to EBA in accordance with Article 19 of Regulation (EU) No 1093/2010. In 
that case, EBA may act in accordance with the powers conferred on it by that Article.  

3. 

Where  Article 111  does  not  apply,  the  competent  authorities  supervising  an 
institution with significant branches in other Member States shall establish and chair 
a college of supervisors to facilitate the cooperation under paragraph 2 of this Article 
and  Article 51.  The  establishment  and  functioning  of  the  college  shall  be  based  on 
written arrangements to be determined, after consultation with competent authorities 
concerned,  by  the  competent  authority  of  the  home  Member  State.  The  competent 
authority  of  the  home  Member  State  shall  decide  which  competent  authorities 
participate in a meeting or in an activity of the college. 

The  decision  of  the  competent  authority  of  the  home  Member  State  shall  take 
account of the relevance of the supervisory activity to be planned or coordinated for 
those  authorities,  in  particular  the  potential  impact  on  the  stability  of  the  financial 
system  in  the  Member  States  concerned  referred  to  in  Article 8  and  the  obligations 
referred to in paragraph 2 of this Article. 

The  competent  authority  of  the  home  Member  State  shall  keep  all  members  of  the 
college  fully  informed,  in  advance,  of  the  organisation  of  such  meetings,  the  main 
issues to be discussed and the activities to be considered. The competent authority of 
the  home  Member  State  shall  also  keep  all  the  members  of  the  college  fully 
informed, in a timely manner, of the actions taken in those meetings or the measures 
carried out. 

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4. 

The competent authorities of the host Member State shall have the power to carry out 
on  a  case  by  case  basis  on-the-spot  inspections  of  the  activities  carried  out  by 
branches  of  institutions  on  their  territory  and  require  information  from  a  branch 
about  its  activities.  Before  the  inspection,  the  competent  authorities  of  the  home 
Member State shall be consulted. After the inspection, the competent  authorities of 
the host Member State shall communicate to the competent authorities of the home 
Member  State  the  information  obtained  and  findings  that  are  relevant  for  the  risk 
assessment  of  the  institution  or  the  stability  of  the  financial  system  in  the  host 
Member State. The competent authorities of the home Member State shall duly take 
into  account  this  information  and  these  findings  in  determining  their  supervisory 
examination programme referred to in Article 96, having regard also to the stability 
of the financial system in the host member State.  

5. 

EBA  shall  develop  draft  regulatory  technical  standards  in  order  to  specify  general 
conditions for the functioning of colleges of supervisors. 

Power is delegated to the Commission to adopt these regulatory technical standards 
in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) 
No 1093/2010. 

EBA shall develop draft implementing technical standards in order to determine the 
operational functioning of colleges of supervisors. 

Power  is  conferred  on  the  Commission  to  adopt  these  implementing  technical 
standards in accordance with Article 15 of Regulation (EU) No 1093/2010. 

EBA shall submit the draft technical standards referred to in paragraphs 5 and 6 to 
the Commission by 31 December 2015. 

Article 53 

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

Host  Member  States  shall  provide  that,  where  an  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 51. 

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 116. 

6. 

7. 

1. 

2. 

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SECTION II 

EXCHANGE OF INFORMATION AND PROFESSIONAL SECRECY 

Article 54 

Professional secrecy 

1. 

Member 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 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. 

Paragraph 1 shall not prevent the competent authorities of the various Member States 
from exchanging information or transmitting information to EBA in accordance with 
this Directive, Regulation [inserted by OP], with other Directives applicable to credit 
institutions,  and  with  Articles  31  and  35  of  Regulation  (EU)  No  1093/2010.  That 
information shall be subject to the conditions relating to professional secrecy set out 
in paragraph 1. 

Paragraph 1 shall not prevent the competent authorities from publishing the outcome 
of stress tests carried out in accordance with Article 97 or Article 32 of Regulation 
(EU) No 1093/2010 and from transmitting the outcome of stress tests to EBA for the 
purpose of the publication by EBA of the results of EU-wide stress tests. 

2. 

3. 

Article 55 

Use of confidential information 

Competent authorities receiving confidential information under Article 54 may use it only in 
the course of their duties and only for any of the following purposes: 

(a) 

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

(b) 

to impose sanctions; 

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(c) 

(d) 

in  an  appeal  against  a  decision  of  the  competent  authority  including  court 
proceedings pursuant to Article 71; 

in  court  proceedings  initiated  pursuant  to  special  provisions  provided  for  in  Union 
law adopted in the field of credit institutions. 

Article 56 

Cooperation agreements 

Member  States and EBA, in  accordance with Article 33 of Regulation (EU) No 1093/2010, 
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 Article 57 and Article 58(1) of this Directive only if the information disclosed is 
subject to guarantees of professional secrecy at least equivalent to those referred to in Article 
54(1) of this Directive. Such exchange of information shall be for the purpose of performing 
the supervisory tasks of those authorities or bodies. 

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

Article 57 

Exchange of information within a Member State 

Articles 54(1) and 55 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,  in  the  discharge  of  their 
supervisory functions: 

(a) 

(b) 

(c) 

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 
similar procedures;  

persons  responsible  for  carrying  out  statutory  audits  of  the  accounts  of  credit 
institutions and other financial institutions. 

Articles  54(1)  and  55  shall  not  preclude  the  disclosure  to  bodies  which  administer  deposit-
guarantee schemes of information necessary to the exercise of their functions. 

In  both  cases,  the  information  received  shall  be  subject  to  the  conditions  of  professional 
secrecy specified in Article 54(1). 

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Article 58 

Exchange of information with oversight bodies 

1. 

Notwithstanding  Articles  54  to  56,  Member  States  may  authorise  exchange  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 in other similar procedures;  

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. 

2. 

In the cases referred to in paragraph 1, Member States shall require fulfilment of at 
least the following conditions: 

(a) 

(b) 

the  information  shall  be  for  the  purpose  of  performing  the  supervisory  task 
referred to in paragraph 1; 

information  received  in  this  context  shall  be  subject  to  the  conditions  of 
professional secrecy specified in Article 54(1);  

(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 EBA the  names  of  the  authorities  which  may 
receive information pursuant to paragraphs 1 and 2. 

3. 

Notwithstanding  Articles  54  to  56,  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  shall  require  fulfilment  of  at  least  the  following 
conditions: 

(a) 

(b) 

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

information received in this context is subject to the conditions of professional 
secrecy specified in Article 54(1);  

(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. 

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4. 

5. 

6. 

Where,  in  a  Member  State,  the  authorities  or  bodies  referred  to  in  the  paragraph  1 
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 in the 
second subparagraph. 

Member  States  shall  communicate  to  EBA  the  names  of  the  authorities  or  bodies 
which may receive information pursuant to this Article. 

In  order  to  implement  paragraph  4,  the  authorities  or  bodies  referred  to  in  the 
paragraph 1 shall communicate to the competent authorities which have disclosed the 
information, the names and precise responsibilities of the persons to whom it is to be 
sent. 

Article 59 

Transmission of information concerning monetary, systemic and payment aspects 

1. 

Nothing  in  this  Chapter  shall  prevent  a  competent  authority  from  transmitting 
information to the following for the purposes of their tasks: 

(a) 

central  banks  and  other  bodies  with  a  similar  function  in  their  capacity  as 
monetary authorities when the information is relevant for the exercise of their 
respective statutory tasks, including the conduct of monetary policy and related 
liquidity  provision,  oversight  of  payments,  clearing  and  settlement  systems, 
and the safeguarding of stability of the financial system; 

(b)  where appropriate, other public authorities responsible for overseeing payment 

systems; 

(c) 

the European Systemic Risk Board (ESRB), where that information is relevant 
for the exercise of its statutory tasks under Regulation (EU) No 1092/2010 35. 

Nothing in this Chapter shall prevent the authorities or bodies referred to in the first 
subparagraph from communicating to the competent authorities such information as 
they may need for the purposes of Article 55. 

Information received in this context shall be subject to the conditions of professional 
secrecy specified in Article 54(1). 

In an emergency situation as referred to in Article 109(1), Member States shall allow 
the competent authorities to communicate, without delay, information to the central 
banks  where  that  information  is  relevant  for  the  exercise  of  their  statutory  tasks, 
including  the  conduct  of  monetary  policy  and  related  liquidity  provision,  the 
oversight of payments, clearing and settlement systems, and the safeguarding of the 

Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 
on  European  Union  macro-prudential  oversight  of  the  financial  system  and  establishing  a  European 
Systemic Risk Board, OJ L 331, 15.12.2010, p. 1. 

2. 

3. 

4. 

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1. 

2. 

stability of the financial system, and to the ESRB where such information is relevant 
for the exercise of its statutory tasks. 

Article 60 

Transmission of information to other entities 

Notwithstanding  Articles  54(1)  and  55,  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. 

In an emergency situation as referred to in Article 109(1), Member States shall allow 
competent  authorities  to  disclose  information  which  is  relevant  to  the  departments 
referred to in the first paragraph in all Member States concerned. 

Member  States  may  authorise  the  disclosure  of  certain  information  related  to  the 
prudential supervision of institutions to parliamentary enquiry committees, courts of 
auditors  and  other  entities  in  charge  of  enquiries  in  a  Member  State,  under  the 
following conditions: 

(a)  Such entities have a precise mandate defined by national law to investigate or 
scrutinize  the  actions  of  authorities  responsible  for  the  supervision  of 
institutions or for legislation on such supervision; 

(b)  The  information  is  strictly  necessary  for  fulfilling  the  mandate  referred  to  in 

point (a); 

(c)  The  persons  having  access  to  the  information  are  subject  to  secrecy 
requirements  under  national  law,  which  ensure  that  the  information  is  not 
disclosed to anybody who is not member or employee of such entities;  

(d)  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 solely for the purposes for which those authorities gave 
their agreement. 

To  the  extent  that  the  disclosure  of  information  related  to  prudential  supervision 
involves processing of personal data, any processing by the entities mentioned above 
shall respect the applicable national laws implementing Directive 95/46/EC. 

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Article 61 

Information obtained by on-the-spot verifications 

Member States shall provide that information received under Articles 52(4), 54(2) and 57 and 
information obtained by means of the on-the-spot verification referred to in Article 53(1) and 
(2)  may  never  be  disclosed  in  the  cases  referred  to  in  Article  60  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. 

Article 62 

Information concerning clearing and settlement services 

3. 

4. 

Nothing  in  this  Chapter  shall  prevent  the  competent  authorities  of  a  Member  State 
from  communicating  the  information  referred  to  in  Articles  54  to  56  to  a  clearing 
house  or  other  similar  body  recognised  under  national  law  for  the  provision  of 
clearing or settlement services for one of their national 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 specified in Article 54(1). 

The  Member  States  shall,  however,  ensure  that  information  received  under  Article 
54(2) may not be disclosed in the circumstances referred to in paragraph 1 without 
the express consent of the competent authorities which disclosed it. 

SECTION III 

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

Article 63 

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

Member States shall provide at least that any person authorised within the meaning 
of Directive 2006/43/EEC36 performing in an institution the task described in Article 
51 of Directive 78/660/EEC37, Article 37 of Directive 83/349/EEC38 or Article 73 of 
Directive  2009/65/EC,  or  any  other  statutory  task,  shall  have  a  duty  to  report 
promptly to the competent authorities any fact or decision concerning that institution 

Directive 2006/43 of the European Parliament and of the Council of 17 May 2006 on statutory audit of 
annual accounts and consolidated accounts (OJ L 157, 9.6.2006, p. 87). 
Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54 (3) (g) of the Treaty on the 
annual accounts of certain types of companies, OJ L 222, 14.8.1978, p. 11. 
Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article 54 (3) (g) of the Treaty on 
consolidated accounts, OJ L 193, 18.7.1983, p. 1. 

1. 

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of which that person 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 institutions; 

(b) 

affect the continuous functioning of the institution;  

(c) 

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

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

2. 

The  disclosure  in  good  faith  to  the  competent  authorities,  by  persons  authorised 
within the meaning of Directive 2006/43/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 any liability. 

SECTION IV 

SUPERVISORY POWERS, POWER OF SANCTION AND RIGHT OF APPEAL 

Article 64 

Supervisory powers 

For the purposes of Article 99 and the application of Regulation [inserted by OP], competent 
authorities shall have at least the following powers: 

(a) 

(b) 

(c) 

(d) 

(e) 

to  require  institutions  to  hold  specific  own  funds  related  to  elements  of  risks  and 
risks not covered by Article 1 of Regulation [inserted by OP], as determined by the 
competent authorities under Article 98; 

to  require  the  reinforcement  of  the  arrangements,  processes,  mechanisms  and 
strategies implemented to comply with Articles 72 to 74; 

to require institutions to apply a specific provisioning policy or treatment of assets in 
terms of own funds requirements; 

to restrict or limit the business, operations or network of institutions or to request the 
divestment of activities that pose excessive risks to the soundness of an institution;  

to require the reduction of the risk inherent in the activities, products and systems of 
institutions; 

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(f) 

(g) 

(h) 

(i) 

(j) 

1. 

2. 

3. 

to require institutions to limit variable remuneration as a percentage of net revenues 
when it is inconsistent with the maintenance of a sound capital base; 

to  require  institutions  to  use  net  profits  to  strengthen  own  funds,  including  by 
restricting or prohibiting distributions to shareholders or members by the institution; 

to impose additional or more frequent reporting requirements, including reporting on 
capital and liquidity positions; 

to impose restrictions on maturity mismatches between assets and liabilities; 

to  prohibit  the  payment  or  distribution  of  dividend  or  interest  on  Additional  Tier  1 
instruments. 

Article 65 

Sanctions 

Member  States  shall  provide  that  their  respective  competent  authorities  may  take 
appropriate  administrative  sanctions  and  measures  where  the  provisions  of 
Regulation [inserted by OP] or the national provisions adopted in the implementation 
of this Directive have not been complied with, and shall ensure that they are applied. 
The sanctions and measures shall be effective, proportionate and dissuasive. 

Member  States  shall  ensure  that  where  obligations  apply  to  institutions,  financial 
holding  companies,  mixed  financial  holding  companies  and  mixed-activity  holding 
companies,  in  case  of  a  breach  sanctions  can  be  applied  to  the  members  of  the 
management  body,  and  to  any  other  individuals  who  under  national  law  are 
responsible for the breach. 

Competent authorities shall be given all investigatory powers that are necessary for 
the exercise of their functions. In the exercise of their sanctioning powers, competent 
authorities shall cooperate closely to ensure that sanctions or measures produce the 
desired results and coordinate their action when dealing with cross border cases. 

Article 66 

Authorisation requirements and requirements for acquisitions of qualifying holdings 

1. 

This Article shall apply to the following: 

(a) 

(b) 

(c) 

carrying on the business of taking deposits  or other repayable funds  from the 
public without being a credit institution in breach of Article 3;  

commencing activities as a credit institution without obtaining authorisation in 
breach of Article 9;  

acquiring,  directly  or  indirectly,  a  qualifying  holding  in  a  credit  institution  or 
further  increasing,  directly  or  indirectly,  such  a  qualifying  holding  in  a  credit 
institution  as  a  result  of  which  the  proportion  of  the  voting  rights  or  of  the 

EN 

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capital held would reach or exceed 20 %, 30 % or 50 % or so that the credit 
institution would become its subsidiary (hereinafter referred to as the proposed 
acquisition), without notifying in writing the competent authorities of the credit 
institution  in  which  they  are  seeking  to  acquire  or  increase  a  qualifying 
holding, in breach of Article 22(1); 

(d)  disposing, directly or indirectly, of a qualifying holding in a credit institution or 
reducing a qualifying holding so that the proportion of the voting rights or of 
the  capital  held  would  fall  below  20  %,  30  %  or  50  %  or  so  that  the  credit 
institution  would  cease  to  be  a  subsidiary,  without  notifying  in  writing  the 
competent authorities in breach of Article 25. 

2. 

Member  States  shall  ensure  that  in  the  cases  referred  to  in  paragraph  1,  the 
administrative  sanctions  and  measures  that  can  be  applied  include  at  least  the 
following:  

(a) 

(b) 

(c) 

a public statement which indicates the natural or legal person responsible and 
the nature of the breach; 

an order requiring the natural or legal person responsible to cease the conduct 
and to desist from a repetition of that conduct; 

in case of a legal person, administrative pecuniary sanctions of up to 10 % of 
the  total  annual  turnover  of  the  undertaking  in  the  preceding  business  year; 
where the undertaking is a subsidiary of a parent undertaking, the relevant total 
annual  turnover  shall  be  the  total  annual  turnover  resulting  from  the 
consolidated  account  of  the  ultimate  parent  undertaking  in  the  preceding 
business year; 

(d) 

in  case  of  a  natural  person,  administrative  pecuniary  sanctions  of  up  to  EUR 
5 000 000, or in the Member States where the Euro is not the official currency, 
the corresponding value in the national currency on the date of adoption of this 
Directive; 

(e) 

administrative  pecuniary  sanctions  of  up  to  twice  the  amount  of  the  benefit 
derived from the breach where that benefit can be determined. 

Article 67 

Other provisions  

1. 

This Article shall apply in all the following circumstances: 

(a) 

(b) 

an  institution  has  obtained  an  authorisation  through  false  statements  or  any 
other irregular means, in breach of Article 18(b);  

an institution, on becoming aware 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  22(1)  and  Article  25,  fails  to  inform  the  competent 
authorities of those acquisitions or disposals in breach of the first subparagraph 
of Article 26(1). 

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(c)  An  institution  listed  on  a  regulated  market  as  referred  to  in  the  list  to  be 
published by ESMA according to Article 47 of Directive 2004/39/EC does not, 
at  least  once  a  year,  inform  the  competent  authorities  of  the  names  of 
shareholders and members possessing qualifying holdings and the sizes of such 
holdings in breach of the second subparagraph of Article 26(1). 

(d) 

(e) 

(f) 

(g) 

(h) 

(i) 

(j) 

(k) 

(l) 

an  institution  fails  to  have  in  place  governance  arrangements  required  by  the 
competent authorities in accordance with the national provisions implementing 
Article 73;  

an  institution  fails  to  report  information  on  the  obligation  to  meet  own  funds 
requirements  set  out  in  Article  87  of  Regulation  [inserted  by  OP]  to  the 
competent authorities as required by the first subparagraph of Article 95(1) of 
that Regulation; 

an  institution  fails  to  report  to  the  competent  authorities  the  data  on  capital 
requirements required by Article 96 of Regulation [inserted by OP];  

an  institution  fails  to  report  information  about  a  large  exposure  to  the 
competent authorities as required by Article 383(1) of Regulation [inserted by 
OP];  

an  institution  fails  to  report  information  on  liquidity  to  the  competent 
authorities as required by Article 403(1) and 403(2) of Regulation [inserted by 
OP]; 

an institution fails to report information on the leverage ratio to the competent 
authorities as required by Article 417(1) of Regulation [inserted by OP]; 

an institution fails to hold at all times liquid assets as required by Article 401 of 
Regulation [inserted by OP]; 

an  institution  incurs  an  exposure  in  excess  of  the  limits  laid  down  in  Article 
384 of Regulation [inserted by OP]; 

an  institution  which  is  exposed  to  the  credit  risk  of  a  securitisation  position 
without  satisfying  the  conditions  laid  down  in  Article  394  of  Regulation 
[inserted by OP];  

(m)  an institution fails to disclose information in accordance with Articles 418(1) to 

(3) or 436(1) of Regulation [inserted by OP]. 

2. 

Without prejudice to the supervisory powers of competent authorities in accordance 
with Article 64, Member States shall ensure that in the cases referred to in paragraph 
1, the administrative sanctions and measures that can be applied include at least the 
following:  

(a) 

(b) 

a public statement which indicates the natural or legal person and the nature of 
the breach; 

an order requiring the natural or legal person to cease the conduct and to desist 
from a repetition of that conduct; 

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(c) 

(d) 

(e) 

in  case  of  an  institution,  withdrawal  of  the  authorisation  of  the  institution  in 
accordance with Article 18; 

a temporary ban against any member of the institution's management body or 
any  other  natural  person,  who  is  held  responsible,  to  exercise  functions  in 
institutions; 

in case of a legal person, administrative pecuniary sanctions of up to 10 % of 
the  total  annual  turnover  of  that  legal  person  in  the  preceding  business  year; 
where the legal person is a subsidiary of a parent undertaking, the relevant total 
annual  turnover  shall  be  the  total  annual  turnover  resulting  from  the 
consolidated  account  of  the  ultimate  parent  undertaking  in  the  preceding 
business year; 

(f) 

in  case  of  a  natural  person,  administrative  pecuniary  sanctions  of  up  to  EUR 
5 000 000, or in the Member States where the Euro is not the official currency, 
the corresponding value in the national currency on the date of entry into force 
of this Directive; 

(g) 

administrative  pecuniary  sanctions  of  up  to  twice  the  amount  of  the  profits 
gained or losses avoided because of the breach where those can be determined. 

Article 68 

Publication of sanctions 

Member  States  shall  ensure  that  the  competent  authorities  publish  any  sanction  or  measure 
imposed  for  breach  of  the  provisions  of  Regulation  [inserted  by  OP]  or  of  the  national 
provisions  adopted  in  the  implementation  of  this  Directive  without  undue  delay  including 
information on the type and nature of the breach and the identity of persons responsible for it, 
unless  such  publication  would  seriously  jeopardise  the  stability  of  financial  markets.  Where 
publication  would  cause  a  disproportionate  damage  to  the  parties  involved,  competent 
authorities shall publish the sanctions on an anonymous basis. 

Article 69 

Effective application of sanctions and exercise of sanctioning powers by competent 
authorities  

1. 

Member  States  shall  ensure  that  when  determining  the  type  of  administrative 
sanctions  or  measures  and  the  level  of  administrative  pecuniary  sanctions,  the 
competent authorities shall take into account all relevant circumstances, including: 

(a) 

the gravity and the duration of the breach; 

(b) 

the degree of responsibility of the responsible natural or legal person;  

(c) 

the financial strength of the responsible natural or legal person, as indicated by 
the  total  turnover of  the responsible  legal  person  or  the  annual  income  of  the 
responsible natural person; 

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(d) 

(e) 

(f) 

the importance of profits gained or losses avoided by the responsible natural or 
legal person, insofar as they can be determined; 

the  losses  for  third  parties  caused  by  the  breach,  insofar  as  they  can  be 
determined; 

the  level  of  cooperation  of  the  responsible  natural  or  legal  person  with  the 
competent authority; 

(g)  previous breaches by the responsible natural or legal person. 

EBA  shall  issue  guidelines  addressed  to  competent  authorities  in  accordance  with 
Article  16  of  Regulation  (EU)  No  1093/2010  on  types  of  administrative  measures 
and sanctions and level of administrative pecuniary sanctions.  

Article 70 

Reporting of breaches  

that  competent  authorities  establish  effective 
Member  States  shall  ensure 
mechanisms  to  encourage  reporting  of  breaches  of  the  provisions  of  Regulation 
[inserted by OP] and of national provisions implementing this Directive to competent 
authorities. 

2. 

1. 

2. 

The mechanisms referred to in paragraph 1 shall include at least: 

(a) 

specific procedures for the receipt of reports on breaches and their follow-up;  

(b) 

(c) 

appropriate  protection  for  employees  of  institutions  who  denounce  breaches 
committed within the institution; 

protection  of  personal  data  concerning  both  the  person  who  reports  the 
breaches  and  the  natural  person  who  is  allegedly  responsible  for  a  breach,  in 
compliance with the principles laid down in Directive 95/46/EC. 

3. 

Member States shall require institutions to have in place appropriate procedures for 
their employees to report breaches internally through a specific channel. 

Article 71 

Right of appeal 

Member  States  shall  ensure  that  decisions  and  measures  taken  in  pursuance  of  laws, 
regulations  and  administrative  provisions  adopted  in  accordance  with  this  Directive  or 
Regulation [inserted by OP] are subject to the right of appeal. 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. 

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Chapter 2 

Review Processes 

SECTION I 

INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS 

Article 72 

Internal Capital 

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 institution concerned. 

SECTION II 

ARRANGEMENTS, PROCESSES AND MECHANISMS OF INSTITUTIONS 

SUB-SECTION 1 

GENERAL PRINCIPLES 

Article 73 

Procedures and internal control mechanisms 

1. 

Competent  authorities  shall  require  every  institution  to  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, adequate internal 
control mechanisms, including sound administration and accounting procedures, and 
remuneration policies and practices that are consistent with and promote sound and 
effective risk management. 

2. 

The  arrangements,  processes  and  mechanisms  referred  to  in  paragraph  1  shall  be 
comprehensive  and  proportionate  to  the  nature,  scale  and  complexity  of  the 

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institution's activities. The technical criteria established in Sub-sections 2 and 3 shall 
be taken into account. 

3. 

EBA shall develop draft regulatory technical standards to specify the arrangements, 
processes  and  mechanisms  referred  to  in  paragraph  1,  in  accordance  with  the 
principles of proportionality and comprehensiveness set out in paragraph 2. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure established in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

EBA shall submit those draft regulatory technical standards to the Commission by 31 
December 2015. 

Article 74 

Oversight of remuneration policies 

1. 

2. 

3. 

Competent  authorities  shall  use  the  information  collected  in  accordance  with  the 
criteria for disclosure established in Article 435 (1) of Regulation [inserted by OP] to 
benchmark  remuneration  trends  and  practices.  The  competent  authorities  shall 
provide EBA with that information. 

EBA  shall  issue  guidelines  on  sound  remuneration  policies  which  comply  with  the 
principles set out in Article 88. The guidelines shall take into account the principles 
on  sound  remuneration  policies  set  out  in  the  Commission  Recommendation  of  30 
April 2009 on remuneration policies in the financial services sector39. 

ESMA  shall  cooperate  closely  with  EBA  to  develop  guidelines  on  remuneration 
policies for categories of staff involved in the provision of investment services and 
activities within the meaning of point 2 of Article 4(1) of Directive 2004/39/EC. 

EBA shall use the information received from the competent authorities in accordance 
with paragraph 3 to benchmark remuneration trends and practices at Union level. 

Competent  authorities  shall  collect  information  on  the  number  of  individuals  per 
institution  in  pay  brackets  of  at  least  EUR  1  million,  including  the  business  area 
involved  and  the  main  elements  of  salary,  bonus,  long-term  award  and  pension 
contribution. That information shall be forwarded to EBA, which shall publish it on 
an  aggregate  home  Member  State  basis  in  a  common  reporting  format.  EBA  may 
elaborate guidelines to facilitate the implementation of this paragraph and ensure the 
consistency of the information collected. 

39 

C(2009) 3159. 

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SUB-SECTION 2 

TECHNICAL CRITERIA CONCERNING THE ORGANISATION AND TREATMENT OF 
RISKS 

Article 75 

Treatment of risks 

1. 

2. 

3. 

4. 

5. 

Competent  authorities  shall  ensure  that  the  management  body  approves  and 
periodically reviews the strategies and policies for taking up, managing, monitoring 
and  mitigating  the  risks  the  institution  is  or  might  be  exposed  to,  including  those 
posed  by  the  macroeconomic  environment  in  which  it  operates  in  relation  to  the 
status of the business cycle. 

Competent  authorities  shall  ensure  that  the  management  body  in  its  supervisory 
function devotes sufficient time to consideration of risk issues. 

Competent  authorities  shall  ensure  that  institutions  establish  a  risk  committee 
composed of members of the management body who do not perform any executive 
function  in  the  institution  concerned.  Members  of  the  risk  committee  shall  have 
appropriate knowledge, skills and expertise to fully understand and monitor the risk 
strategy and the risk appetite of the institution.  

The risk committee shall advise the management body in its supervisory function on 
the  institution’s  overall  current  and  future  risk  appetite  and  strategy  and  assist  the 
management  body  in  its  supervisory  function  in  overseeing  the  implementation  of 
that strategy.  

Competent  authorities  may  authorise  an  institution  not  to  establish  a  separate  risk 
committee taking into account the nature, scale and complexity of credit institution's 
activities. 

Competent  authorities  shall  ensure  that  the  risk  committee,  or,  when  such  a 
committee has not been established, the management body in its supervisory function 
regularly  communicates  with  the  institution’s  risk  management  function  and  shall, 
where appropriate, have access to external expert advice. 

The  risk  committee,  or,  when  such  a  committee  has  not  been  established,  the 
management body in its supervisory function, shall determine the nature, the amount, 
the format, and the frequency of the information on risk it shall receive from senior 
management.  

Competent authorities shall ensure that institutions have a risk management function 
independent  from  the  operational  and  management  functions  and  which  shall  have 
sufficient authority, stature, resources and access to the management body.  

The  risk  management  function  shall  be  responsible  for  identifying,  measuring,  and 
reporting on risk exposures. The risk management function shall be actively involved 

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in  elaborating  institution‘s  risk  strategy  and  in  all  material  risk  management 
decisions. The risk management function shall be able to deliver a complete view on 
the whole range of risks of the institution.  

The  risk  management  function  shall  be  able  to  report  directly  to  the  management 
body  in  its  supervisory  function  when  necessary,  independent  from  senior 
management. 

The head of the risk management function shall be an independent senior executive 
with distinct responsibility for the risk management function. Where the nature, scale 
and complexity of the activities of the institution do not justify a specially appointed 
person, another senior person within the institution may fulfil this function, provided 
there is no conflict of interest. 

The  head  of  the  risk  management  function  shall  not  be  removed  without  prior 
approval  of  the  management  body  in  its  supervisory  function  and  shall  be  able  to 
have  direct  access  to  the  management  body  in  its  supervisory  function  when 
necessary. 

Article 76 

Internal Approaches for calculating own funds requirements 

Competent authorities shall ensure that institutions take appropriate steps to develop 
internal  ratings  based  approaches  for  calculating  own  funds  requirements  for  credit 
risk where their exposures are material in absolute terms and where they have at the 
same time a large number of material counterparties. 

Competent authorities shall ensure that institutions take appropriate steps to develop 
and use  internal  models for calculating own funds requirements for specific risk of 
debt instruments in the trading book, together with internal models to calculate own 
funds  requirements  for  default  and  migration risk  where  their  exposures  to  specific 
risk are material in absolute terms and where they have a large number of material 
positions in debt instruments of different issuers. 

EBA  shall  develop  draft  regulatory  technical  standards  to  further  define  the  notion 
'exposures which are material in absolute terms' referred to in paragraph 1 and 2 and 
the  thresholds  for  large  numbers  of  material  counterparties  and  positions  in  debt 
instruments  of  different  issuers.  EBA  shall  submit  those  draft  regulatory  technical 
standards to the Commission by 1 January 2014.  

Power  is  conferred  on  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Article 14 of Regulation (EU) No 1093/2010. 

1. 

2. 

3. 

Article 77  

Credit and counterparty risk 

Competent authorities shall ensure the following: 

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(a) 

(b) 

Credit-granting  is  based  on  sound  and  well-defined  criteria.  The  process  for 
approving, amending, renewing, and re-financing credits is clearly established; 

Institutions have internal methodologies that enable them to assess the credit risk of 
exposures to individual borrowers, securities or counterparties as well as credit risk 
at  the  portfolio  level.  In  particular,  internal  methodologies  shall  not  rely  solely  or 
mechanistically  on  external  ratings.  Where  own  funds  requirements  are  based  on  a 
rating by an External Credit Assessment Institution (ECAI) or based on the fact that 
an  exposure  is  unrated,  institutions  shall  use  their  own  methodologies  in  order  to 
assess  the  appropriateness  of  the  rank-ordering  of  credit  risk  implicit  in  those  own 
funds  requirements  and  take  the  result  into  account  in  their  allocation  of  internal 
capital; 

(c) 

The  ongoing  administration  and  monitoring  of  the  various  credit  risk-bearing 
portfolios  and  exposures  of  institutions,  including  for  identifying  and  managing 
problem  credits  and  for  making  adequate  value  adjustments  and  provisions,  is 
operated through effective systems; 

(d) 

Diversification  of  credit  portfolios  is  adequate  given  an  institution's  target  markets 
and overall credit strategy. 

Article 78 

Residual risk 

Competent  authorities  shall  ensure  that  the  risk  that  recognised  credit  risk  mitigation 
techniques used by institutions prove less effective than expected is addressed and controlled 
by means of written policies and procedures. 

Article 79 

Concentration risk 

Competent  authorities  shall  ensure  that  the  concentration  risk  arising  from  exposures  to 
counterparties,  including  central  counterparties,  groups  of  connected  counterparties,  and 
counterparties  in  the  same  economic  sector,  geographic  region  or  from  the  same  activity  or 
commodity,  the  application  of  credit  risk  mitigation  techniques,  and  including  in  particular 
risks  associated  with  large  indirect  credit  exposures  such  as  a  single  collateral  issuer,  is 
addressed and controlled by means of written policies and procedures. 

Article 80  

Securitisation risk 

1. 

Competent  authorities  shall  ensure  that  the  risks  arising  from  securitisation 
transactions  in  relation  to  which  the  credit  institutions  are  investor,  originator  or 
sponsor, including reputational risks, such as arise in relation to complex structures 
through  appropriate  policies  and 
or products,  are  evaluated  and  addressed 

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2. 

1. 

2. 

3. 

procedures, to ensure that the economic substance of the transaction is fully reflected 
in the risk assessment and management decisions. 

Competent authorities shall ensure that liquidity plans to address the implications of 
both  scheduled  and  early  amortisation  exist  at  institutions  which  are  originators  of 
revolving securitisation transactions involving early amortisation provisions. 

Article 81  

Market risk 

Competent  authorities  shall  ensure  that  policies  and  processes  for  the  measurement 
and management of all material sources and effects of market risks are implemented.  

When  the  short  position  falls  due  before  the  long  position,  competent  authorities 
shall  ensure  that  institutions  also  take  measures  against  the  risk  of  a  shortage  of 
liquidity. 

The internal capital shall be adequate for material market risks that are not subject to 
an own funds requirement.  

Institutions,  which  have,  in  calculating  own  funds  requirements  for  position  risk  in 
accordance  with  Part  Three,  Title  IV,  Chapter  2  of  Regulation  [inserted  by  OP], 
netted  off  their  positions  in  one  or  more  of  the  equities  constituting  a  stock-index 
against one or more positions in the stock-index future or other stock-index product 
shall  have  adequate  internal  capital  to  cover  the  basis  risk  of  loss  caused  by  the 
future's or other product's value not moving fully in line with that of its constituent 
equities;  institutions  shall  also  do  this  when  they  hold  opposite  positions  in  stock-
index  futures  which  are  not  identical  in  respect  of  either  their  maturity  or  their 
composition or both. 

Where using the treatment in Article 334 of Regulation [inserted by OP], institutions 
shall  ensure  that  they  hold  sufficient  internal  capital  against  the  risk  of  loss  which 
exists between the time of the initial commitment and the next working day. 

Article 82  

Interest risk arising from non-trading book activities 

Competent  authorities  shall  ensure  that  institutions  implement  systems  to  evaluate  and 
manage the risk arising from potential changes in interest rates that affect an institution's non-
trading activities. 

Article 83 

Operational risk 

1. 

Competent authorities shall ensure that institutions implement policies and processes 
to evaluate and manage the exposure to operational risk, including to low-frequency 

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2. 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

high-severity events. Institutions shall articulate what constitutes operational risk for 
the purposes of those policies and procedures. 

Competent authorities shall ensure that contingency and business continuity plans are 
in  place  to  ensure  an  institution's  ability  to  operate  on  an  ongoing  basis  and  limit 
losses in the event of severe business disruption. 

Article 84 

Liquidity risk 

Competent  authorities  shall  ensure  that  institutions  have  robust  strategies,  policies, 
processes  and  systems  for  the  identification,  measurement,  management  and 
monitoring of liquidity risk over an appropriate period of time, including intra-day, 
so as to ensure that institutions maintain adequate levels of liquidity buffers. Those 
strategies,  policies,  processes  and  systems  shall  be  tailored  to  business  lines, 
currencies,  branches  and  legal  entities  and  shall  include  adequate  allocation 
mechanisms of liquidity costs, benefits and risks.  

The  strategies,  policies,  processes  and  systems  referred  to  in  paragraph  1  shall  be 
proportionate  to  the  complexity,  risk  profile,  scope  of  operation  of  the  institutions 
and  risk  tolerance  set  by  the  management  body  and  reflect  the  institution's 
importance  in  each  Member  State  in  which  it  carries  on  business.  Institutions  shall 
communicate risk tolerance to all relevant business lines. 

Competent  authorities  shall  ensure  that  institutions  develop  methodologies  for  the 
identification,  measurement,  management  and  monitoring  of  funding  positions. 
Those methodologies shall include the current and projected material cash-flows in 
and  arising  from  assets,  liabilities,  off-balance-sheet  items,  including  contingent 
liabilities and the possible impact of reputational risk. 

Competent authorities shall ensure that institutions distinguish between pledged and 
unencumbered  assets  that  are  available  at  all  times,  in  particular  during  emergency 
situations.  They  shall  also  take  into  account  the  legal  entity  in  which  assets  reside, 
the country where assets are legally recorded either in a register or in an account as 
well  as  their  eligibility  and  shall  monitor  how  assets  can  be  mobilised  in  a  timely 
manner. 

Competent authorities shall ensure that institutions also have regard to existing legal, 
regulatory  and  operational  limitations  to  potential  transfers  of  liquidity  and 
unencumbered assets amongst entities, both within and outside the EEA. 

Competent  authorities  shall  ensure  that  institutions  consider  different  liquidity  risk 
mitigation tools, including a system of limits and liquidity buffers in order to be able 
to withstand a range of different stress events and an adequately diversified funding 
structure  and  access  to  funding  sources.  Those  arrangements  shall  be  reviewed 
regularly. 

Competent  authorities  shall  ensure  that  alternative  scenarios  on  liquidity  positions 
and  on  risk  mitigants  are  considered  and  the  assumptions  underlying  decisions 
concerning  the  funding  position  shall  be  reviewed  regularly.  For  these  purposes, 

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8. 

9. 

10. 

1. 

2. 

alternative  scenarios  shall  address,  in  particular,  off-balance  sheet  items  and  other 
contingent  liabilities,  including  those  of  Securitisation  Special  Purpose  Entities 
(SSPE)  or  other  special  purpose  entities,  as  referred  to  in  Regulation  [inserted  by 
OP], in relation to which the institution acts as sponsor or provides material liquidity 
support. 

Competent  authorities  shall  ensure  that  institutions  consider  the  potential  impact  of 
institution-specific,  market-wide and combined alternative scenarios. Different time 
periods and varying degrees of stress conditions shall be considered. 

Competent  authorities  shall  ensure  that  institutions  adjust  their  strategies,  internal 
policies and limits on liquidity risk and develop effective contingency plans, taking 
into account the outcome of the alternative scenarios referred to in paragraph 7. 

Competent  authorities  shall  ensure  that  institutions  have  in  place  liquidity  recovery 
plans setting out adequate strategies and proper implementation measures in order to 
address possible liquidity shortfalls, including in relation to branches established in 
another Member State. Those plans shall be regularly tested, updated on the basis of 
the  outcome  of  the  alternative  scenarios  set  out  in  paragraph  7,  be  reported  to  and 
approved  by  senior  management,  so  that  internal  policies  and  processes  can  be 
adjusted  accordingly.  Institutions  shall  take  the  necessary  operational  steps  in 
advance to ensure that liquidity recovery plans can be implemented immediately. For 
credit institutions, such operational steps shall include holding collateral immediately 
available for central bank funding. This includes holding collateral where necessary 
in the currency of another Member State, or currency of a third country to which the 
credit  institution  has  exposures,  and  where  operationally  necessary  within  the 
territory of a host Member State or third country whose currency it is exposed to. 

Article 85 

Risk of excessive leverage 

Competent  authorities  shall  ensure  that  the  institution  has  policies  and  processes  in 
place  for  the  identification,  management  and  monitoring  of  the  risk  of  excessive 
leverage. Indicators for the risk of excessive leverage shall include the leverage ratio 
determined  in  accordance  with  Article  416  of  Regulation  [inserted  by  OP]  and 
mismatches between assets and obligations. 

Competent  authorities  shall  ensure  that  institutions  address  the  risk  of  excessive 
leverage  in  a  precautionary  manner  by  taking  due  account  of  potential  increases  in 
the  risk  of  excessive  leverage  caused  by  reductions  of  the  institution's  own  funds 
through expected or realised losses, depending on the applicable accounting rules. To 
this end, institutions shall be able to withstand a range of different stress events with 
respect to the risk of excessive leverage. 

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SUB-SECTION 3 

GOVERNANCE  

Article 86 

Governance arrangements 

1. 

Member  States  shall  ensure  that  the  management  body  defines  and  oversees  the 
implementation  of  the  governance  arrangements  that  ensure  effective  and  prudent 
management of an institution, including the segregation of duties in the organisation 
and the prevention of conflicts of interest.  

Those arrangements shall comply with the following principles: 

(a) 

(b) 

(c) 

the  management  body  shall  have  the  overall  responsibility  for  the  institution, 
including  approving  and  overseeing  the  implementation  of  the  institution's 
strategic objectives, risk strategy and internal governance; 

the management body shall be responsible for providing effective oversight of 
senior management; 

the  chairman  of  the  management  body  of  an  institution  shall  not  exercise 
simultaneously  the  functions  of  a  chief  executive  officer  within  the  same 
institution, unless justified and authorised by competent authorities. 

Competent  authorities  shall  ensure  that  the  management  body  monitors  and 
periodically  assesses  the  effectiveness  of  the  institution’s  governance  arrangements 
and takes appropriate steps to address any deficiencies.  

2. 

Competent authorities shall ensure that institutions establish a nomination committee 
composed of members of the management body who do not perform any executive 
function in the institution concerned.  

The nomination committee shall carry out the following: 

(a) 

identify  and  recommend,  for  the  approval  of  the  management  body  in  its 
supervisory  function  candidates  to  fill  management  body  vacancies.  In  doing 
so, the nomination committee shall evaluate the balance of knowledge, skills, 
diversity and experience of the management body, prepare a description of the 
roles  and  capabilities  for  a  particular  appointment,  and  assess  the  time 
commitment expected; 

(b)  periodically  assess  the  structure,  size,  composition  and  performance  of  the 
management body, and make recommendations to the management body in its 
supervisory function with regard to any changes; 

(c) 

periodically assess the knowledge, skills and experience of individual members 
of the management body and of the management body collectively, and report 
this to the management body in its supervisory function; 

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(d)  periodically  review  the  policy  of  the  management  body  for  selection  and 
appointment  of  senior  management  and  make  recommendations  to  the 
management body. 

In performing its duties, the nomination committee shall be able to use any forms of 
resources  it  deems  appropriate,  including  external  advice,  and  shall  receive 
appropriate funding from the institution to this effect. 

Competent  authorities  may  authorise  an  institution  not  to  establish  a  separate 
nomination  committee  taking  into  account  the  nature,  scale  and  complexity  of  the 
institution's activities. 

Where, under national law, the management body does not have any competence in 
the process of appointment of its members, this paragraph shall not apply. 

Article 87 

Management body 

1. 

Competent authorities shall require that all members of the management body of any 
institution  shall  at  all  times  be  of  sufficiently  good  repute,  possess  sufficient 
knowledge, skills and experience and commit sufficient time to perform their duties. 
Members  of  the  management  body  shall,  in  particular,  fulfil  the  following 
requirements:  

(a)  Members  of  the  management  body  shall  commit  sufficient  time  to  perform 
their functions in the institution. They shall not combine at the same time more 
than one of the following combinations: 

(i) 

one executive directorship with two non-executive directorships;  

(ii) 

four non-executive directorships.  

Executive  or  non-executive  directorships  held  within  the  same  group  shall 
count as one single directorship. 

Competent authorities may authorise a member of the management body of an 
institution  to  combine  more  directorships  than  permitted,  if  this  does  not 
prevent the member from committing sufficient time to perform its functions in 
the  institution,  taking  into  account  individual  circumstances  and  the  nature, 
scale and complexity of the institution's activities. 

(b)  The management body shall possess adequate collective knowledge, skills and 
experience  to  be  able  to  understand  the  institution's  activities,  including  the 
main risks. 

(c)  Each  member  of  the  management  body  shall  act  with  honesty,  integrity  and 
independence  of  mind  to  effectively  challenge  the  decisions  of  the  senior 
management where necessary. 

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2. 

3. 

4. 

Competent  authorities  shall  require  institutions  to  devote  adequate  human  and 
financial  resources  to  the  induction  and  training  of  members  of  the  management 
body. 

Competent authorities shall require institutions to take into account diversity as one 
of  the  criteria  for  selection  of  members  of  the  management  body.  In  particular, 
institutions  shall  put  in  place  a  policy  promoting  gender,  age,  geographical, 
educational and professional diversity on the management body. 

Competent  authorities  shall  use  the  information  collected  in  accordance  with  the 
criteria  for  disclosure  established  in  Article  422  of  Regulation  [inserted  by  OP]  to 
benchmark  diversity  practices.  The  competent  authorities  shall  provide  EBA  with 
that information. EBA shall use this information to benchmark diversity practices at 
Union level. 

5. 

 EBA shall develop draft regulatory technical standards to specify the following: 

(a) 

(b) 

(c) 

(d) 

(e) 

the  notion  of  sufficient  time  commitment  of  a  member  of  the  management 
body to perform his functions, in relation to the individual circumstances and 
the nature, scale and complexity of activities of the institution which competent 
authorities  must  take  into  account  when  they  authorise  a  member  of  the 
management  body  of  an  institution  to  combine  more  directorships  than 
permitted as referred to in paragraph 1(a); 

the  notion  of  adequate  collective  knowledge,  skills  and  experience  of  the 
management body as referred to in paragraph 1(b); 

the notions of honesty, integrity and independence of mind of a member of the 
management body as referred to in paragraph 1(c); 

the notion of adequate human and financial resources devoted to the induction 
and training of members of the management body as referred to in paragraph 2; 

the notion of diversity to be taken into account for the selection of members of 
the management body as referred to in paragraph 3.  

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred  to  in  the  first  subparagraph  in  accordance  with  Articles  10  to  14  of 
Regulation (EU) No 1093/2010. 

EBA shall submit those draft regulatory technical standards  to the Commission by 
31 December 2015. 

Article 88  

Remuneration policies 

1. 

The application of Articles 88(2) to 91 shall be ensured by competent authorities for 
institutions  at  group,  parent  company  and  subsidiary  levels,  including  those 
established in offshore financial centres. 

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2. 

Competent  authorities  shall  ensure  that,  when  establishing  and  applying  the  total 
remuneration  policies,  inclusive  of  salaries  and  discretionary  pension  benefits,  for 
categories of staff including senior management, risk takers, staff engaged in control 
functions  and  any  employee  receiving  total  remuneration  that  takes  them  into  the 
same remuneration bracket as senior management and risk takers, whose professional 
activities  have  a  material  impact  on  their  risk  profile,  institutions  comply  with  the 
following  principles  in  a  way  and  to  the  extent  that  is  appropriate  to  their  size, 
internal organisation and the nature, the scope and the complexity of their activities: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

the  remuneration  policy  is  consistent  with  and  promotes  sound  and  effective 
risk management and does not encourage risk-taking that exceeds the level of 
tolerated risk of the institution; 

the remuneration policy is in line with the business strategy, objectives, values 
and  long-term  interests  of  the  institution,  and  incorporates  measures  to  avoid 
conflicts of interest; 

the management body, in its supervisory function, of the institution adopts and 
periodically  reviews  the  general  principles  of  the  remuneration  policy  and  is 
responsible for its implementation; 

the implementation of the remuneration policy is, at least annually, subject to 
central  and  independent  internal  review  for  compliance  with  policies  and 
procedures  for  remuneration  adopted  by  the  management  body  in  its 
supervisory function; 

staff engaged in control functions are independent from the business units they 
oversee,  have  appropriate  authority,  and  are  remunerated  in  accordance  with 
the achievement of the objectives linked to their functions, independent of the 
performance of the business areas they control; 

the remuneration of the senior officers in the risk management and compliance 
functions  is  directly  overseen  by  the  remuneration  committee  referred  to  in 
Article 91 or, if such a committee has not been established, by the management 
body in its supervisory function. 

Article 89 

Institutions that benefit from government intervention 

In  the  case  of  institutions  that  benefit  from  exceptional  government  intervention,  the 
following principles shall apply in addition to those set out in Article 88(2): 

(a) 

(b) 

variable  remuneration  is  strictly  limited  as  a  percentage  of  net  revenue  where  it  is 
inconsistent  with  the  maintenance  of  a  sound  capital  base  and  timely  exit  from 
government support; 

the relevant competent authorities require institutions to restructure remuneration in a 
manner aligned with sound risk management and long-term growth, including, where 
appropriate,  establishing  limits  to  the  remuneration  of  the  persons  who  effectively 
direct the business of the credit institution within the meaning of Article 13(1); 

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(c) 

no variable remuneration is paid to the persons who effectively direct the business of 
the institution within the meaning of Article 13(1) unless justified. 

Article 90 

Variable elements of remuneration 

1. 

For  variable  elements  of  remunerations,  the  following  principles  shall  apply  in 
addition to those set out in Article 88(2): 

(a)  where remuneration is performance related, the total amount of remuneration is 
based on a combination of the assessment of the performance of the individual 
and of the business unit concerned and of the overall results of the institution 
and when assessing individual performance, financial and non-financial criteria 
are taken into account; 

(b) 

the assessment of the performance is set in a multi-year framework in order to 
ensure  that  the  assessment  process  is  based  on  longer-term  performance  and 
that  the  actual  payment  of  performance-based  components  of  remuneration  is 
spread over a period which takes account of the underlying business cycle of 
the credit institution and its business risks; 

(c) 

the  total  variable  remuneration  does  not  limit  the  ability  of  the  institution  to 
strengthen its capital base; 

(d)  guaranteed  variable  remuneration  is  exceptional  and  occurs  only  when  hiring 

new staff and is limited to the first year of employment; 

(e) 

fixed and variable components of total remuneration are appropriately balanced 
and the fixed component represents a sufficiently high proportion  of the total 
remuneration  to  allow  the  operation  of  a  fully  flexible  policy  on  variable 
remuneration  components,  including  the  possibility  to  pay  no  variable 
remuneration component; 

(f) 

institutions  shall  set  the  appropriate  ratios  between  the  fixed  and  the  variable 
component of the total remuneration; 

(g)  payments  related  to  the  early  termination  of  a  contract  reflect  performance 
achieved over time and are designed in a way that does not reward failure; 

(h) 

(i) 

(j) 

the  measurement  of  performance  used  to  calculate  variable  remuneration 
components  or  pools  of  variable  remuneration  components  includes  an 
adjustment for all types of current and future risks and takes into account the 
cost of the capital and the liquidity required; 

the  allocation  of  the  variable  remuneration  components  within  the  credit 
institution shall also take into account all types of current and future risks; 

a  substantial  portion,  and  in  any  event  at  least  50 %,  of  any  variable 
remuneration shall consist of an appropriate balance of the following: 

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(i) 

shares or equivalent ownership interests, subject to the legal structure of 
the  institution  concerned  or  share-linked  instruments  or  equivalent  non-
cash instruments, in case of a non-listed institution; 

(ii)  where appropriate, other instruments within the meaning of Article 49 of 
Regulation  [inserted  by  OP]  that  adequately  reflect  the  credit  quality  of 
the institution as a going concern. 

The  instruments  referred  to  in  this  point  shall  be  subject  to  an  appropriate 
retention  policy  designed  to  align  incentives  with  the  longer-term  interests  of 
the  institution.  Member  States  or  their  competent  authorities  may  place 
restrictions  on  the  types  and  designs  of  those  instruments  or  prohibit  certain 
instruments as appropriate. This point shall be applied to both the portion of the 
variable remuneration component deferred in accordance with point (k) and the 
portion of the variable remuneration component not deferred; 

(k) 

a  substantial  portion,  and  in  any  event  at  least  40 %,  of  the  variable 
remuneration component is deferred over a period which is not less than three 
to 5 years and is correctly aligned with the nature of the business, its risks and 
the activities of the member of staff in question. 

Remuneration payable under deferral arrangements shall vest no faster than on 
a  pro-rata  basis.  In  the  case  of  a  variable  remuneration  component  of  a 
particularly  high  amount,  at  least  60 %  of  the  amount  shall  be  deferred.  The 
length  of  the  deferral  period  shall  be  established  in  accordance  with  the 
business  cycle,  the  nature  of  the  business,  its  risks  and  the  activities  of  the 
member of staff in question; 

(l) 

the variable remuneration, including the deferred portion, is paid or vests only 
if  it  is  sustainable  according  to  the  financial  situation  of  the  institutions  as  a 
whole,  and  justified  according  to  the  performance  of  the  institution,  the 
business unit and the individual concerned. 

Without prejudice to the general principles of national contract and labour law, 
the  total  variable  remuneration  shall  generally  be  considerably  contracted 
where  subdued  or  negative  financial  performance  of  the  institution  occurs, 
taking  into  account  both  current  remuneration  and  reductions  in  payouts  of 
amounts  previously  earned, 
through  malus  or  clawback 
including 
arrangements; 

(m) 

the pension policy is in line with the business strategy, objectives, values and 
long-term interests of the credit institution; 

If the employee leaves the institution before retirement, discretionary pension 
benefits shall be held by the institution for a period of 5 years in the form of 
instruments referred to in point (j). In case of an employee reaching retirement, 
discretionary  pension  benefits  shall  be  paid  to  the  employee  in  the  form  of 
instruments referred to in point (j) subject to a five-year retention period; 

(n) 

staff members are required to undertake not to use personal hedging strategies 
or  remuneration-  and  liability-related  insurance  to  undermine  the  risk 
alignment effects embedded in their remuneration arrangements; 

EN 

88 

   EN 

(o)  variable remuneration is not paid through vehicles or methods that facilitate the 
non-compliance with the requirements of this Directive or Regulation [inserted 
by OP]. 

2. 

EBA shall develop draft regulatory technical standards with respect to the criteria to 
determine  the  appropriate  ratios  between  fixed  and  the  variable  component  of  the 
total remuneration referred to in point (e) and to specifying the classes of instruments 
that satisfy the conditions laid down point (j)(ii). 

EBA shall submit those draft regulatory technical standards to the Commission by 31 
December 2013. 

Power  is  conferred  on  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Article 10 to 14 of Regulation (EU) No 1093/2010.  

Article 91 

Remuneration Committee 

1. 

2. 

Competent  authorities  shall  ensure  that  institutions  that  are  significant  in  terms  of 
their size, internal organisation and the nature, the scope and the complexity of their 
activities establish a remuneration committee. The remuneration committee shall be 
constituted  in  such  a  way  as  to  enable  it  to  exercise  competent  and  independent 
judgment  on  remuneration  policies  and  practices  and  the  incentives  created  for 
managing risk, capital and liquidity. 

Competent  authorities  shall  ensure  that  the  remuneration  committee  is  responsible 
for the preparation of decisions regarding remuneration, including those which have 
implications for the risk and risk management of the credit institution concerned and 
which are to be taken by the management body in its supervisory function. The Chair 
and  the  members  of  the  remuneration  committee  shall  be  members  of  the 
management  body  who  do  not  perform  any  executive  functions  in  the  credit 
institution  concerned.  When  preparing  such  decisions,  the  remuneration  committee 
shall  take  into  account  the  long-term  interests  of  shareholders,  investors  and  other 
stakeholders in the institution. 

SECTION III 

SUPERVISORY REVIEW AND EVALUATION PROCESS 

Article 92 

Supervisory review and evaluation 

1. 

Taking  into  account  the  technical  criteria  set  out  in  Article  94,  the  competent 
authorities  shall  review  the  arrangements,  strategies,  processes  and  mechanisms 
implemented  by  the  institutions  to  comply  with  this  Directive  and  Regulation 
[inserted  by  OP]  and  evaluate  the  risks  to  which  the  institutions  are  or  might  be 

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exposed,  and  the  risks  that  an  institution  poses  to  the  financial  system  taking  into 
account  the  identification  and  measurement  of  systemic  risk  under  Article  23  of 
Regulation (EU) No 1093/2010. 

The  scope  of  the  review  and  evaluation  referred  to  in  paragraph  1  shall  cover  all 
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 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 size, systemic importance, 
nature, scale and complexity of the activities of the institution concerned and taking 
into  account  the  principle  of  proportionality.  The  review  and  evaluation  shall  be 
updated at least on an annual basis. 

Article 93 

Supervision of mixed financial holding companies 

Where a mixed financial holding company is subject to equivalent provisions under 
this  Directive  and  under  Directive  2002/87/EC,  in  particular  in  terms  of  risk-based 
supervision,  the  consolidating  supervisor  may,  after  consulting  the  other  competent 
authorities responsible for the supervision of subsidiaries, apply only the provision of 
Directive 2002/87/EC to that mixed financial holding company. 

Where a mixed financial holding company is subject to equivalent provisions under 
this Directive and under Directive 2009/138/EC, in particular in terms of risk-based 
supervision,  the  consolidating  supervisor  may,  in  agreement  with  the  group 
supervisor  in  the  insurance  sector,  apply  to  that  mixed  financial  holding  company 
only the provision of the Directive relating to the most significant financial sector as 
defined in Article 3(2) of Directive 2002/87/EC. 

The  consolidating  supervisor  shall  inform  EBA  and  the  European  Insurance  and 
Occupational  Pensions  Authority  (EIOPA)  established  by  Regulation  (EU)  No 
1094/201040 of the decisions taken under paragraphs 1 and 2. 

EBA, EIOPA and ESMA shall, through the Joint Committee referred to in Article 54 
of those Regulations, develop guidelines aimed at converging supervisory practices 
and  shall,  within  three  years  of  the  adoption  of  those  guidelines,  develop  draft 
regulatory technical standards. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 

Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 
establishing  a  European  Supervisory  Authority  (European  Insurance  and  Occupational  Pensions 
Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC, OJ 
L 331, 15.12.2010, p. 48. 

2. 

3. 

4. 

1. 

2. 

3. 

4. 

40 

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Articles  10  to  14  of  Regulation  (EU)  No  1093/2010,  of  Regulation  (EU)  No 
1094/2010 and of Regulation (EU) No 1095/201041. 

Article 94 

Technical criteria for the supervisory review and evaluation 

1. 

In  addition  to  credit,  market  and  operational  risks,  the  review  and  evaluation 
performed  by  competent  authorities  pursuant  to  Article  92  shall  include  all  of  the 
following: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

the  results  of  the  stress  test  carried  out  by  institutions  applying  an  IRB 
approach; 

the  exposure  to  and  management  of  concentration  risk  by  institutions, 
including  their  compliance  with  the  requirements  laid  down  in  Part  Four  of 
Regulation [inserted by OP] and Article 79 of this Directive; 

the  robustness,  suitability  and  manner  of  application  of  the  policies  and 
procedures implemented by institutions for the management of the residual risk 
associated with the use of recognized credit risk mitigation techniques; 

the  extent  to  which  the  own  funds  held  by  an  institution  in  respect  of  assets 
which it has securitised are adequate having regard to the economic substance 
of the transaction, including the degree of risk transfer achieved; 

the exposure to, measurement and management of liquidity risk by institutions, 
including the development of alternative scenario analyses, the management of 
risk  mitigants  (in  particular  the  level,  composition  and  quality  of  liquidity 
buffers) and effective contingency plans; 

the impact of diversification effects and how such effects are factored into the 
risk measurement system; 

the results of stress tests carried out by institutions using an internal model to 
calculate  market  risk  own  funds  requirements  under  Part  Three,  Title  IV, 
Chapter 5 of Regulation [inserted by OP]; 

(h) 

the geographical location of institutions' exposures; 

(i) 

the business model of the institution. 

For the purposes of point (e) of paragraph 1, the competent authorities shall regularly 
carry  out  a  comprehensive  assessment  of  the  overall  liquidity  risk  management  by 
institutions  and  promote  the  development  of  sound  internal  methodologies.  While 
conducting  those  reviews,  the  competent  authorities  shall  have  regard  to  the  role 

Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 
establishing a European Supervisory Authority (European Securities and Markets Authority), amending 
Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC, OJ L 331, 15.12.2010, p. 
84. 

2. 

41 

EN 

91 

   EN 

 
                                                 
3. 

4. 

5. 

6. 

7. 

1. 

played  by  institutions  in  the  financial  markets.  The  competent  authorities  in  one 
Member  State  shall  duly  consider  the  potential  impact  of  their  decisions  on  the 
stability of the financial system in all other Member States concerned. 

Competent  authorities  shall  monitor  whether  an  institution  has  provided  implicit 
support to a securitisation. If an institution is found to have provided implicit support 
on more than one occasion the competent authority shall take appropriate measures 
reflective  of  the  increased  expectation  that  it  will  provide  future  support  to  its 
securitisation thus failing to achieve a significant transfer of risk. 

For  the  purposes  of  the  determination  to  be  made  under  Article  92(3)  of  this 
Directive,  competent  authorities  shall  consider  whether  the  valuation  adjustments 
taken  for  positions/portfolios  in  the  trading  book,  as  set  out  in  Article  100  of 
Regulation [inserted by OP], enable the institution to sell or hedge out its positions 
within  a  short  period  without  incurring  material  losses  under  normal  market 
conditions.  

The  review  and  evaluation  performed  by  competent  authorities  shall  include  the 
exposure  of  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 institutions. 

The  review  and  evaluation  performed  by  competent  authorities  shall  include  the 
exposure of institutions to the risk of excessive leverage as reflected by indicators of 
excessive  leverage,  including  the  leverage  ratio  determined  in  accordance  with 
Article  416  of  Regulation  [inserted  by  OP]  .  In  determining  the  adequacy  of  the 
leverage  ratio  of  institutions  and  of  the  arrangements,  strategies,  processes  and 
mechanisms  implemented  by  institutions  to  manage  the  risk  of  excessive  leverage, 
competent authorities may take into account the business model of these institutions. 

The  review  and  evaluation  performed  by  competent  authorities  shall  include 
governance arrangements of institutions, their corporate culture and values, and the 
ability  of  members  of  the  management  body to  perform  their  duties.  In  performing 
this review and evaluation, competent authorities shall, at least, review agendas and 
supporting documents for meetings of the management body and its committees, and 
the results of the internal or external evaluation of performance of the management 
body. 

Article 95 

Application of supervisory measures to a type of institutions 

Where  the  competent  authorities  determine  under  Article  92  that  a  certain  type  of 
institutions  is  or  might  be  exposed  to  similar  risks  or  pose  similar  risks  to  the 
financial system, they may apply Articles 98 and 99 in a similar manner to this type 
of institutions.  

The  type  of  institutions  may  in  particular  be  determined  according  to  the  criteria 
referred to in Article 94(1) (h) and (i). 

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2. 

1. 

The competent authorities shall notify EBA where they apply paragraph 1. EBA shall 
monitor  supervisory  practices  and  issue  guidelines  to  specify  how  similar  risks 
should be assessed. Those guidelines shall be adopted in accordance with Article 16 
of Regulation (EU) No 1093/2010. 

Article 96 

Supervisory examination programme 

The  competent  authorities  shall,  at  least  annually,  adopt  a  supervisory  examination 
programme  for  the  institutions  they  supervise.  Such  programme  shall  take  into 
account  the  supervisory  review  and  evaluation  process  under  Article  92.  It  shall 
contain the following elements: 

(a)  An  indication  how  competent  authorities  intend  to  carry  out  their  tasks  and 

allocate their resources.  

(b)  An  identification  which  institutions  are  intended  to  be  subject  to  enhanced 
supervision and make provision for such supervision as set out in paragraph 3.  

(c)  A plan for on-site inspections at the premises used by a institution, including its 
branches  and  subsidiaries  established  in  other  Member  States  in  accordance 
with Articles 53, 114 and 116.  

2. 

Supervisory examination programmes shall include the following institutions: 

(a) 

Institutions  for  which  the  results  of  the  stress  tests  referred  to  point  (g)  of 
Article  94(1)  and  Article  97,  or  the  outcome  of  the  supervisory  review  and 
evaluation process under Article 92, indicate significant risks to their ongoing 
financial soundness  or  indicate breaches of  the  requirements  of  this  Directive 
and Regulation [inserted by OP]; 

(b) 

Institutions that pose systemic risk to the financial system; 

(c)  Any other institution for which the competent authorities deem this necessary. 

3. 

When deemed appropriate under Article 92, one or more of the following measures 
shall be taken if necessary:  

(a)  An increase in the number or frequency of on-site inspections of the institution;  

(b)  A permanent presence of the competent authority at the institution;  

(c)  Additional or more frequent reporting by the institution;  

(d)  Additional  or  more  frequent  review  of  the  operational,  strategic  or  business 

plans of the institution; 

(e)  Thematic examinations monitoring specific risks that are likely to materialise. 

EN 

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1. 

2. 

1. 

2. 

3. 

4. 

Article 97 

Supervisory stress testing 

The  competent  authorities  shall  carry  out  annual  supervisory  stress  tests  on 
institutions they supervise, where the review and evaluation process under Article 92 
shows  the  need  for  such  tests,  and  the  stress  tests  carried  out  under  Article  32  of 
Regulation  (EU)  No  1093/2010  do  not  sufficiently  address  the  outcome  of  the 
process under Article 92.  

EBA  shall  issue  guidelines  in  accordance  with  Article  16  of  Regulation  (EU)  No. 
1093/2010  to  ensure  that  common  methodologies  are  used  by  the  competent 
authorities when conducting annual supervisory stress tests.  

Article 98 

Ongoing review of the permission to use internal approaches 

Competent authorities shall continuously review, or re-assess at least every 3 years, 
institutions'  compliance  with  internal  approaches.  They  shall  have  particular  regard 
to changes in the institution's business and to the implementation of those approaches 
to new products. 

For  institutions  that  have  been  granted  permission  to  use  internal  approaches, 
competent  authorities  shall  in  particular  review  and  assess  that  the  institution  uses 
well developed and up-to-date techniques and practices.  

If  for  an  internal  market  risk  model  numerous  overshootings  referred  to  in  Article 
355  of  Regulation  [inserted  by  OP]  indicate  that  the  model  is  not  sufficiently 
accurate, the competent authorities shall revoke the permission for using the internal 
model  or  impose  appropriate  measures  to  ensure  that  the  model  is  improved 
promptly. 

its 

for 

implementation.  The  competent  authorities  shall 

If  an  institution  is  permitted  to  use  an  internal  approach  but  the  approach  does  not 
meet  the  applicable  requirements  anymore,  the  competent  authorities  shall  require 
the institution to present a plan to restore compliance with the requirements and set a 
deadline 
require 
improvements  to  that  plan  if  it  is  unlikely  to  result  in  full  compliance  or  if  the 
deadline  is  inappropriate.  If  the  institution  is  unlikely  to  be  able  to  restore 
compliance  within  an  appropriate  deadline,  the  permission  to  use  the  internal 
approach shall be revoked or limited to compliant areas or those where compliance 
can be achieved within an appropriate deadline. If it is likely that the non-compliance 
leads  to  inadequate  own  funds,  the  competent  authorities  shall  timely  require 
commensurate  additional  own  funds.  The  competent  authorities  shall  monitor  the 
implementation  of  the  plan  and  shall  impose  appropriate  sanctions  in  accordance 
with Article 64 if the institution materially lags behind its plan. 

5. 

In order to promote consistent soundness of internal approaches in the Union, EBA 
shall  analyse  internal  approaches  across  institutions,  including  the  consistency  of 
implementation  of  the  definition  of  default  and  how  those  institutions  treat  similar 
risks or exposures.  

EN 

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EBA shall develop guidelines in accordance with Article 16 of Regulation (EU) No 
1093/2010, which contain benchmarks on the basis of that analysis. 

Competent authorities shall take into account that analysis and those benchmarks for 
the review of the permissions they grant to institutions to use internal approaches. 

SECTION IV 

SUPERVISORY MEASURES 

Article 99 

Supervisory measures 

1. 

2. 

1. 

2. 

Competent authorities shall require any institution to take the necessary measures at 
an early stage to address relevant problems in the following circumstances: 

(a)  The institution does not meet the requirements of this Directive;  

(b)  An institution is likely to breach the requirements of this Directive; 

For the purposes of paragraph 1 competent authorities shall have the powers referred 
to in Article 64. 

Article 100  

Specific own funds requirements 

A  specific  own  funds  requirement  related  to  risks  not  covered  by  Article  1  of 
Regulation [inserted by OP] shall be imposed by the competent authorities at least on 
the  institutions  which  do  not  meet  the  requirements  laid  down  in  Articles  72  to  74 
and  Article  382  of  Regulation  [inserted  by  OP],  or  in  respect  of  which  a  negative 
determination  has  been  made  on  the  issue  described  in  Article  92(3),  if  the  sole 
application  of  other  measures  is  unlikely  to  improve  the  arrangements,  processes, 
mechanisms and strategies sufficiently within an appropriate timeframe. 

For the  purposes of determining  the appropriate level of own funds on the basis of 
the review and evaluation carried out in accordance with Article 92, the competent 
authorities shall assess whether any imposition of a specific own funds requirement 
in  excess  of  the  capital  requirement  is  necessary  to  capture  risks  to  which  an 
institution is or might be exposed, taking into account the following: 

(a) 

(b) 

the  quantitative  and  qualitative  aspects  of  institutions’  assessment  process 
referred to in Article 72; 

institutions’ arrangements, processes and mechanisms referred to in Article 73 
and 74; 

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(c) 

the  outcome  of  the  review  and  evaluation  carried  out  in  accordance  with 
Article 92. 

3. 

Where  an  institution  reports  to  the  competent  authority  in  accordance  with  Article 
367(5)  of  Regulation  [inserted  by  OP]  that  the  stress  test  results  referred  to  in  that 
Article  materially  exceed  its  own  funds  requirement  for  the  correlation  trading 
portfolio, the competent authorities shall consider a specific own funds requirement 
against the correlation trading portfolio in order to cover that excess. 

Article 101 

Specific publication requirements 

1. 

Member States shall empower the competent authorities to require institutions: 

(a) 

(b) 

to publish information referred to in Part Eight of Regulation [inserted by OP] 
more than once per year, and to set deadlines for publication; 

to  use  specific  media  and  locations  for  publications  other  than  the  financial 
statements;  Member  States  shall  empower  competent  authorities  to  require 
parent undertakings to publish annually either in full or by way of references to 
equivalent  information,  a  description  of  their  legal  structure  and  governance 
and  organisational  structure  of  the  group  of  institutions  in  accordance  with 
Articles 14(3), 73(1) and 104(2). 

Article 102 

Consistency of supervisory reviews, evaluations and supervisory measures 

1. 

Competent authorities shall notify EBA of the following: 

(a) 

the functioning of their review and evaluation system referred to in Article 92; 

(b) 

the  methodology  used  to  base  decisions  referred  to  in  Articles  94(3)  and 
Articles 97, 98 and 99 on the systems referred to in point (a). 

Competent  authorities  shall  notify  EBA  of  the  decisions  including  their  reasons, 
which they have taken in accordance with Articles 94(3) and Articles 97, 98 and 99. 

2. 

EBA shall annually report to the European Parliament and the Council on the degree 
of convergence of the application of the provisions of this Chapter between Member 
States. 

In order to increase the degree of such convergence, EBA shall conduct peer reviews 
in accordance with Article 30 of Regulation (EU) No 1093/2010. 

3. 

EBA  shall  develop  draft  regulatory  technical  standards  to  further  specify  the 
following: 

(a) 

the  common  procedure  and  methodology  for  review  and  evaluation  systems 
referred to in paragraph 1 and in Article 92; 

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(b) 

the criteria concerning the organisation and treatment of the risks referred to in 
Articles  75  to  85  and  the  criteria  on  review  and  evaluation  by  the  competent 
authorities as referred to in Article 92. 

4. 

Powers are delegated to the Commission to adopt the regulatory technical standards 
referred to in paragraph 3 in accordance with Articles 10 to 14 of Regulation (EU) 
No 1093/2010. 

EBA  shall  submit  the  draft  technical  standards  referred  to  in  paragraph  3  to  the 
Commission by 31 December 2015. 

SECTION V 

LEVEL OF APPLICATION 

Article 103 

Internal capital adequacy assessment process 

1. 

2. 

3. 

Competent authorities shall require every institution which is neither a subsidiary in 
the  Member  State  where  it  is  authorised  and  supervised,  nor  a  parent  undertaking, 
and  every  institution  not  included  in  the  consolidation  pursuant  to  Article  17  of 
Regulation  [inserted by  OP], to meet the obligations laid down in Article 72  on an 
individual basis.  

Competent authorities may exempt an institution that meets the conditions laid down 
in Article 9 of Regulation [inserted by OP] from Article 72. 

Where the competent authorities waive the application of own fund requirements on 
a  consolidated  basis  provided  for  in  Article  14  of  Regulation  [inserted  by  OP],  the 
requirements of Article 72 shall apply on an individual basis. 

Competent  authorities  shall  require  parent  institutions  in  a  Member  State,  to  the 
extent and in the manner prescribed in Article 16 of Regulation [inserted by OP], to 
meet  the  obligations  laid  down  in  Article  72  on  the  basis  of  their  consolidated 
financial situation.  

Competent  authorities  shall  require  institutions  controlled  by  a  parent  financial 
holding company or a parent mixed financial holding company in a Member State, to 
the extent and in the manner prescribed in Article 16 of Regulation [inserted by OP], 
to  meet  the  obligations  laid  down  in  Article  72  on  the  basis  of  the  consolidated 
financial  situation  of  that  financial  holding  company  or  mixed  financial  holding 
company. 

Where more than one institution is controlled by a parent financial holding company 
or  a  parent  mixed  financial  holding  company  in  a  Member  State,  the  first 
subparagraph  shall  apply  only  to  the  institution  to  which  supervision  on  a 
consolidated basis applies in accordance with Article 106. 

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4. 

Competent authorities shall require subsidiary institutions to apply the requirements 
laid down in Article 72 on a sub-consolidated basis if those institutions, or the parent 
undertaking  where  it  is  a  financial  holding  company  or  mixed  financial  holding 
company,  have  a  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. 

5. 

The consolidated financial situation shall be determined in accordance with Part One, 
Title II, Chapter 2, Sections 2 and 3 of Regulation [inserted by OP] 

1. 

2. 

3. 

1. 

2. 

Article 104 

Institutions' arrangements, processes and mechanisms 

Competent authorities shall require institutions to meet the obligations laid down in 
Section II on an individual basis, unless Member States make use of the derogation 
provided for in Article 6 of Regulation [inserted by OP]. 

Competent authorities shall require the parent undertakings and subsidiaries subject 
to this Directive to meet the obligations laid down in Section II of this Chapter on a 
consolidated or  sub-consolidated basis, to ensure that their  arrangements, processes 
and mechanisms required by those provisions are consistent and well-integrated and 
that any data and information relevant to the purpose of supervision can be produced. 
In  particular,  they  shall  ensure  that  subsidiaries  not  subject  to  this  Directive 
implement  arrangements,  processes  and  mechanisms  to  ensure  compliance  with 
those provisions.  

Obligations  resulting  from  Section  II  of  this  Chapter  concerning  subsidiary 
undertakings, not themselves subject to this directive, shall not apply if the EU parent 
credit  institution  or  credit  institutions  controlled  by  an  EU  parent  financial  holding 
company  or  EU  parent  mixed  financial  holding  company,  can  demonstrate  to  the 
competent authorities that the application of Section II is unlawful under the laws of 
the third country where the subsidiary is established. 

Article 105 

Review and evaluation and supervisory measures 

Competent  authorities  shall  apply  the  review  and  evaluation  process  referred  to  in 
Section III and the supervisory measures referred to in Section IV in accordance with 
the level of application of the requirements of Regulation [inserted by OP] set out in 
Part One, Title I of that Regulation. 

Where the competent authorities waive the application of own funds requirements on 
a consolidated basis provided for in Article 14 of Regulation [inserted by OP] , the 
requirements  of  Article  92  of  this  Directive  shall  apply  to  the  supervision  of 
investment firms on an individual basis.  

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Chapter 3 

Supervision on a consolidated basis 

SECTION I 

PRINCIPLES FOR CONDUCTING SUPERVISION ON A CONSOLIDATED BASIS 

1. 

2. 

3. 

4. 

Article 106 

Determination of the consolidating supervisor 

Where a parent undertaking is a parent institution in a Member State or an EU parent 
institution, supervision on  a consolidated basis shall be  exercised by the  competent 
authorities that authorised it. 

Where  the  parent  of  a  institution  is  a  parent  financial  holding  company  or  parent 
mixed  financial  holding  company  in  a  Member  State  or  an  EU  parent  financial 
holding company or  EU parent  mixed financial holding company, supervision on a 
consolidated basis shall be exercised by the competent authorities that authorised the 
institution.  

Where institutions authorised in two or more Member States have as their parent the 
same parent financial holding company or parent mixed financial holding company 
in a Member State or the same EU parent financial holding company or EU parent 
mixed  financial  holding  company,  supervision  on  a  consolidated  basis  shall  be 
exercised  by  the  competent  authorities  of  the  institution  authorised  in  the  Member 
State  in  which  the  financial  holding  company  or  mixed  financial  holding  company 
was set up. 

Where  the  parent  undertakings  of  institutions  authorised  in  two  or  more  Member 
States comprise more than one financial holding company or mixed 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. 

Where more than one institution authorised in the Union has as its parent the same 
financial  holding  company  or  mixed  financial  holding  company  and  none  of  these 
institutions has been authorised in the Member State in which the financial holding 
company  or  mixed  financial  holding  company  was  set  up,  supervision  on  a 
consolidated basis shall be exercised by the competent authority that authorised the 
institution  with  the  largest  balance  sheet  total,  which  shall  be  considered,  for  the 
purposes  of  this  Directive,  as  the  institution  controlled  by  an  EU  parent  financial 
holding company or EU parent mixed financial holding company. 

5. 

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, 

EN 

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taking into account the 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  institution,  EU  parent  financial 
holding  company,  EU  parent  mixed  financial  holding  company,  or  institution  with 
the largest balance sheet total, as appropriate, an opportunity to state its opinion on 
that decision. 

6. 

The  competent  authorities  shall  notify  the  Commission  and  EBA  of  any  agreement 
falling within paragraph 5. 

Article 107 

Coordination of supervisory activities by the consolidating supervisor 

1. 

In  addition  to  the  obligations  imposed  by  the  provisions  of  this  Directive  and 
Regulation  [inserted  by  OP],  the  consolidating  supervisor  shall  carry  out  the 
following tasks: 

(a) 

coordination  of  the  gathering  and  dissemination  of  relevant  or  essential 
information in going concern and emergency situations; 

(b)  planning and coordination of supervisory activities in going-concern situations, 
including  in  relation  to  the  activities  referred  to  in  Title  VII,  Chapter  3,  in 
cooperation with the competent authorities involved; 

(c) 

planning  and  coordination  of  supervisory  activities  in  cooperation  with  the 
competent  authorities  involved,  and  if  necessary  with  central  banks,  in 
preparation 
including  adverse 
developments  in  institutions  or  in  financial  markets  using,  where  possible, 
existing defined channels of communication for facilitating crisis management. 

for  and  during  emergency  situations, 

2. 

3. 

Where the consolidating supervisor fails to carry out the tasks referred to in the first 
subparagraph  or  where  the  competent  authorities  do  not  cooperate  with  the 
consolidating  supervisor  to  the  extent  required  in  carrying  out  the  tasks  in  the  first 
subparagraph,  any  of  the  competent  authorities  concerned  may  refer  the  matter  to 
EBA,  which  may  act  in  accordance  with  Article  19  of  Regulation  (EU)  No 
1093/2010. 

The planning and coordination of supervisory activities referred to in paragraph 1(c) 
includes  exceptional  measures  referred  to  in  Article 112(1)(d)  and  112(4)(b),  the 
preparation  of  joint  assessments,  the  implementation  of  contingency  plans  and 
communication to the public. 

Article 108 

Joint decisions on institution-specific prudential requirements 

1. 

The  consolidating  supervisor  and  the  competent  authorities  responsible  for  the 
supervision  of  subsidiaries  of  an  EU  parent  institution  or  an  EU  parent  financial 

EN 

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   EN 

 
holding company or EU parent mixed financial holding company in a Member State 
shall do everything within their power to reach a joint decision: 

(a)  on  the  application  of  Articles 72  and  92  to  determine  the  adequacy  of  the 
consolidated level of own funds held by the group of institutions with respect 
to its financial situation and risk profile and the required level of own funds for 
the application of Article 98 to each entity within the group of institutions and 
on a consolidated basis; 

(b)  on measures to address any significant matters and material findings relating to 
liquidity supervision including relating to the adequacy of the organisation and 
the treatment of risks as required pursuant to Article 84 and relating to the need 
for  institution-specific  parameters  different  from  those  set  out  in  Part  Six  of 
Regulation [inserted by OP] in accordance with Article 99 of this Directive. 

2. 

The joint decision referred to in paragraph 1 shall be reached: 

(a) 

for the purposes of paragraph 1(a) within four months after submission by the 
consolidating supervisor of a report containing the risk assessment of the group 
in  accordance  with  Articles  72  and  92  to  the  other  relevant  competent 
authorities.  

(b) 

for  the  purposes  of  paragraph  1(b)  within  one  month  after  submission  by  the 
consolidating supervisor of a report containing the assessment of the liquidity 
risk profile of the group in accordance with Article 84. 

The  joint  decision  shall  also  duly  consider  the  risk  assessment  of  subsidiaries 
performed by relevant competent authorities in accordance with Articles 72 and 92. 

The  joint  decision  shall  be  set  out  in  a  document  containing  the  fully  reasoned 
decision  which  shall  be  provided  to  the  EU  parent  institution  by  the  consolidating 
supervisor.  In  the  event  of  disagreement,  the  consolidating  supervisor  shall  at  the 
request  of  any  of  the  other  competent  authorities  concerned  consult  EBA.  The 
consolidating supervisor may consult EBA on its own initiative. 

In the absence of such a joint decision between the competent authorities within the 
time period referred to in paragraph 2, a decision on the application of Articles 72, 
84,  92,  98  and  99  shall  be  taken  on  a  consolidated  basis  by  the  consolidating 
supervisor  after  duly  considering  the  risk  assessment  of  subsidiaries  performed  by 
relevant  competent  authorities.  If,  at  the  end  of  the  time  period  referred  to  in 
paragraph  2,  any  of  the  competent  authorities  concerned  has  referred  the  matter  to 
EBA  in  accordance  with  Article  19  of  Regulation  (EU)  No  1093/2010,  the 
consolidating  supervisor  shall  defer  its  decision  and  await  any  decision  that  EBA 
may  take  in  accordance  with  Article  19(3)  of  that  Regulation,  and  shall  take  its 
decision  in  conformity  with  the  decision  of  EBA.  The  time  period  referred  to  in 
paragraph  2  shall  be  deemed  the  conciliation  period  within  the  meaning  of  the 
Regulation.  EBA  shall  take  its  decision  within  1  month.  The  matter  shall  not  be 
referred to EBA after the end of the four month period or after a joint decision has 
been reached. 

The decision on the application of Articles 72, 84, 92, 98 and 99 shall be taken by the 
respective competent authorities responsible for supervision of subsidiaries of an EU 

3. 

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parent  credit  institution  or  a  EU  parent  financial  holding  company  or  EU  parent 
mixed  financial  holding  company  on  an  individual  or  sub-consolidated  basis  after 
duly  considering  the  views  and  reservations  expressed  by  the  consolidating 
supervisor.  If,  at  the  end  of  the  time  period  referred  to  in  paragraph  2,  any  of  the 
competent authorities concerned has referred the matter to EBA in accordance with 
Article  19  of  Regulation  (EU)  No  1093/2010,  the  competent  authorities  shall  defer 
their decision and await any decision that EBA shall take in accordance with Article 
19(3) of that Regulation, and shall take its decision in conformity with the decision 
of  EBA.  The  time  period  referred  to  in  the  paragraph  2  shall  be  deemed  the 
conciliation  period  within  the  meaning  of  that  Regulation.  EBA  shall  take  its 
decision within 1 month. The matter shall not be referred to EBA after the end of the 
four-month period or after a joint decision has been reached. 

The decisions shall be set out in a document containing the fully reasoned decisions 
and shall take into account the risk assessment, views and reservations of the other 
competent  authorities  expressed  during  the  time  period  referred  to  in  paragraph  2. 
The  document  shall  be  provided  by  the  consolidating  supervisor  to  all  competent 
authorities concerned and to the EU parent institution. 

Where  EBA  has  been  consulted,  all  the  competent  authorities  shall  consider  its 
advice, and explain any significant deviation therefrom. 

4. 

The  joint  decision  referred  to  in  paragraph  1  and  the  decisions  taken  by  the 
competent  authorities  in  the  absence  of  a  joint  decision  referred  to  in  paragraph  3 
shall be binding on the competent authorities in the Member State concerned. 

The  joint  decision  referred  to  in  the  paragraph  2  and  any  decision  taken  in  the 
absence  of a joint decision  in accordance with paragraph 3, shall be updated on an 
annual  basis  or,  in  exceptional  circumstances,  where  a  competent  authority 
responsible for the supervision of subsidiaries of an EU parent institution or, an EU 
parent  financial  holding  company  or  EU  parent  mixed  financial  holding  company 
makes a written and fully reasoned request to the consolidating supervisor to update 
the  decision  on  the  application  of  Articles  98  and  99.  In  the  latter  case,  the  update 
may be addressed on a bilateral basis between the consolidating supervisor and the 
competent authority making the request. 

5. 

EBA  shall  develop  draft  implementing  technical  standards  to  ensure  uniform 
conditions of application of the joint decision process referred to in this Article, with 
regard to the application of Articles 72, 84, 92, 98 and 99 with a view to facilitating 
joint decisions. 

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Article 15 of Regulation (EU) No 1093/2010. 

EBA  shall  develop  draft  implementing  technical  standards  for  submission  to  the 
Commission by 31 December 2013. 

EN 

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   EN 

1. 

2. 

1. 

2. 

Article 109 

Information requirements in emergency situations 

Where  an  emergency  situation,  including  a  situation  as  defined  in  Article  18  of 
Regulation  (EU)  No  1093/2010  or  a  situation  of  adverse  developments  in  markets, 
arises,  which  potentially  jeopardises  the  market  liquidity  and  the  stability  of  the 
financial  system  in  any  of  the  Member  State  where  entities  of  a  group  have  been 
authorised or where significant branches referred to in Article 52 are established, the 
consolidating supervisor shall, subject to Chapter 1, Section 2, and where applicable 
Articles 54  and  58  of  Directive 2004/39/EC,  alert  as  soon  as  is  practicable,  EBA, 
ESRB  and  the  authorities  referred  to  in  Article  59(4)  and  in  Article  60  and  shall 
communicate  all  information  essential  for  the  pursuance  of  their  tasks.  Those 
obligations  shall  apply  to  all  competent  authorities  if  the  authority  referred  to  in 
Article  59(4)  becomes  aware  of  a  situation  described  in  the  first  subparagraph,  it 
shall  alert  as  soon  as  is  practicable  the  competent  authorities  referred  to  in  Article 
107, and EBA. 

Where possible, the competent authority and the authority referred to in Article 59(4) 
shall use existing defined channels of communication. 

The  consolidating  supervisor  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 110 

Coordination and cooperation arrangements 

In order to facilitate and establish effective supervision, the consolidating supervisor 
and the other competent authorities shall have written coordination and cooperation 
arrangements in place. 

Under  these  arrangements  additional  tasks  may  be  entrusted  to  the  consolidating 
supervisor and procedures for the decision-making process and for cooperation with 
other competent authorities, may be specified. 

The  competent  authorities  responsible  for  authorising  the  subsidiary  of  a  parent 
undertaking  which  is  a  institution  may,  by  bilateral  agreement,  in  accordance  with 
Article  28  of  Regulation  (EU)  No  1093/2010,  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.  EBA  shall  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 European Banking Committee. 

EN 

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Article 111 

Colleges of supervisors 

1. 

The  consolidating  supervisor  shall  establish  colleges  of  supervisors  to  facilitate  the 
exercise  of  the  tasks  referred  to  in  Articles  107  to  109(1)  and  subject  to  the 
confidentiality  requirements  of  paragraph  2  of  this  Article  and  compatibility  with 
Union  law,  ensure  appropriate  coordination  and  cooperation  with  relevant  third-
country competent authorities where appropriate. 

EBA  shall  contribute  to  promoting  and  monitoring  the  efficient,  effective  and 
consistent  functioning  of  colleges  of  supervisors  referred  to  in  this  Article  in 
accordance  with  Article  21  of  Regulation  (EU)  No  1093/2010.  To  that  end,  EBA 
shall  participate  as  it  deems  appropriate  and  shall  be  considered  as  a  competent 
authority for that purpose. 

Colleges of supervisors shall provide a framework for the consolidating supervisor, 
EBA and the other competent authorities concerned to carry out the following tasks: 

(a) 

(b) 

(c) 

(d) 

(e) 

exchanging information among themselves and with EBA in accordance with 
Article 21 of Regulation (EU) No 1093/2010; 

agreeing  on  voluntary  entrustment  of  tasks  and  voluntary  delegation  of 
responsibilities where appropriate; 

determining  supervisory  examination  programmes  referred  to  in  Article  94 
based on a risk assessment of the group in accordance with Article 92; 

increasing  the  efficiency  of  supervision  by  removing  unnecessary  duplication 
of  supervisory  requirements,  including  in  relation  to  the  information  requests 
referred to in Articles 109 and 112(2); 

consistently  applying  the  prudential  requirements  under  this  Directive  and 
Regulation  [inserted  by  OP]  across  all  entities  within  a  group  of  institutions 
without prejudice to the options and discretions available in Union legislation; 

(f) 

applying  Article  107(1)(c)  taking  into  account  the  work  of  other  forums  that 
may be established in that area. 

The competent authorities participating in the colleges of supervisors and EBA shall 
cooperate  closely.  The  confidentiality  requirements  under  Chapter  1,  Section  II  of 
this Directive, and Articles 54 and 58 of Directive 2004/39/EC shall not prevent the 
competent  authorities  from  exchanging  confidential  information  within  colleges  of 
supervisors.  The  establishment  and  functioning  of  colleges  of  supervisors  shall  not 
affect the rights and responsibilities of the competent authorities under this Directive 
and regulation [inserted by OP]. 

The  establishment  and  functioning  of  the  colleges  shall  be  based  on  written 
arrangements  referred  to  in  Article  110,  determined  after  consultation  with 
competent authorities concerned by the consolidating supervisor. 

2. 

3. 

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4. 

EBA  shall  develop  draft  regulatory  technical  standards  in  order  to  specify  general 
conditions of functioning of the colleges of supervisors. 

EBA shall submit these draft regulatory technical standards by 31 December 2013. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

5. 

EBA shall develop draft implementing technical standards in order to determine the 
operational functioning of the colleges of supervisors. 

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Article 15 of Regulation (EU) No 1093/2010. 

EBA  shall  submit  these  draft  implementing  technical  standards  by  31  December 
2013. 

The  competent  authorities  responsible  for  the  supervision  of  subsidiaries  of  an  EU 
parent  credit  institution  or  an  EU  parent  financial  holding  company  or  EU  parent 
mixed  financial  holding  company  and  the  competent  authorities  of  a  host  Member 
State where significant branches as referred to in Article 52 are established, central 
banks  as  appropriate,  and  third  countries'  competent  authorities  where  appropriate 
and subject to confidentiality requirements that are equivalent, in the opinion of all 
competent  authorities,  to  the  requirements  under  Chapter  1  Section II,  and  where 
applicable, Articles 54 and 58 of  Directive 2004/39/EC,  may participate in  colleges 
of supervisors. 

The consolidating supervisor shall chair the meetings of the college and shall decide 
which competent authorities participate in a meeting or in an activity of the college. 
The consolidating supervisor shall keep all members of the college fully informed, in 
advance,  of  the  organisation  of  such  meetings,  the  main  issues  to  be  discussed  and 
the  activities  to  be  considered.  The  consolidating  supervisor  shall  also  keep  all  the 
members  of  the  college  fully  informed,  in  a  timely  manner,  of  the  actions  taken  in 
those meetings or the measures carried out. 

The  decision  of  the  consolidating  supervisor  shall  take  account  of  the  relevance  of 
the  supervisory  activity  to  be  planned  or  coordinated  for  those  authorities,  in 
particular the potential impact on the stability of the financial system in the Member 
States  concerned  referred  to  in  Article  8  and  the  obligations  referred  to  in  Article 
52(2). 

The  consolidating  supervisor,  subject  to  the  confidentiality  requirements  under 
Chapter  1,  Section 
II,  and  where  applicable,  Articles 54  and  58  of 
Directive 2004/39/EC,  shall  inform  EBA  of  the  activities  of  the  college  of 
supervisors,  including  in  emergency  situations,  and  communicate  to  EBA  all 
information  that  is  of  particular  relevance  for  the  purposes  of  supervisory 
convergence. 

6. 

7. 

8. 

9. 

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Article 112 

Cooperation obligations 

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 and Regulation [inserted by 
OP].  In  this  regard,  the  competent  authorities  shall  communicate  on  request  all 
relevant  information  and  shall  communicate  on  their  own  initiative  all  essential 
information. 

The  competent  authorities  shall  cooperate  with  EBA  for  the  purposes  of  this 
Directive and Regulation [inserted by OP], in accordance with Regulation (EU) No 
(EU) No 1093/2010. 

The competent authorities shall provide EBA with all information necessary to carry 
out its duties under this Directive, Regulation [inserted by OP], and under Regulation 
(EU) No 1093/2010, in accordance with Article 35 of that Regulation. 

Information  referred  to  in  the  first  subparagraph  shall  be  regarded  as  essential  if  it 
could materially influence the assessment of the financial soundness of a institution 
or financial institution in another Member State. 

In  particular,  consolidating  supervisors  of  EU  parent  credit  institutions  and 
institutions controlled by EU parent financial holding companies or EU parent mixed 
financial holding companies shall provide the competent authorities in other Member 
States  who  supervise  subsidiaries  of  these  parent  undertakings  with  all  relevant 
information.  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) 

the  group's 

legal  structure  and 

Identification  of 
the  governance  and 
organisational structure, including all regulated entities, non-regulated entities, 
non-regulated subsidiaries and significant branches belonging to the group, the 
parent  undertakings,  in  accordance  with  Articles  14(3),  73(1)  and  104(2),  as 
well as of the competent authorities of the regulated entities in the group;  

(b)  procedures  for  the  collection  of  information  from  the  institutions  in  a  group, 

and the verification of that information; 

(c) 

adverse  developments  in  institutions  or  in  other  entities  of  a  group,  which 
could seriously affect the institutions; 

(d)  major  sanctions  and  exceptional  measures  taken  by  competent  authorities  in 
accordance with this Directive, including the imposition of a specific own fund 
requirement under Article 100 and the imposition of any limitation on the use 
of the Advanced Measurement Approach for the calculation of the own funds 
requirements under Article 301 (2) of Regulation [inserted by OP]. 

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2. 

The competent authorities may refer to EBA any of the following situations: 

(a)  where a competent authority has not communicated essential information; 

(b)  where a request for cooperation, in particular to exchange relevant information, 

has been rejected or has not been acted upon within a reasonable time. 

Without prejudice to Article 258 TFEU, EBA may act in accordance with the powers 
conferred on it under Article 19 of Regulation (EU) No 1093/2010. 

3. 

4. 

The  competent  authorities  responsible  for  the  supervision  of  credit  institutions 
controlled  by  an  EU  parent  credit  institution  shall  whenever  possible  contact  the 
consolidating  supervisor  when  they  need  information  regarding  the  implementation 
of  approaches  and  methodologies  set  out  in  this  Directive  and  Regulation  [inserted 
by OP] that may already be available to that competent authority. 

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: 

(a) 

changes  in  the  shareholder,  organisational  or  management  structure  of  credit 
institutions  in  a  group,  which  require  the  approval  or  authorisation  of 
competent authorities; and 

(b)  major  sanctions  or  exceptional  measures  taken  by  competent  authorities, 
including the imposition of an additional own funds requirement under Article 
99  and  the  imposition  of  any  limitation  on  the  use  of  the  Advances 
Measurement  Approaches  for  the  calculation  of  the  own  funds  requirements 
under Article 301 (2) of Regulation [inserted by OP]. 

For the purposes of point (b), the consolidating supervisor 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. 

Article 113 

Verification of information concerning entities in other Member States 

Where, in applying this Directive and Regulation [inserted by OP], the competent authorities 
of one Member State wish in specific cases to verify the information concerning a institution, 
a  financial  holding  company,  a  mixed  financial  holding  company,  a  financial  institution,  an 
ancillary  services  undertaking,  a  mixed-activity  holding  company,  a  subsidiary  of  the  kind 
covered  in  Article  119  or  a  subsidiary  of  the  kind  covered  in  Article  114(3),  situated  in 
another Member State, they shall ask the competent authorities of that other Member State to 
have that verification carried out. The authorities  which receive  such  a  request shall,  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 

EN 

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an auditor or expert to carry it out. 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. 

SECTION II 

FINANCIAL HOLDING COMPANIES AND MIXED FINANCIAL HOLDING COMPANIES 

Article 114 

1. 

2. 

3. 

Inclusion of holding companies in consolidated supervision 

Member  States  shall  adopt  any  measures  necessary,  where  appropriate,  to  include 
financial holding companies and mixed financial holding companies in consolidated 
supervision.  Without  prejudice  to  Article  115,  the  consolidation  of  the  financial 
situation of the financial holding company or mixed financial holding company shall 
not  in  any  way  imply  that  the  competent  authorities  are  required  to  play  a 
supervisory  role  in  relation  to  the  financial  holding  company  or  mixed  financial 
holding company on a stand-alone basis except where required to apply Chapter 3. 

When  the  competent  authorities  of  a  Member  State  do  not  include  a  institution 
subsidiary in supervision on a consolidated basis under one of the cases provided for 
in  points  (a)  and  (b)  of  Article  13  of  Regulation  [inserted  by  OP],  the  competent 
authorities of the Member State in which that institution subsidiary is  situated may 
ask the parent undertaking for information which may facilitate their supervision of 
that institution. 

Member  States  shall  provide  that  their  competent  authorities  responsible  for 
exercising  supervision  on  a  consolidated  basis  may  ask  the  subsidiaries  of  a  credit 
institution, a financial holding company or mixed financial holding company, which 
are  not  included  within  the  scope  of  supervision  on  a  consolidated  basis  for  the 
information referred to in Article 116. In such a case, the procedures for transmitting 
and verifying the information laid down in that Article shall apply. 

Article 115 

Qualification of directors 

The Member States shall require that persons who effectively direct the business of a financial 
holding company or mixed financial holding company be of sufficiently good repute and have 
sufficient experience to perform those duties. 

Article 116 

Requests for information and inspections 

1. 

Pending further coordination of consolidation methods, Member States shall provide 
that,  where  the  parent  undertaking  of  one  or  more  institutions  is  a  mixed-activity 
holding  company,  the  competent  authorities  responsible  for  the  authorisation  and 

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2. 

1. 

2. 

1. 

supervision  of  those  institutions  shall,  by  approaching  the  mixed-activity  holding 
company  and  its  subsidiaries  either  directly  or  via  institution  subsidiaries,  require 
them  to  supply  any  information  which  would  be  relevant  for  the  purpose  of 
supervising the institution subsidiaries. 

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  119  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  institution  subsidiary  is  situated,  on-the-spot  verification  of  information 
shall be carried out in accordance with the procedure laid down in Article 113. 

Article 117 

Supervision 

Without  prejudice  to  Part  V  of  Regulation  [inserted  by  OP],  Member  States  shall 
provide  that,  where  the  parent  undertaking  of  one  or  more  institutions  is  a  mixed-
activity holding company, the competent  authorities  responsible  for the supervision 
of these institutions shall exercise general supervision over transactions between the 
institution and the mixed-activity holding company and its subsidiaries. 

Competent  authorities  shall  require  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 institution of 
any significant transaction with these entities other than the one referred to in Article 
383  of  Regulation  [inserted  by  OP].  These  procedures  and  significant  transactions 
shall be subject to overview by the competent authorities. 

Where these intra-group transactions are a threat to a institution's financial position, 
the  competent  authority  responsible  for  the  supervision  of  the  institution  shall  take 
appropriate measures. 

Article 118 

Exchange of information  

Member  States  shall  take  the  necessary  steps  to  ensure  that  there  are  no  legal 
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  114,  of  any 
information which would be relevant for the purposes of supervision in accordance 
with Chapter 3, and Articles 105 to 114 and this Article. 

2. 

Where  a  parent  undertaking  and  any  of  its  subsidiaries  that  are  institutions  are 
situated in different Member States, the competent authorities of each Member State 

EN 

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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 
Articles  106,  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. 

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,  mixed  financial  holding  companies,  financial 
institutions  or  ancillary  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  116  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 114(3). 

Article 119 

Cooperation 

Where an  institution,  financial holding company,  mixed  financial  holding  company 
or  a  mixed-activity  holding  company  controls  one  or  more  subsidiaries  which  are 
insurance companies or other 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. 

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 
institutions  or 
Directive 2004/39/EC for investment firms. 

in  Chapter  1,  Section  2 

for  credit 

The  competent  authorities  responsible  for  supervision  on  a  consolidated  basis  shall 
establish  lists  of  the  financial  holding  companies  or  mixed  financial  holding 
companies referred to in Article 10 of Regulation [inserted by OP]. Those lists shall 
be communicated to the competent authorities of the other Member States, to EBA 
and to the Commission. 

3. 

1. 

2. 

3. 

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Article 120 

Sanctions 

In accordance with Title VII, Chapter 1 Section IV, Member States shall ensure that sanctions 
or  measures  aimed  at  ending  observed  breaches  or  the  causes  of  such  breaches  may  be 
imposed  on  financial  holding  companies,  mixed  financial  holding  companies,  and  mixed-
activity  holding  companies,  or  their  effective  managers,  that  infringe  laws,  regulations  or 
administrative provisions enacted to implement Chapter 3. 

1. 

2. 

3. 

Article 121 

Assessment of equivalence of third countries' consolidated supervision 

Where  a  institution,  the  parent  undertaking  of  which  is  a  institution  or  a  financial 
holding company or mixed financial holding company, the head office of which is in 
a  third  country,  is  not  subject  to  consolidated  supervision  under  Articles  106,  the 
competent  authorities  shall  verify  whether  the  institution  is  subject  to  consolidated 
supervision  by  a  third-country  competent  authority  which  is  equivalent  to  that 
governed by the principles laid down in this Directive and the requirements of Part 
One, Title II, Chapter 2 of Regulation [inserted by OP]. 

The  verification  shall  be  carried  out  by  the  competent  authority  which  would  be 
responsible for consolidated supervision if paragraph 3 were to apply, at the request 
of the parent undertaking or of any of the regulated entities authorised in the Union 
or on its own initiative. That competent authority shall consult the other competent 
authorities involved. 

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  institutions,  the  parent 
undertaking of which has its head office in a third country. 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. EBA 
shall  assist  the  Commission  and  the  European  Banking  Committee  in  carrying  out 
those tasks, including as to whether such guidance should be updated. 

The  competent  authority  carrying  out  the  verification  referred  to  in  the  first 
subparagraph  of  paragraph  1  shall  take  into  account  any  such  guidance.  For  that 
purpose, the competent authority shall consult EBA before adopting a decision. 

In  the  absence  of  such  equivalent  supervision,  Member  States  shall  apply  the 
provisions  of  this  Directive  and  Regulation  [inserted  by  OP]  to  the  institution  by 
analogy  or  shall  allow  their  competent  authorities  to  apply  other  appropriate 
supervisory techniques which achieve the objectives of supervision on a consolidated 
basis of institutions. 

Those  supervisory  techniques  shall,  after  consultation  with  the  other  competent 
authorities  involved,  be  agreed  upon  by  the  competent  authority  which  would  be 
responsible for consolidated supervision. 

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Competent  authorities  may  in  particular  require  the  establishment  of  a  financial 
holding  company  or  mixed  financial  holding  company  which  has  its  head  office  in 
the Union, and apply the provisions on consolidated supervision to the consolidated 
position  of  that  financial  holding  company  or  the  consolidated  position  of  the 
institutions of that mixed financial holding company. 

The  supervisory  techniques  shall  be  designed  to  achieve  the  objectives  of 
consolidated supervision as defined in this Chapter and shall be notified to the other 
competent authorities involved, EBA and the Commission. 

Chapter 4 

Capital Buffers 

SECTION I 
CAPITAL CONSERVATION AND COUNTERCYCLICAL CAPITAL BUFFERS 

Article 122 
Definitions 

For the purpose of this Chapter, the following definitions shall apply: 

(1) 

(2) 

(3) 

(4) 

(5) 

1. 

'Capital  conservation  buffer'  means  the  own  funds  that  an  institution  is  required  to 
maintain in accordance with Article 123; 

'Combined  Buffer  Requirement'  means  the  total  Common  Equity  Tier  1  capital 
required to meet the requirement for the Capital Conservation Buffer extended by an 
institution specific Countercyclical Capital Buffer if more than 0% of risk weighted 
assets; 

'Countercyclical  buffer  rate'  means  the  rate  that  institutions  must  apply  in  order  to 
calculate  their  institution  specific  countercyclical  capital  buffer,  and  that  is  set  in 
accordance with Article 126, Article 127 or by a relevant third country authority (as 
the case may be);  

'Domestically authorised institution' means an institution that has been authorised in 
the Member State for which a particular designated authority is responsible; 

'Institution  specific  countercyclical  capital  buffer'  means  the  own  funds  that  an 
institution is required to maintain in accordance with Article 124; 

Article 123 
 Requirement to maintain a Capital Conservation Buffer 

Member  States  shall  require  institutions  to  maintain,  in  addition  to  the  Common 
Equity Tier 1 capital maintained to meet the own funds requirement imposed by 87 
of  Regulation  [inserted  by  OP],  a  Capital  Conservation  Buffer  of  Common  Equity 

EN 

112 

   EN 

 
2. 

3. 

1. 

2. 

3. 

1. 

Tier  1  capital  equivalent  to  2.5%  of  their  total  risk  exposure  amount  calculated  in 
accordance with Article 87(3)  of that Regulation on an individual and consolidated 
basis, as applicable in accordance with Part One, Title II of that Regulation. 

Institutions  shall  not  use  Common  Equity  Tier  1  capital  that  is  maintained  to  meet 
the requirement under paragraph 1 to meet any requirements imposed under Article 
100. 

Where an institution fails to meet fully the requirement under paragraph 1, it shall be 
subject  to  the  restrictions  on  distributions  set  out  in  paragraphs  2  and  3  of  Article 
131. 

Article 124 
 Requirement to maintain an institution specific countercyclical capital buffer 

Member  States  shall  require  institutions  to  maintain  an  institution  specific 
Countercyclical Capital Buffer calculated in accordance with Article 130.  

Institutions shall meet the requirement imposed by paragraph 1 with Common Equity 
Tier  1  capital,  which  shall  be  additional  to  any  Common  Equity  Tier  1  capital 
maintained to meet the own funds requirement imposed by Article 87 of Regulation 
[inserted  by  OP],  the  requirement  to  maintain  a  Capital  Conservation  Buffer  under 
Article 123 and any requirement imposed under Article 100. 

Where an institution fails to meet fully the requirement under paragraph 1, it shall be 
subject  to  the  restrictions  on  distributions  set  out  in  paragraphs  2  and  3  of  Article 
131. 

SECTION II 
SETTING AND CALCULATING COUNTERCYCLICAL CAPITAL BUFFERS 

Article 125 
ESRB guidance on setting countercyclical buffer rates  

The ESRB may give, by way of recommendations in accordance with Article 16 of 
Regulation  (EU)  No.1092/2010,  guidance  to  authorities  designated  by  Member 
States  under  Article  126(1)  on  setting  countercyclical  buffer  rates,  including  the 
following: 

(a) 

principles to guide designated authorities when exercising their judgement as to 
the  appropriate  countercyclical  buffer  rate,  ensure  that  authorities  adopt  a 
sound  approach  to  relevant  macro-economic  cycles  and  promote  sound  and 
consistent decision-making; 

(b)  guidance on: 

(i) 

the measurement and calculation of the deviation from long term trends 
of ratios of credit to GDP; 

EN 

113 

   EN 

2. 

1. 

2. 

(ii) 

the calculation of buffer guides required by Article 126(2); 

(c) 

guidance  on  variables  that  indicate  or  might  indicate  the  build-up  of  system-
wide risk in a financial system, and on other relevant factors that should inform 
the decisions of designated authorities on the appropriate countercyclical buffer 
rate under Article 126; 

(d)  guidance  on  variables  that  indicate  that  the  buffer  should  be  reduced  or  fully 

released. 

Where  it  has  issued  a  recommendation  under  paragraph  1,  the  ESRB  shall  keep  it 
under  review  and  update  it,  where  necessary,  in  the  light  of  experience  of  setting 
buffers under this Directive or of developments in internationally agreed practices. 

Article 126 
Setting countercyclical buffer rates 

Each Member State shall designate an authority (hereafter, a 'designated authority') 
that is responsible for setting the countercyclical buffer rate for that Member State. 

Each  designated  authority  shall  calculate  for  every  quarter  a  buffer  guide  as  a 
reference to guide its exercise of judgement in setting the countercyclical buffer rate 
in accordance with paragraph 3. The buffer guide shall be based on the deviation of 
the ratio of credit-to-GDP from its long-term trend, taking into account: 

(a) 

(b) 

the growth of levels of credit within that jurisdiction and, in particular, changes 
in the ratio of credit granted in that Member State to GDP; 

any  current  guidance  maintained  by  the  ESRB  in  accordance  with  Article 
125(1)(b). 

3. 

Each designated authority shall assess and set the appropriate countercyclical buffer 
rate for its Member State on a quarterly basis, and in so doing shall take into account: 

(a) 

the buffer guide calculated in accordance with paragraph 2;  

(b) 

any  current  guidance  maintained  by  the  ESRB  in  accordance  with  Article 
125(1)(a),  (c)  and  (d)  and  any  recommendations  issued  by  the  ESRB  under 
paragraph 9; and 

(c) 

any other variables that the designated authority considers relevant. 

4. 

The variables referred to in point (c) of paragraph 3 may include structural variables 
and  the  exposure  of  the  banking  sector  to  particular  risk  factors,  or  to  any  other 
factors related to risks to financial stability. 

Where,  in  setting  the  countercyclical  buffer  rate,  a  designated  authority  takes  into 
account  variables  mentioned  in  point  (c),  and  the  setting  of  that  buffer  rate  would 
have been lower if variables mentioned in point (c) had not been taken into account, 
the designated authority shall notify EBA and the ESRB. EBA and the ESRB shall 
assess  whether  the  variables  on  which  the  buffer  rate  is  based  relate  to  risks  to 

EN 

114 

   EN 

5. 

6. 

7. 

8. 

financial stability and whether the setting of a buffer rate taking into account those 
variables  is  consistent  with  the  fundamental  principles  of  the  internal  market  for 
financial services as reflected in Union legislation in the field of financial services. 

By  way  of  derogation  from  paragraph  3,  the  designated  authority  shall  review  the 
part of the countercyclical buffer rate based on the other variables referred to in point 
(c) of paragraph 3 on an annual basis only. That part shall not be taken into account 
by  institutions  established  in  another  Member  State  for  the  purposes  of  calculating 
their institution specific countercyclical capital buffer.  

The countercyclical buffer rate, expressed as a percentage of the total risk exposure 
amount referred to in Article 87(3) of Regulation [inserted by OP] of institutions that 
have  credit  exposures  in  that  Member  State,  must  be  between  0%  and  2.5%, 
calibrated in steps of 0.25 percentage points or multiples of 0.25 percentage points. 
Where  justified  in  view  of  the  considerations  set  out  in  paragraph  3,  a  designated 
authority  may  set  a  countercyclical  buffer  rate  in  excess  of  2.5%  of  the  total  risk 
exposure amount referred to in Article 87(3) of Regulation [inserted by OP] for the 
purpose set out in Article 130(3). 

When  a  designated  authority  sets  the  countercyclical  buffer  rate  above  zero  for  the 
first  time,  or  when  thereafter  a  designated  authority  increases  the  prevailing 
countercyclical  buffer  rate  setting,  it  shall  also  decide  the  date  from  which  the 
institutions  must  apply  that  increased  buffer  for  the  purposes  of  calculating  their 
institution specific countercyclical capital buffer. That date may be no later than 12 
months after the date when the increased buffer setting is announced in accordance 
with paragraph 8. If the date is less than 12 months after the increased buffer setting 
is  announced,  that  shorter  deadline  for  application  shall  be  justified  by  exceptional 
circumstances.  

If a designated authority reduces the existing countercyclical buffer rate, whether or 
not  it  is  reduced  to  zero,  it  shall  also  decide  an  indicative  period  during  which  no 
increase in the buffer is expected. However, that indicative period shall not bind the 
designated authority. 

Each designated authority shall announce the quarterly setting of the countercyclical 
buffer rate by publication on its website. The announcement shall include at least the 
following information: 

(a) 

the applicable countercyclical buffer rate; 

(b) 

the relevant credit-to-GDP-ratio and its deviation from the long-tem trend; 

(c) 

the buffer guide calculated in accordance with paragraph 2; 

(d) 

a justification for that buffer rate, including by reference to any variables other 
than those covered by the buffer guide that the designated authority took into 
account  in  accordance  with  point  (c)  of  paragraph  3  when  setting  the 
countercyclical buffer rate; 

(e)  where  the  buffer  rate  is  increased,  the  date  from  which  the  institutions  must 
apply that increased buffer rate for the purposes of calculating their institution 
specific countercyclical capital buffer; 

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(f)  where the date mentioned in point (e) is less than 12 months after the date of 
the  announcement  under  this  paragraph,  a  reference  to  the  exceptional 
circumstances that justify that shorter deadline for application; 

(g)  where  the  buffer  rate  is  decreased,  the  indicative  period  during  which  no 
increase  in  the  buffer  rate  is  expected,  together  with  a  justification  for  that 
period; 

(h)  where  the  designated  authority  has  taken  into  account  variables  mentioned  in 
point  (c)  of  paragraph  3,  an  indication  of  the  amount  of  the  buffer  rate  that 
relates to those variables. 

Designated authorities shall take all reasonable steps to coordinate the timing of that 
announcement. 

Designated authorities shall notify each quarterly setting of the countercyclical buffer 
rate and the information specified in points (a) to (g) to the ESRB. The ESRB shall 
publish on its website all such notified buffer rates and related information. 

The ESRB may issue recommendations in accordance with Article 16 of Regulation 
(EU)  No.  1092/2010  concerning  the  quarterly  setting  of  the  countercyclical  buffer 
rate  in  a  specific  Member  State  or,  where  appropriate,  in  more  than  one  Member 
State. 

Article 127 
Recognition of countercyclical buffer rates in excess of 2.5%  

Where a designated authority, in accordance with Article 126(5), or a relevant third 
country authority has set a countercyclical buffer rate in excess of 2.5% of the total 
risk exposure amount referred to in Article 87(3) of Regulation [inserted by OP], the 
other  designated  authorities  may  recognise  that  buffer  rate  for  the  purposes  of  the 
calculation  by  domestically  authorised  institutions  of  their  institution  specific 
countercyclical capital buffers. 

Where a designated authority recognises a buffer rate in excess of 2.5% of the total 
risk exposure amount referred to in Article 87(3) of Regulation [inserted by OP] in 
accordance with paragraph 1, it shall announce that recognition by publication on its 
website. The announcement shall include at least the following information: 

(a) 

the applicable countercyclical buffer rate; 

(b) 

the Member State to which it applies; 

(c)  where  the  buffer  rate  is  increased,  the  date  from  which  the  institutions 
authorised  in  the  Member  State  of  the  designated  authority  must  apply  that 
increased  buffer  rate  for  the  purposes  of  calculating  their  institution  specific 
countercyclical capital buffer; 

(d)  where the date mentioned in point (c) is less than 12 months after the date of 
the  announcement  under  this  paragraph,  a  reference  to  the  exceptional 
circumstances that justify that shorter deadline for application. 

9. 

1. 

2. 

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Article 128 
ESRB recommendation on third country countercyclical buffer rates 

The  ESRB  may,  in  accordance  with  Article  16  of  Regulation  (EU)  No.1092/2010,  issue  a 
recommendation  to  designated  authorities  on  the  appropriate  countercyclical  buffer  rate  for 
exposures to that third country where: 

(a) 

(b) 

1. 

2. 

3. 

4. 

a  countercyclical  buffer  rate  has  not  been  set  and  published  by  the  relevant  third 
country authority for a third country (hereinafter referred to as 'relevant third country 
authority') to which one or more Union institutions have credit exposures; 

the  ESRB  considers  that  a  countercyclical  buffer  rate  which  has  been  set  and 
published by the relevant third country authority for a third country is not sufficient 
to protect Union institutions appropriately from the risks of excessive credit growth 
in  that  country,  or  a  designated  authority  notifies  the  ESRB  that  it  considers  that 
buffer rate to be insufficient for that purpose. 

Article 129 
Decision by designated authorities on third country countercyclical buffer rates 

This Article applies irrespective of whether the ESRB has issued a recommendation 
to designated authorities as mentioned in Article 128. 

In  the  circumstances  mentioned  in  point  (a)  of  Article  128,  designated  authorities 
may set the countercyclical buffer rate that domestically authorised institutions must 
apply for the purposes of the calculation of their institution specific countercyclical 
capital buffer.  

Where a countercyclical buffer rate has been set and published by the relevant third 
country authority for a third country, a designated authority may set a different buffer 
rate  for  that  third  country  for  the  purposes  of  the  calculation  by  domestically 
authorised  institutions  of  their  institution  specific  Countercyclical  Capital  Buffer  if 
they  reasonably  consider  that  the  buffer  rate  set  by  the  relevant  third  country 
authority is not sufficient to protect those institutions appropriately from the risks of 
excessive credit growth in that country. 

When  exercising  the  power  under  the  first  sub-paragraph,  a  designated  authority 
shall  not  set  a  countercyclical  buffer  rate  below  the  level  set  by  the  relevant  third 
country authority unless that buffer rate exceeds 2.5%, expressed, as a percentage of 
the total risk exposure amount referred to in Article 87(3) of Regulation [inserted by 
OP] of institutions that have credit exposures in that third country. 

Where a relevant third country authority sets a countercyclical buffer rate for a third 
pursuant to paragraph 2 or 3 which increases the existing applicable countercyclical 
buffer  rate,  it  shall  decide  the  date  from  which  domestically  authorised  institutions 
must  apply  that  buffer  rate  for  the  purposes  of  calculating  their  institution  specific 
countercyclical  capital  buffer.  That  date  shall  be  no  later  than  12  months  from  the 
date when the buffer rate is announced in accordance with paragraph 5. If that date is 
less  than  12  months  after  the  setting  is  announced,  that  shorter  deadline  for 
application must be justified by exceptional circumstances. 

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5. 

Designated authorities shall publish any setting of a countercyclical buffer rate for a 
third  country  pursuant  to  paragraph  2  or  3  on  their  websites,  and  shall  include  the 
following information: 

(a) 

the countercyclical buffer rate and the third country to which it applies; 

1. 

2. 

(b) 

a justification for that buffer rate; 

(c)  where the buffer rate is set above zero for the first time or is increased, the date 
from  which  the  institutions  must  apply  that  increased  buffer  rate  for  the 
purposes of calculating their institution specific countercyclical capital buffer; 

(d)  where the date mentioned in point (c) is less than 12 months after the date of 
the  publication  of  the  setting  under  this  paragraph,  a  reference  to  the 
exceptional circumstances that justify that shorter deadline for application. 

Article 130 
Calculation of Institution Specific Countercyclical Capital Buffer 

The institution specific Countercyclical Capital Buffer shall consist of the weighted 
average  of  the  countercyclical  buffer  rates  that  apply  in  the  jurisdictions  where  the 
relevant credit exposures of the institution are located, or are applied for the purposes 
of this Article by virtue of Article 129(2) or (3). 

Member States shall require  institutions, in order to calculate the weighted  average 
referred  to  in  the  first  sub-paragraph,  to  apply  to  each  applicable  countercyclical 
buffer rate its total own funds requirements for credit risk, determined in accordance 
with  Part  Three,  Title  II  of  Regulation  [inserted  by  OP]  that  relates  to  the  relevant 
credit  exposures  in  the  territory  in  question,  divided  by  its  total  own  funds 
requirements for credit risk that relates to all of its relevant credit exposures. 

If,  in  accordance  with  Article  126(5),  a  designated  authority  sets  a  countercyclical 
buffer  rate  in  excess  of  2.5%  of  total  risk  exposure  amount  referred  to  in  Article 
87(3) of Regulation [inserted by OP], Member States shall ensure that the following 
buffer  rates  apply  to  relevant  credit  exposures  located  in  the  Member  State  of  that 
designated authority (hereafter, 'Member State A') for the purposes of the calculation 
required  under  paragraph  1  including,  where  relevant,  for  the  purposes  of  the 
calculation  of  the  element  of  consolidated  capital  that  relates  to  the  institution  in 
question: 

(a) 

(b) 

domestically  authorised  institutions  shall  apply  that  buffer  rate  in  excess  of 
2.5% of total risk exposure amount; 

institutions  that  are  authorised  in  another  Member  State  shall  apply  a 
countercyclical  buffer  rate  of  2.5%  of  total  risk  exposure  amount  if  the 
designated authority in the Member State in which they have been authorised 
has not recognised the buffer rate in excess of 2.5% in accordance with Article 
127(1); 

(c) 

institutions  that  are  authorised  in  another  Member  State  shall  apply  the 
countercyclical buffer rate set by the designated authority of Member State A if 

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the  designated  authority  in  the  Member  State  in  which  they  have  been 
authorised has recognised the that buffer rate in accordance with Article 127. 

3. 

If the countercyclical buffer rate set by the relevant third country authority for a third 
country  exceeds  2.5%  of  total  risk  exposure  amount  referred  to  in  Article  87(3)  of 
Regulation  [inserted  by  OP],  Member  States  shall  ensure  that  the  following  buffer 
rates apply to relevant credit exposures located in that third country for the purposes 
of  the  calculation  required  under  paragraph  1  including,  where  relevant,  for  the 
purposes of the calculation of the element of consolidated capital that relates to the 
institution in question: 

(a) 

(b) 

institutions  shall  apply  a  countercyclical  buffer  rate  of  2.5%  of  total  risk 
exposure amount if the designated authority in the Member State in which they 
have  been  authorised  has  not  recognised  the  buffer  rate  in  excess  of  2.5%  in 
accordance with Article 127(1); 

institutions shall apply the countercyclical buffer rate set by the relevant third 
country authority if the designated authority in the Member State in which they 
have  been  authorised  has  recognised  the  that  buffer  rate  in  accordance  with 
Article 127. 

4. 

Relevant  credit  exposures  shall  include  all those  exposure  classes,  other  than  those 
mentioned in points (a), (b), (d), (e) and (f) of Article 107 of Regulation [inserted by 
OP], that are subject to: 

(a) 

the  own  funds  requirements  for  credit  risk  under  Part  Three,  Title  II  of  that 
Regulation, 

(b)  where  the  exposure  is  held  in  the  trading  book,  own  funds  requirements  for 
specific  risk  under  Part  Three,  Title  IV,  Chapter  2  of  that  Regulation  or 
incremental default and migration risk under Part Three, Title IV, Chapter 5 of 
that Regulation; 

(c)  where the exposure is a securitisation, the own funds requirements under Part 

Three, Title II, Chapter 5b of that Regulation; 

5. 

Institutions  shall  identify  the  geographical  location  of  a  relevant  credit  exposure  in 
accordance with regulatory technical standards adopted in accordance with paragraph 
6. 

6. 

For the purposes of the calculation required under paragraph 1: 

(a) 

(b) 

a  countercyclical  buffer  rate  for  a  Member  State  shall  apply  from  the  date 
specified in the information published in accordance with Article 126(8)(e) or 
127(2)(c) if the effect of that decision is to increase the buffer rate; 

subject to point (c), a countercyclical buffer rate for a third country shall apply 
12 months after the date on which a change in the buffer rate was announced 
by  the  relevant  third  country  authority,  irrespective  of  whether  that  authority 
requires  institutions  incorporated  in  that  third  country  to  apply  the  change 
within  a  shorter  period,  if  the  effect  of  that  decision  is  to  increase  the  buffer 
rate; 

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(c)  where the designated authority of the home Member State of the institution sets 
the countercyclical buffer rate for a third country pursuant to Article 129(2) or 
(3), or recognises the countercyclical buffer rate for a third country pursuant to 
Article  127,  that  buffer  rate  shall  apply  from  the  date  specified  in  the 
information  published  in  accordance  with  Article  129(5)(c)  or  Article  127 
(2)(c), if the effect of that decision is to increase the buffer rate; 

(d) 

a  countercyclical  buffer  rate  shall  apply  immediately  if  the  effect  of  that 
decision is to reduce the buffer rate. 

For the purposes of point (b), a change in the countercyclical buffer rate for a third 
country shall  be  considered to be announced  on the date that it is published by the 
relevant third country authority in accordance with the applicable national rules. 

7. 

EBA shall develop draft regulatory technical standards to specify the method for the 
identification of the geographical location of the relevant credit exposures referred to 
in paragraph 5. 

Powers are delegated to the Commission to adopt the regulatory technical standards 
referred  to  in  the  first  subparagraph  in  accordance  with  Articles  10  to  14  of 
Regulation (EU) No 1093/2010.  

EBA shall submit the draft regulatory standards to the Commission by 31 December 
2014. 

SECTION III 
CAPITAL CONSERVATION MEASURES 

Article 131 
Restrictions on distributions 

1. 

2. 

Member  States  shall  prohibit  any  institution  that  meets  the  combined  buffer 
requirement  from  making  a  distribution  in  connection  with  Common  Equity  Tier  1 
capital to an extent that would decrease its Common Equity Tier 1 capital to a level 
where the combined buffer requirement is not longer met. 

Member  States  shall  require  institutions  that  fail  to  meet  the  combined  buffer 
requirement to calculate the Maximum Distributable Amount ('MDA') in accordance 
with paragraph 4. 

Where  the  first  sub-paragraph  applies,  Member  State  shall  prohibit  any  such 
institution from undertaking any of the following actions before it has calculated the 
MDA: 

(a)  make a distribution in connection with Common Equity Tier 1 capital; 

(b) 

create  an  obligation  to  pay  variable  remuneration  or  discretionary  pension 
benefits or pay variable remuneration if the obligation to pay was created at a 
time when the institution failed to meet the combined buffer requirements; 

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(c)  make payments on Additional Tier 1 instruments. 

3. 

4. 

While  an  institution  fails  to  meet  or  exceed  its  combined  buffer  requirement, 
Member States shall prohibit it from distributing more than the MDA calculated in 
accordance  with  paragraph  4  through  any  action  mentioned  in  points  (a)  to  (c)  of 
paragraph 2. 

Member  States  shall  require  institutions  to  calculate  the  MDA  by  multiplying  the 
sum calculated in accordance with point (a) by the factor determined in accordance 
with point (b). The MDA shall be reduced by any of the actions referred to in points 
(a), (b) or (c) of paragraph 2.  

(a)  The sum to be multiplied shall consist of: 

(i) 

interim profits not included in Common Equity Tier 1 pursuant to Article 
24(2) of Regulation [inserted by OP] that have been generated since the 
most  recent  decision  on  the  distribution  of  profits  or  any  of  the  actions 
referred to in points (a), (b) or (c) of paragraph 2; 

plus 

(ii)  year-end  profits  not  included  in  Common  Equity  Tier  1  pursuant  to 
Article  24(4)  of  Regulation  [inserted  by  OP]  that  have  been  generated 
since the most recent decision on the distribution of profits or any of the 
actions referred to in points (a), (b) or (c) of paragraph 2; 

minus 

(iii)  amounts which would be payable by tax if the items specified in (i) and 

(ii) were to be retained.  

(b)  The factor shall be determined as follows: 

(i)  where  the  Common  Equity  Tier  1  capital  maintained  by  the  institution 
which  is  not  used  to  meet  the  own  funds  requirement  under  Article 
87(1)(c) of Regulation [inserted by OP], expressed as a percentage of the 
total  risk  exposure  amount  within  the  meaning  of  Article  87(3)  of  that 
Regulation,  is  within  the  first  (that  is,  the  lowest)  quartile  of  the 
combined buffer requirement, the factor shall be 0; 

(ii)  where  the  Common  Equity  Tier  1  capital  maintained  by  the  institution 
which  is  not  used  to  meet  the  own  funds  requirement  under  Article 
87(1)(c) of Regulation [inserted by OP], expressed as a percentage of the 
total  risk  exposure  amount  within  the  meaning  of  Article  87(3)  of  that 
Regulation,  is  within  the  second  quartile  of  the  combined  buffer 
requirement, the factor shall be 0.2; 

(iii)  where  the  Common  Equity  Tier  1  capital  maintained  by  the  institution 
which  is  not  used  to  meet  the  own  funds  requirement  under  Article 
87(1)(c) of Regulation [inserted by OP], expressed as a percentage of the 
total  risk  exposure  amount  within  the  meaning  of  Article  87(3)  of  that 

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Regulation,  is  within  the  third  quartile  of  the  combined  buffer 
requirement, the factor shall be 0.4; 

(iv)  where  the  Common  Equity  Tier  1  capital  maintained  by  the  institution 
which  is  not  used  to  meet  the  own  funds  requirement  under  Article 
87(1)(c) of Regulation [inserted by OP], expressed as a percentage of the 
total  risk  exposure  amount  within  the  meaning  of  Article  87(3)  of  that 
Regulation,  is  within  the  fourth  (that  is,  the  highest)  quartile  of  the 
combined buffer requirement, the factor shall be 0.6; 

The  lower  and  upper  bounds  of  each  quartile  of  the  combined  buffer  requirement 
shall be calculated as follows: 

Lower bound of quartile

=

%5,2

ISCCB
+
4

×

(
nQ

−

)1

Upper bound of quartile

=

%5,2

ISCCB
+
4

×

nQ

"ISCCB"  means  "Institution  specific  countercyclical  capital  buffer"  and  "Qn" 
indicates the ordinal number of the quartile concerned. 

5. 

6. 

The restrictions imposed by this Article shall only apply to payments that result in a 
reduction of Common Equity Tier 1 capital or in a reduction of profits, and where a 
suspension of payment or failure to pay does not constitute an event of default or a 
condition  for  the  commencement  of  proceedings  under  the  insolvency  regime 
applicable to the institution. 

Where  an  institution  fails  to  meet  the  combined  buffer  requirement  and  intends  to 
distribute any of its distributable profits or undertake an action referred to in points 
(a)  to  (c)  of  paragraph  2,  it  shall  notify  the  competent  authority  and  provide  the 
following information: 

(a) 

the amount of capital maintained by the institution, subdivided as follows: 

(i)  Common Equity Tier 1 capital, 

(ii)  Additional Tier 1 capital, 

(iii)  Tier 2 capital; 

(b) 

the amount of its interim and year-end profits; 

(c) 

the MDA calculated in accordance with paragraph 4; 

(d) 

the amount of distributable profits it intends to allocate between the following: 

(i) 

dividend payments, 

(ii) 

share buybacks, 

(iii)  payments on Additional Tier 1 instruments, 

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(iv) 

the  payment  of  variable  remuneration  or  discretionary  pension  benefits, 
whether by creation of a new obligation to pay, or payment pursuant to 
an obligation to pay created at a time when the institution failed to meet 
its combined buffer requirements. 

7. 

8. 

Institutions  shall  maintain  arrangements  to  ensure  that  the  amount  of  distributable 
profits and the MDA are calculated accurately, and shall be able to demonstrate that 
accuracy to the competent authority on request. 

For the purposes of paragraphs 1 and 2, a distribution in connection with Common 
Equity Tier 1 capital shall include the following: 

(a) 

a payment of cash dividends; 

(b) 

(c) 

(d) 

(e) 

a distribution of fully or partly paid bonus shares or other capital instruments 
mentioned in Article 24(1)(a) of Regulation [inserted by OP]; 

a  redemption  or  purchase  by  an  institution  of  its  own  shares  or  other  capital 
instruments mentioned in Article 24(1)(a) of that Regulation; 

a  repayment  of  amounts  paid  up  in  connection  with  capital  instruments 
mentioned in Article 24(1)(a) of that Regulation; 

a  distribution  of  items  referred  to  in  points  (b)  to  (e)  of  Article  24(1)  of  that 
Regulation. 

Article 132 
 Capital Conservation Plan 

1. 

Where an institution fails to meet its Combined Buffer Requirement, it shall prepare 
a capital conservation plan and submit it to the competent authority no later than 5 
working days after it identified that it was failing to meet that requirement. 

2. 

The capital conservation plan shall include the following: 

(a) 

estimates of income and expenditure and a forecast balance sheet; 

(b)  measures to increase the capital ratios of the institution; 

(c) 

(d) 

a  plan  and  timeframe  for  the  increase  of  own  funds  with  the  objective  of 
meeting fully the combined buffer requirement; 

any other information the competent authority deems necessary to carry out the 
assessment required by paragraph 3. 

3. 

The competent authority shall assess the capital conservation plan, and shall approve 
the plan only if it considers that the plan, if implemented, would be reasonably likely 
to conserve or raise sufficient capital to enable the institution to meet its combined 
buffer  requirements  within  a  period  which  the  competent  authority  considers 
appropriate. 

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   EN 

4. 

If  the  competent  authority  does  not  approve  the  capital  conservation  plan  in 
accordance with paragraph 3, it shall impose one or both of the following measures: 

(a) 

(b) 

require the institution to increase own funds to specified levels within specified 
periods; 

exercise  its  powers  under  Article  99  to  impose  more  stringent  restrictions  on 
distributions than those required by Article 131. 

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Title VIII 

Disclosure by competent authorities 

Article 133 

General requirements 

1. 

Competent authorities shall publish the following information: 

(a) 

(b) 

(c) 

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  Union 
legislation; 

the  general  criteria  and  methodologies  they  use  in  the  review  and  evaluation 
referred to in Article 92;  

(d)  without prejudice to the provisions laid down in Title VII, Chapter 1, Section II 
of  this  Directive  and  Articles 54  and  58  of  Directive 2004/39/EC,  aggregate 
statistical  data  on  key  aspects  of  the  implementation  of  the  prudential 
framework  in  each  Member  State,  including  the  number  and  nature  of 
supervisory measures taken in accordance with Article 99. 

2. 

3. 

The  information  published  according  to  paragraph  1  shall  be  sufficient  to  enable  a 
meaningful  comparison  of  the  approaches  adopted  by  the  competent  authorities  of 
the different Member States. The disclosures shall be published following a common 
format,  and  updated  regularly.  The  disclosures  shall  be  accessible  at  a  single 
electronic location. 

EBA shall develop draft implementing technical standards to determine the format, 
structure,  contents  list  and  annual  publication  date  of  the  information  listed  in 
paragraph 1. 

EBA  shall  submit  those  draft  implementing  technical  standards  to  the  Commission 
by 1 January 2014. 

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) 
No 1093/2010. 

Article 134 

Specific disclosure requirements 

1. 

For  the  purpose  of  Part  Six  of  Regulation  [inserted  by  OP],  competent  authorities 
shall publish the following information: 

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(a) 

the general criteria and methodologies adopted to review the compliance with 
Article 394 of Regulation [inserted by OP]; 

(b)  without  prejudice  to  the  provisions  laid  down  in  Title  VII,  Chapter  1, 
Section II,  a  summary  description  of  the  outcome  of  the  supervisory  review 
and  description  of  the  measures  imposed  in  cases  of  non-compliance  with 
Article 394 of Regulation [inserted by OP] identified on an annual basis. 

2. 

The competent authority of the Member States exercising the discretion laid down in 
Article 6 (3) of Regulation [inserted by OP] shall publish all the following: 

(a) 

(b) 

criteria  it  applies  to  determine  that  there  is  no  current  or  foreseen  material 
practical or legal impediment to the prompt transfer of own funds or repayment 
of liabilities; 

the  number  of  parent  institutions  which  benefit  from  the  exercise  of  the 
discretion  laid  down  in  Article  6  (3)  of  Regulation  [inserted  by  OP]  and  the 
number of these which incorporate subsidiaries in a third country; 

(c)  on an aggregate basis for the Member State: 

(i) 

(ii) 

(iii) 

the  total  amount  of  own  funds  on  the  consolidated  basis  of  the  parent 
institution  in  a  Member  State,  which  benefits  from  the  exercise  of  the 
discretion laid down in Article 6 (3) of that Regulation, which are held in 
subsidiaries in a third country; 

the  percentage  of  total  own  funds  on  the  consolidated  basis  of  parent 
institutions  in  a  Member  State  which  benefits  from  the  exercise  of  the 
discretion  laid  down  in  Article  6  (3)  of  that  Regulation,  represented  by 
own funds which are held in subsidiaries in a third country; 

the percentage of total own funds required under Article 87 of Regulation 
[inserted  by  OP]  on  the  consolidated  basis  of  parent  institutions  in  a 
Member  State,  which  benefits  from  the  exercise  of  the  discretion  laid 
down in Article 6 (3) of Regulation [inserted by OP], represented by own 
funds which are held in subsidiaries in a third country. 

3. 

The competent authority which exercises the discretion laid down in Article 8 (1) of 
Regulation [inserted by OP] shall publish all the following: 

(a) 

(b) 

the criteria it applies to determine that there is no current or foreseen material 
practical or legal impediment to the prompt transfer of own funds or repayment 
of liabilities; 

the  number  of  parent  institutions  which  benefit  from  the  exercise  of  the 
discretion  laid  down  in  Article  8  (1)  of  Regulation  [inserted  by  OP]  and  the 
number of these which incorporate subsidiaries in a third country; 

(c)  on an aggregate basis for the Member State 

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(i) 

(ii) 

the total amount of own funds of parent institutions which benefit from 
the  exercise  of  the  discretion  laid  down  in  Article  8  (1)  of  Regulation 
[inserted by OP] which are held in subsidiaries in a third country; 

the  percentage  of  total  own  funds  of  parent  institutions  which  benefit 
from  the  exercise  of  the  discretion  laid  down  in  Article  8  (1)  of 
Regulation [inserted by OP] represented by own funds which are held in 
subsidiaries in a third country; 

(iii) 

the percentage of total own funds required under Article 87 of Regulation 
[inserted by OP] of parent institutions which benefit from the exercise of 
the discretion laid down in Article 8 (1) of that Regulation represented by 
own funds which are held in subsidiaries in a third country. 

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Title IX 

Delegated and implementing acts 

Article 135 

Delegated Acts 

The Commission shall be empowered to adopt delegated acts in accordance with Article 138 
concerning the following aspects: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

clarification  of  the  definitions  referred  to  in  Article  4  and  Article  122  to  ensure 
uniform application of this Directive; 

clarification of the definitions referred to in Article 4 and Article 122 in order to take 
account, in the application of this Directive, of developments on financial markets; 

the alignment of terminology on, and the framing of definitions referred to in Article 
4 in accordance with subsequent acts on institutions and related matters; 

expansion  of  the  content  of  the  list  referred  to  in  Articles  33  and  34  and  set  out  in 
Annex  I  to  this  Directive  or  adaptation  of  the  terminology  used  in  that  list  to  take 
account of developments on financial markets; 

the areas in which the competent authorities shall exchange information as listed in 
Article 51; 

adjustment of the provisions in Articles 75 to 86 and 94 in order to take account of 
developments  on  financial  markets  (in  particular  new  financial  products)  or  in 
accounting  standards  or  requirements  which  take  account  of  Union  legislation,  or 
with regard to the convergence of supervisory practices; 

(g) 

adjustments of the criteria set out in Article 23(1), in order to take account of future 
developments and to ensure the uniform application of this Directive. 

Article 136 

Implementing Acts 

The  following  measures  shall  be  adopted  as  implementing  acts  in  accordance  with  the 
examination procedure referred to in Article 137(2): 

(a) 

(b) 

technical adjustments to the list in Article 2; 

alteration of the amount of initial capital prescribed in Article 12 and Title IV to take 
account of developments in the economic and monetary field. 

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1. 

2. 

1. 

2. 

3. 

4. 

5. 

Article 137 

European Banking Committee 

For  the  adoption  of  implementing  acts,  the  Commission  shall  be  assisted  by  the 
European  Banking  Committee  established  by  Commission  Decision  2004/10/EC. 
That  committee  shall  be  a  committee  within  the  meaning  of  Article  3(2)  of 
Regulation (EU) No 182/2011. 

Where  reference  is  made  to  this  paragraph,  Article  5  of  Regulation  (EU)  No. 
182/2011 shall apply. 

Article 138 

Exercise of the delegation 

The  power  to  adopt  delegated  acts  is  conferred  on  the  Commission  subject  to  the 
conditions laid down in this Article.  

The  delegation  of  power  referred  to  in  Article  135  shall  be  conferred  for  an 
indeterminate period of time from the date referred to in Article 153.  

The delegation of powers referred to in Article 135 may be revoked at any time by 
the European Parliament or by the Council. A decision of revocation shall put an end 
to the delegation of the power specified in that decision. It shall take effect the day 
following  the  publication  of  the  decision  in  the  Official  Journal  of  the  European 
Union  or  at  a  later  date  specified  therein.  It  shall  not  affect  the  validity  of  any 
delegated acts already in force. 

As soon as it adopts a delegated act, the Commission shall notify it simultaneously to 
the European Parliament and to the Council.  

A  delegated  act  adopted  pursuant  to  Article  135  shall  enter  into  force  only  if  no 
objection  has  been  expressed  either  by  the  European  Parliament  or  the  Council 
within a period of 2 months of notification of that act to the European Parliament and 
the Council or if, before the expiry of that period, the European Parliament and the 
Council  have  both  informed  the  Commission  that  they  will  not  object.  That  period 
shall  be  extended  by  2  months  at  the  initiative  of  the  European  Parliament  or  the 
Council. 

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Title X 

Amendments of Directive 2002/87/EC 

Article 139 

Amendment of Directive 2002/87/EC 

1. 

2. 

In Article 21a(2), point (a) is deleted. 

After Article 21a(2a), the following paragraph is inserted: 

"(3) In order to ensure consistent harmonisation of the calculation methods listed in 
Annex I part II in conjunction with Article 45 (2) of Regulation [inserted by OP] and 
Article 228(1) of Directive 2009/138/EC, but without prejudice to Article 6(4), EBA, 
EIOPA  and  ESMA  shall,  through  the  Joint  Committee,  develop  draft  regulatory 
technical standards with regard to Article 6(2). 

ESA shall submit those draft regulatory technical standards to the Commission by 1 
January 2013. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the third paragraph in accordance with Articles 10 to 14 of Regulation 
(EU) No 1093/2010." 

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Title XI 

Transitional and final provisions 

Chapter 1 

Transitional provisions on the supervision of credit institutions 
exercising the freedom of establishment and the freedom to 
provide services 

Article 140 

Scope 

1. 

2. 

The provisions in this chapter shall apply instead of Articles 40, 41, 43, 51 and 52 
until  1  January  2015  and,  where  the  Commission  has  adopted  a  delegated  act  in 
accordance with paragraph 2, for an additional period of up to 2 years.  

In  order  to  ensure  that  the  phasing  in  of  supervisory  arrangements  for  liquidity  is 
fully aligned with the development of uniform liquidity rules, the Commission shall 
be empowered to adopt delegated acts in accordance with Article 135 postponing the 
date referred to in paragraph 1 by up to 2 years, where uniform liquidity rules have 
not  been  introduced  in  the  Union  because  international  standards  on  liquidity 
supervision  have  not  yet  been  agreed  upon  at  the  date  referred  to  in  the  first 
subparagraph. 

Article 141 

Reporting requirements 

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. 

In  discharging  the  responsibilities  imposed  on  them  in  Article  145  of  this  Directive,  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. 

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Article 142 

Measures taken by the competent authorities of the home Member State in relation to 
activities carried out in the host Member State 

1. 

2. 

3. 

4. 

Where  the  competent  authorities  of  a  host  Member  State  ascertain  that  a  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. 

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. 

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  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. 

Article 143 

Precautionary measures 

Before following the procedure provided for in Article 142, 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  shall  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 shall amend or abolish those measures. 

Article 144 

Responsibility 

1. 

The  prudential  supervision  of  a  credit  institution,  including  that  of  the  activities  it 
carries  on  accordance  with  Articles  33  and  34,  shall  be  the  responsibility  of  the 

EN 

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competent  authorities  of  the  home  Member  State,  without  prejudice  to  those 
provisions of this Directive which give responsibility to the competent authorities of 
the host Member State. 

2. 

3. 

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

The competent authorities in one Member State shall, in the exercise of their general 
duties,  duly  consider  the  potential  impact  of  their  decisions  on  the  stability  of  the 
financial  system  in  all  other  Member  States  concerned  and,  in  particular,  in 
emergency situations, based on the information available at the relevant time. 

Article 145 

Liquidity supervision 

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. 

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. 

Article 146 

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  through  a  branch,  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. 

Article 147 

Significant branches 

1. 

The  competent  authorities  of  a  host  Member  State  may  make  a  request  to  the 
consolidating supervisor where Article 107(1) applies or to the competent authorities 
of  the  home  Member  State,  for  a  branch  of  a  credit  institution  to  be  considered  as 
significant. 

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2. 

That request shall provide reasons for considering the branch to be significant with 
particular regard to the following: 

(a)  whether  the  market  share  of  the  branch  of  a  credit  institution  in  terms  of 

deposit exceeds 2 % in the host Member State; 

(b) 

the  likely  impact  of  a  suspension  or  closure  of  the  operations  of  the  credit 
institution  on  market  liquidity  and  the  payment  and  clearing  and  settlement 
systems in the host Member State; 

(c) 

the size and the importance of the branch in terms of number of clients within 
the context of the banking or financial system of the host Member State. 

The  competent  authorities  of  the  home  and  host  Member  States,  and  the 
consolidating  supervisor  where  Article  107(1)  applies,  shall  do  everything  within 
their  power  to  reach  a  joint  decision  on  the  designation  of  a  branch  as  being 
significant. 

If  no  joint  decision  is  reached  within  two  months  of  receipt  of  a  request  under  the 
first  subparagraph,  the  competent  authorities  of  the  host  Member  State  shall  take 
their  own  decision  within  a  further  period  of  two  months  on  whether  the  branch  is 
significant.  In  taking  their  decision,  the  competent  authorities  of  the  host  Member 
State  shall  take  into  account  any  views  and  reservations  of  the  consolidating 
supervisor or the competent authorities of the home Member State. 

The  decisions  referred  to  in  the  third  and  fourth  subparagraph  shall  be  set  out  in  a 
document  containing  the  fully  reasoned  decision  and  transmitted  to  the  competent 
authorities  concerned,  and  shall  be  recognised  as  determinative  and  applied  by  the 
competent authorities in the Member States concerned. 

The  designation  of  a  branch  as  being  significant  shall  not  affect  the  rights  and 
responsibilities of the competent authorities under this Directive. 

The  competent  authorities  of  the  home  Member  State  shall  communicate  to  the 
competent  authorities  of  a  host  Member  State  where  a  significant  branch  is 
established the information referred to in Article 112(1)(c) and (d) and carry out the 
tasks referred to in Article 107(1)(c) in cooperation with the competent authorities of 
the host Member State. 

If a competent authority of a home Member State becomes aware of an emergency 
situation  within  a  credit  institution  as  referred  to  in  Article  109(1),  it  shall  alert  as 
soon  as  practicable  the  authorities  referred  to  in  the  fourth  paragraph  of  Article  59 
and in Article 60. 

Where  Article  111  does  not  apply,  the  competent  authorities  supervising  a  credit 
institution with significant branches in other Member States shall establish and chair 
a college of supervisors to facilitate the cooperation under paragraph 2 of this Article 
and  Article  61.  The  establishment  and  functioning  of  the  college  shall  be  based  on 
written  arrangements  determined,  after  consultation  with  competent  authorities 
concerned,  by  the  competent  authority  of  the  home  Member  State.  The  competent 
authority  of  the  home  Member  State  shall  decide  which  competent  authorities 
participate in a meeting or in an activity of the college. 

3. 

4. 

5. 

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   EN 

6. 

7. 

1. 

2. 

3. 

1. 

2. 

The  decision  of  the  competent  authority  of  the  home  Member  State  shall  take 
account of the relevance of the supervisory activity to be planned or coordinated for 
those  authorities,  in  particular  the  potential  impact  on  the  stability  of  the  financial 
system  in  the  Member  States  concerned  referred  to  in  Article  144(3)  and  the 
obligations referred to in paragraph 2 of this Article. 

The  competent  authority  of  the  home  Member  State  shall  keep  all  members  of  the 
college  fully  informed,  in  advance,  of  the  organisation  of  such  meetings,  the  main 
issues to be discussed and the activities to be considered. The competent authority of 
the  home  Member  State  shall  also  keep  all  the  members  of  the  college  fully 
informed, in a timely manner, of the actions taken in those meetings or the measures 
carried out. 

Article 148 

On-the-spot verifications 

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 52. 

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 113. 

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. 

Chapter 2 

Transitional provision on capital buffers 

Article 149 
 Transitional provisions for capital buffer 

This  Article  modifies  the  requirements  of  Articles  122  and  123  for  a  transitional 
period between 1 January 2016 and 31 December 2018. 

For the period from 1 January 2016 until 31 December 2016: 

(a) 

the  Capital  Conservation  Buffer  shall  consist  of  common  equity  Tier  1 
equivalent to 0.625% of the total of the risk-weighted exposure amounts of the 
institution calculated in accordance with Article 87 (3) of Regulation [inserted 
by OP]; 

EN 

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(b) 

the  institution  specific  Countercyclical  Capital  Buffer  shall  be  no  more  than 
0.625% of that total, with the result that the combined buffer requirement shall 
be  between  0.625%  and  1.25%  of  the  total  of  the  risk-weighted  exposure 
amounts of the institutions. 

3. 

For the period from 1 January 2017 until 31 December 2017: 

(a) 

(b) 

the  Capital  Conservation  Buffer  shall  consist  of  common  equity  Tier  1 
equivalent to 1.25% of the total of the risk-weighted exposure amounts of the 
institution calculated in accordance with Article 87 (3) of Regulation [inserted 
by OP]; 

the  institution  specific  Countercyclical  Capital  Buffer  shall  be  no  more  than 
1.25% of that total, with the result that the combined buffer requirement shall 
be  between  1.25%  and  2.50%  of  the  total  of  the  risk-weighted  exposure 
amounts of the institutions. 

4. 

For the period from 1 January 2018 until 31 December 2018:  

(c) 

(d) 

the  Capital  Conservation  Buffer  shall  consist  of  common  equity  Tier  1 
equivalent to 1.875% of the total of the risk-weighted exposure amounts of the 
institution calculated in accordance with Article 87 (3) of Regulation [inserted 
by OP]; 

the  institution  specific  Countercyclical  Capital  Buffer  shall  be  no  more  than 
1.875% of that total with the result that the combined buffer requirement shall 
be  between  1.875%  and  3.750%  of  the  total  of  the  risk-weighted  exposure 
amounts of the institutions. 

5. 

6. 

The requirement for a capital conservation plan and the restrictions on distributions 
referred to in Article 131 and Article 132 shall apply during the transitional period 
between  1  January  2016  and  31  December  2018  where  institutions  fail  to  meet  the 
modified requirements set out in paragraphs 2 to 4. 

Member  States  may  impose  a  shorter  transitional  period  than  that  specified  in 
paragraph 1 where that is justified by excessive credit growth at any time during that 
period. Where a Member States does so, the shorter period shall apply only for the 
purposes of the calculation of the institution specific Countercyclical Capital Buffer 
by  institutions  that  are  authorised  in  the  Member  State  for  which  the  designated 
authority is responsible. 

EN 

136 

   EN 

Chapter 3 

Final provisions 

Article 150 

Review 

1. 

2. 

3. 

4. 

1. 

By  1  April  2013  the  Commission  shall  review  and  report  on  the  provisions  on 
remuneration  in  this  Directive  and  Regulation  [inserted  by  OP],  with  particular 
regard  to  their  efficiency,  implementation  and  enforcement,  taking  into  account 
international developments. That review shall identify any lacunae arising from the 
application of the principle of proportionality to those provisions. The Commission 
shall  submit  its  report  to  the  European  Parliament  and  the  Council,  and,  if 
appropriate, a legislative proposal. 

The  Commission’s  periodic  review  of  the  application  of  this  Directive  shall  ensure 
that  the  way  it  is  applied  does  not  result  in  manifest  discrimination  between 
institutions on the basis of their legal structure or ownership model. 

From 2014 onwards, EBA shall, in cooperation with EIOPA and ESMA, biannually 
publish  a  report  about  the  extent  legislation  of  Member  States  refers  to  external 
ratings  and  about  steps  taken  by  Member  States  to  reduce  such  references.  This 
report shall also outline how competent authorities meet their obligations set out in in 
Article 76(1) and (2) and in Article 77(1)(b). This report shall also outline the degree 
of supervisory convergence in this regard. 

By 31 December 2013, the Commission shall review and report on the application of 
Articles 103 and 104 and shall submit this report to the European Parliament and the 
Council, and if appropriate, a legislative proposal. 

By  31  December  2016,  the  Commission  shall  review  and  report  on  the  results 
achieved  under  Article  87(4),  including  the  appropriateness  of  benchmarking 
diversity practices, and, shall submit this report to the European Parliament and the 
Council, and, if appropriate, a legislative proposal. 

Article 151 

Transposition 

By 31 December 2012 Member States shall adopt and publish the laws, regulations 
and  administrative  provisions  necessary  to  comply  with  this  Directive. They  shall 
forthwith  communicate  to  the  Commission  the  text  of  those  provisions  and  a 
correlation table between those provisions and this Directive. 

Member states shall apply those provisions from 1 January 2013. 

EN 

137 

   EN 

 
 
 
2. 

3. 

4. 

By  way  of  derogation  from  paragraph  1,  Title  VII,  Chapter  4  shall  apply  from  1 
January 2016. 

When  Member  States  adopt  the  provisions  referred  to  in  paragraphs  1  and  2,  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 
Directives  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  and  to  EBA  the  text  of  the 
main  provisions  of  national  law  which  they  adopt  in  the  field  covered  by  this 
Directive.  

Article 152 

Repeal 

Directives  2006/48/EC  and  2006/49/EC  together  with  their  successive  amendments,  are 
repealed with effect from 1 January 2013. 

References  to  the  repealed  Directives  shall  be  construed  as  references  to  this  Directive  and 
shall be read in accordance with the correlation table in Annex II. 

Article 153 

Entry into force 

This  Directive  shall  enter  into  force  on  the  20th day following  that of  its  publication  in  the 
Official Journal of the European Union. 

Article 154 

Addressee 

This Directive is addressed to Member States. 

EN 

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Annex I 

List of activities subject to mutual recognition 

Acceptance of deposits and other repayable funds. 

Lending  including,  inter  alia:  consumer  credit,  credit  agreements  relating  to 
immovable  property,  factoring,  with  or  without  recourse,  financing  of  commercial 
transactions (including forfeiting). 

Financial leasing. 

Payment services as defined in Article 4(3) of Directive 2007/64/EC of the European 
Parliament  and  of  the  Council  of  13  November  2007  on  payment  services  in  the 
internal market42. 

Issuing  and  administering  other  means  of  payment  (e.g.  travellers'  cheques  and 
bankers' drafts) insofar as this activity is not covered by point 4. 

Guarantees and commitments. 

Trading for own account or for account of customers in any of the following: 

(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. 

Participation in securities issues and the provision of services related to such issues. 

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. 

Money broking. 

Portfolio management and advice. 

Safekeeping and administration of securities. 

Credit reference services. 

Safe custody services. 

Issuing electronic money. 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

10. 

11. 

12. 

13. 

14. 

15. 

42 

OJ L 319, 5.12.2007, p. 1 

EN 

139 

   EN 

 
                                                 
The services and activities provided for in Sections A and B of Annex I to Directive 
2004/39/EC  of  the  European  Parliament  and  of  the  Council  of  21  April  2004  on 
markets  in  financial  instruments43,  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. 

43 

OJ L 145, 30.4.2004, p. 1. 

EN 

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   EN 

                                                 
Annex II 

Correlation Table 

This Directive 

Directive 2006/48/EC 

Directive 
2006/49/EC 

Article 1 

Article 1(1) 

Article 2(1) 

Article 1(2) 

Article 2(2) 

Article 1(3) 

Article 2(3) 

Article 3 

Article 4(1) 

Article 2 

Article 5 

Article 4(2)(a) 

Article 4(20) 

Article 4(2)(b) 

Article 4(2)(c) 

Article 5(1) 

Article 5(2) 

Article 5(3) 

Article 5(4) 

Article 6 

Article 7 

Article 8 

Article 128 

Article 42b(1) 

Article 40(3) 

Article 9(1) 

Article 6(1) 

Article 9(2) 

Article 6(2) 

Article 9(3) 

Article 6(3) 1. subparagraph 

Article 9(4) 

Article 6(3) 2. subparagraph 

Article 10 

Article 11 

Article 7 

Article 8 

Article 12(1) 

Article 9(1) 1. subparagraph 

Article 36(1) 

Article 36(2) 

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   EN 

 
  
  
  
  
  
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Article 12(2) 

Article 9(1) 2. subparagraph 

Article 12(3) 

Article 9(1) 3. subparagraph 

Article 12(4) 

Article 9(2) 

Article 13(1) 

Articel 11(1) 

Article 13(2) 

Articel 11(2) 

Article 14(1) 

Article 12(1) 

Article 14(2) 

Article 12(2) 

Article 14(3) 

Article 12(3) 

Article 15 

Article 13 

Article 16(1) 

Article 15(1) 

Article 16(2) 

Article 15(2) 

Article 16(3) 

Article 15(3) 

Article 17 

Article 18 

Article 19 

Article 20 

Article 21 

Article 16 

Article 17(1) 

Article 18 

Article 14, Article 9(4)c and Article 17(2) 

Article 22(1) 

Article 19(1) 

Article 22(2) 

Article 19(2) 

Article 22(3) 

Article 19(3) 

Article 22(4) 

Article 19(4) 

Article 22(5) 

Article 19(5) 

Article 22(6) 

Article 19(6) 

Article 22(7) 

Article 19(7) 

Article 22(8) 

Article 19(8) 

Article 22(9) 

Article 19(9) 

EN 

142 

   EN 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Article 23(1) 

Article 19a(1) 

Article 23(2) 

Article 19a(2) 

Article 23(3) 

Article 19a(3) 

Article 23(4) 

Article 19a(4) 

Article 23(5) 

Article 19a(5) 

Article 24(1) 

Article 19b(1) 

Article 24(2) 

Article 19b(2) 

Article 25 

Article 20 

Article 26(1) 

Article 21(1) 

Article 26(2) 

Article 21(2) 

Article 27 

Article 21(3) 

Article 28(1) 

Article 28(2) 

Article 29(1) 

Article 29(2) 

Article 29(3) 

Article 29(4) 

Article 30 

Article 31(1) 

Article 31(2) 

Article 32(1) 

Article 32(2) 

Article 33 

Article 23 

Article 34(1) 

Article 24(1) 

Article 34(2) 

Article 24(2) 

Article 34(3) 

Article 24(3) 

Article 4 

Article 9 

Article 5(1) 

Article 5(2) 

Article 5(3) 

Article 5(2) 

Article 6 

Article 7 

Article 8 

Article 10(1) 

Article 10(2) 

EN 

143 

   EN 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Article 35(1) 

Article 25(1) 

Article 35(2) 

Article 25(2) 

Article 35(3) 

Article 25(3) 

Article 35(4) 

Article 25(4) 

Article 35(5) 

Article 25(5) 

Article 36(1) 

Article 26(1) 

Article 36(2) 

Article 26(2) 

Article 36(3) 

Article 26(3) 

Article 36(4) 

Article 26(4) 

Article 36(5) 

Article 26(5) 

Article 37 

Article 38 

Article 36 

Article 27 

Article 39(1) 

Article 28(1) 

Article 39(2) 

Article 28(2) 

Article 39(3) 

Article 28(3) 

Article 39(4) 

Article 28(4) 

Article 40 

Article 29(1) 

Article 41(1) 

Article 30(1) 

Article 41(2) 

Article 42 

Article 32 

Article 43(1) 

Article 33(1) 

Article 43(2) 

Article 43(3) 

Article 43(4) 

Article 43(5) 

Article 43(6) 

Article 33(2) 

EN 

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   EN 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Article 44(1) 

Article 34 

Article 44(2) 

Article 31 

Article 45 

Article 46 

Article 35 

Article 37 

Article 47(1) 

Article 38(1) 

Article 47(2) 

Article 38(2) 

Article 47(3) 

Article 38(3) 

Article 48(1) 

Article 39(1) 

Article 48(2) 

Article 39(2) 

Article 48(3) 

Article 39(3) 

Article 48(4) 

Article 39(4) 

Article 49(1) 

Article 40(1) 

Article 49(2) 

Article 40(2) 

Article 50 

Article 41(3) 

Article 51(1) 

Article 42(1) 

Article 51(2) 

Article 51(3) 

Article 51(4) 

Article 51(5) 

Article 42(2) and (3) 

Article 51(6) 

Article 42(4) and (5) 

Article 51(7) 

Article 42(6) and (7) 

Article 52(1) 

Article 42a(1) 

Article 52(2) 

Article 42a(2) 

Article 52(3) 

Article 42a(3) 

Article 52(4) 

Article 52(5) 

EN 

145 

   EN 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Article 53(1) 

Article 43(1) 

Article 53(2) 

Article 43(2) 

Article 54(1) 

Article 44(1) 

Article 54(2) 

Article 44(2) 

Article 54(3) 

Article 55 

Article 56 

Article 57 

Article 45 

Article 46 

Article 47 

Article 58(1) 

Article 48(1) 

Article 58(2) 

Article 48(1) 

Article 58(3) 

Article 48(2)  

Article 59 

Article 49 

Article 60(1) 

Article 50 

Article 60(2) 

Article 61 

Article 62 

Article 51 

Article 52 

Article 63(1) 

Article 53(1) 

Article 63(2) 

Article 53(2) 

Article 64 

Article 136(2) 

Article 64(3) 

Article 65 

Article 66(1) 

Article 66(2) 

Article 67(1) 

Article 67(2) 

Article 68(1) 

EN 

146 

   EN 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Annex I point 38 

Article 68(2) 

Article 69 

Article 70(1) 

Article 70(2) 

Article 70(3) 

Article 71 

Article 55 

Article 72(1) 

Article 123 

Article 72(2) 

Article 72(3) 

Article 73(1) 

Article 22(1) 

Article 73(2) 

Article 22(2) 

Article 73(3) 

Article 22(3) (2010/78) 

Article 74(1) 

Article 22(3) (2010/76) 

Article 74(2) 

Article 22(4) 

Article 74(3) 

Article 22(5) 

Article 75(1) 

Annex V point 2 

Article 75(2) 

Article 75(3) 

Article 75(4) 

Article 75(5) 

Article 76(1) 

Article 76(2) 

Article 76(3) 

Article 77(1) 

Annex V point 3 

Article 77(2) 

Annex V point 4 

Article 77(3) 

Annex V point 5 

EN 

147 

   EN 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Annnex IV point 5 

Article 78 

Article 79 

Annex V point 6 

Annex V point 7 

Article 80(1) 

Annex V point 8 

Article 80(2) 

Annex V point 9 

Article 81 

Article 82 

Annex V point 10 

Annex V point 11 

Article 83(1) 

Annex V point 12 

Article 83(2) 

Annex V point 13 

Article 84(1) 

Annex V point 14 

Article 84(2) 

Annex V point 14a 

Article 84(3) 

Annex V point 15 

Article 84(4) 

Annex V point 16 

Article 84(5) 

Annex V point 17 

Article 84(6) 

Annex V point 18 

Article 84(7) 

Annex V point 19 

Article 84(8) 

Annex V point 20 

Article 84(9) 

Annex V point 21 

Article 84(10) 

Annex V point 22 

Article 85(1) 

Article 85(2) 

Article 86(1) 

Article 86(2) 

Article 87(1) 

Article 87(2) 

Article 87(3) 

Article 87(4) 

EN 

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   EN 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Article 87(5) 

Article 88(1) 

Annex V point 23, last subparagraph 

Article 88(2) 

Annex V points 23a to f and first subparagraph 

Article 89 

Annex V point 23k 

Article 90(1) 

Annex V points 23g to t 

Article 90(2) 

Article 150(3)b 

Article 91(1) 

Annex V point 24 

Article 91(2) 

Annex V point 24 

Article 92(1) 

Article 124(1) 

Article 92(2) 

Article 124(2) 

Article 92(3) 

Article 124(3) 

Article 92(4) 

Article 124(4) 

Article 92(5) 

Article 124(5) 

Article 92(6) 

Article 92(7) 

Article 92(8) 

Article 92(9) 

Article 93 

Article 94(1) 

Annex XI point 1 

Article 94(2) 

Annex XI point 1a 

Article 94(3) 

Annex XI point 2 

Article 94(4) 

Annex XI point 3 

Article 95 

Article 96(1) 

Article 96(2) 

Article 96(3) 

EN 

149 

   EN 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Article 97(1) 

Article 97(2) 

Article 98(1) 

Article 98(2) 

Article 98(3) 

Article 98(4) 

Article 98(5) 

Article 99(1) 

Article 136(1) 

Article 99(2) 

Article 100(1) 

Article 136(2) 1. subparagraph 

Article 100(2) 

Article 136(2) 2. subparagraph 

Article 101 

Article 149 

Article 102 

Article 103(1) 

Article 68(2) 

Article 103(1) 

Article 3 

Article 103(1) 

Article 123 

Article 103(2) 

Article 71(1) 

Article 103(3) 

Article 71(2) 

Article 103(4) 

Article 73(2) 

Article 103(5) 

Article 104(1) 

Article 68(1) 

Article 104(2) 

Article 73(3) 

Article 104(3) 

Article 105(1) 

Article 124(2) 

Article 105(2) 

Article 23 

Article 106(1) 

Article 125(1) 

Article 2 

EN 

150 

   EN 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Article 106(2) 

Article 125(2) 

Article 2 

Article 106(3) 

 Article 126(1) 

Article 106(4) 

 Article 126(2) 

Article 106(5) 

 Article 126(3) 

Article 106(6) 

 Article 126(4) 

Article 107(1) 

Article 129(1) 1. subparagraph 

Article 107(2) 

Article 129(1) 2. subparagraph 

Article 107(3) 

Article 129(1) 3. subparagraph 

Article 108(1)a 

Article 129(3) 1. subparagraph 

Article 108(1)b 

Article 108(2)a 

Article 129(3) 2. subparagraph 

Article 108(2)b 

Article 108(3) 

Article 129(3) 4.-7. subparagraph 

Article 108(4) 

Article 129(3) 8. subparagraph 

Article 108(5) 

Article 129(3) 9. subparagraph 

Article 108(6) 

Article 129(3) 10. subparagraph 

Article 109(1) 

Article 130(1) 

Article 109(2) 

Article 130(2) 

Article 110 

Article 131 

Article 111(1) 

Article 131a(1) 

Article 111(2) 

Article 131a(2) 

Article 112(1) 

Article 132(1) 

Article 112(2) 

Article 132(2) 

Article 112(3) 

Article 132(3) 

Article 112(4) 

??? 

Article 113 

Article 141 

EN 

151 

   EN 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Article 114(1) 

Article 127(1) 

Article 114(2) 

Article 127(2) 

Article 114(3) 

Article 127(3) 

Article 115 

Article 135 

Article 116(1) 

Article 137(1) 

Article 116(2) 

Article 137(2) 

Article 117(1) 

Article 138(1) 

Article 117(2) 

Article 138(2) 

Article 118(1) 

Article 139(1) 

Article 118(2) 

Article 139(2) 

Article 118(3) 

Article 139(3) 

Article 119(1) 

Article 140(1) 

Article 119(2) 

Article 140(2) 

Article 119(3) 

Article 140(3) 

Article 120 

Article 142 

Article 121(1) 

Article 143(1) 

Article 121(2) 

Article 143(2) 

Article 121(3) 

Article 143(3) 

Article 122 

Article 123 

Article 124 

Article 125 

Article 126 

Article 127 

Article 128 

Article 129 

Article 2 

Article 2 

Article 2 

EN 

152 

   EN 

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Article 130 

Article 131 

Article 133(1) 

Article 144 

Article 133(2) 

Article 133(3) 

Article 134(1) 

Article 122a.9 

Article 134(2) 

Article 69(4) 

Article 134(3) 

Article 70(4) 

Article 135 

Article 150(1) 

Article 136(1) 

Article 150(1)(a) 

Article 136(2) 

Article 150(2) 

Article 137(1) 

Article 151(1) 

Article 137(2) 

Article 151(2) 

Article 138(1) 

Articles 151a,b,c 

Article 138(2) 

Articles 151a,b,c 

Article 138(3) 

Articles 151a,b,c 

Article 138(4) 

Articles 151a,b,c 

Article 138(5) 

Articles 151a,b,c 

Article 139 

Article 140 

Article 141 

Article 29 

Article 142 

Article 30 

Article 143 

Article 33 

Article 144 

Article 40 

Article 145 

Article 41 

Article 146 

Article 42 

EN 

153 

   EN 

 
 
 
 
  
 
  
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Article 147 

Article 42a 

Article 148 

Article 43 

Article 149 

Article 150(1) 

Article 156(4) 

Article 150(2) 

Article 151(1) 

Article 157(1) 

Article 151(2) 

Article 151(3) 

Article 157(2) 

Article 151(4) 

Article 157(2) 

Article 152 

Article 158 

Article 153 

Article 159 

Article 154 

Article 160 

Annex I 

Annex I 

EN 

154 

   EN