Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on structural measures improving the resilience of EU credit institutions
Date: 2014-01-29
Institutions: European Commission
Subjects: bank, banking system, credit institution, financial control, financial intervention, financial legislation













EUR-Lex - 52014PC0043 - EN











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52014PC0043

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on structural measures improving the resilience of EU credit institutions /* COM/2014/043  final - 2014/0020 (COD) */









EXPLANATORY MEMORANDUM

1.                      
CONTEXT OF THE PROPOSAL

Since the start of the financial crisis,
the European Union ("Union") and its Member States have engaged in a
fundamental overhaul of financial regulation and supervision.
In the area of banking, the Union has
initiated a number of reforms to create a safer, sounder, more transparent and
responsible financial system that works for the economy and society as a whole.
However, the Union banking sector remains large in absolute (EUR42.9 trillion)
and relative terms (nearly 350 per cent of Union GDP). The individual size of the
largest Union banks by assets is roughly similar or close to the GDP of its
home country. These banks still remain too-big-to-fail, too-big-to-save and
too-complex-to-resolve.
In this context, Commissioner Barnier
announced in November 2011 the setting up of a High-Level Expert Group
("HLEG") with a mandate to assess the need for structural reform of
the Union banking sector, chaired by Erkki Liikanen, Governor of the Bank of
Finland.[1]
The report was presented in October 2012 stating that bank restructuring is
necessary to complement existing reforms and recommending the mandatory
separation of proprietary trading and other high-risk trading activities into a
separate legal entity within the banking group. The separation would be
mandatory only for banks where the activities to be separated amounted to a
significant share of the banks business.[2]
On 3 July 2013, by large majority the European Parliament ("EP") adopted
an own initiative report called "Reforming the structure of the EU banking
sector"[3]
that welcomes structural reform measures at Union level to tackle concerns on
“Too-Big-To-Fail” ("TBTF") banks[4].
This proposal represents a critical part of
the Union response to tackling the TBTF dilemma. It aims at preventing the
residual unmanaged risks in the Union banking system from materialising. It
will curtail the artificial expansion of banks' balance sheets, particularly
those activities of a purely speculative nature, thereby reducing the risk that
tax payers have to step in to save failing banks, and reducing the cost and
complexity of any resolution when required. It is also an important complement
to the Directive establishing a framework for the recovery and resolution of
credit institutions and investment firms ("BRRD").[5]
Structural reform has so far not been part
of the international reform agenda agreed by the G20. However, a number of
jurisdictions around the world have enacted or proposed measures to address the
above concerns. In the last years a number of Member States have engaged in
reform initiatives (Germany, France, the United Kingdom and Belgium). The
United States has recently adopted the so-called "Volcker rule"
prohibiting proprietary trading by banks. Furthermore, international
organisations have called for a global debate on bank structures and business
models. In view of the proliferation of reform initiatives in this context, and
with a view to prevent overlapping or incompatible measures affecting
internationally active banks, the G20 leaders at the last summit in Saint
Petersburg called on the Financial Stability Board to assess cross-border
consistencies and global financial stability implications of structural banking
reforms. This proposal takes careful note of emerging international coordination
efforts and recognises the need to prevent opportunities for regulatory
arbitrages.
This proposal is accompanied by a directly
related proposal to tackle another conduit for financial contagion – namely,
interconnectedness among market participants including systemic banks through
opaque trading links in securities financing transactions. The Green Paper on
shadow banking presented by the Commission on 19 March 2012[6] recognises that any
reinforced banking regulation could drive a substantial part of banking
activities beyond the boundaries of traditional banking and towards “shadow
banking” defined as "the system of credit intermediation that involves
entities and activities outside the regular banking system"[7]. On 20 November 2012,
the EP adopted a resolution on shadow banking[8]
where it underlined the need to ensure greater transparency in the structure
and activities of financial institutions as well as the need for supervisors to
have knowledge of the level of shadow banking activities like repurchase
agreements and securities lending. On 4 September 2013, the Commission
highlighted in its communication on shadow banking[9] that strengthening
transparency of securities financing transactions, such as repurchase
agreements and securities lending, other equivalent transactions and
re-hypothecation will be essential to monitor the risks associated with
interconnectedness, excessive leverage and pro-cyclical behaviours.
The remainder of this explanatory
memorandum is confined to a presentation of the present proposal relating to
structural separation of credit institutions.

2.                      
RESULTS OF CONSULTATIONS WITH THE INTERESTED
PARTIES AND IMPACT ASSESSMENTS

Stakeholders have been consulted on a
number of occasions. The HLEG met with a variety of stakeholders during its
mandate and held a public consultation targeting banks, corporate customers and
retail clients and their associations.[10]
The Commission also held a public stakeholder consultation in October 2012.[11] Structural bank reform
and the need for a coordinated action at Union level have also been subject to
discussions with Member States.
In the course of preparing the Impact
Assessment ("IA"), the Commission held an additional public
stakeholder consultation in the spring of 2013 inviting banks to model the
impact of different types of structural reform options.[12] The 500 consultation
responses highlighted the divisions among banks, on the one hand, and consumers
and non-bank financials on the other hand. The former were to an overwhelming
extent against structural separation; the latter were largely in favour. The
views of other categories were more balanced.
An Inter-service Steering Group ("ISG")
on bank structural reform was established in March 2013 with representatives
from the Directorate Generals COMP, ECFIN, EMPL, ENTR, JUST, MARKT, SG, SJ,
TAXUD and the JRC. This ISG met in March, April and September 2013 and
supported the work on the IA.
The draft IA was submitted to the Impact
Assessment Board (the “IAB”) of the Commission on 19 September 2013 and
discussed with the IAB on 16 October 2013. The IAB provided its recommendations
for improvement on 18 October 2013. The main recommendations were: (i) to
improve the problem description and baseline scenario; (ii) to better describe
and explain the reform options; (iii) to better assess impacts and better
demonstrate the effectiveness of the retained reform options; (iv) to better
present stakeholder views; and (v) to add a glossary. The Commission services
resubmitted a revised IA on 18 December 2013, alongside with a separate
document explaining to the IAB how the IAB recommendations had been
incorporated. The IAB subsequently issued a positive opinion on 15 January
2014, whilst providing recommendations for further improvements, asking in
particular to strengthen the analysis of the justification of the proposed
measures, alternative reform options, impact, and stakeholder views with
respect to the transparency measures that had only been introduced in the
resubmission of the final IA. The IAB also recommended further strengthening
the structural reform options presentation and the assessment of the impact and
effectiveness of the retained reform options. The final version of the IA has
significantly expanded the analysis of the transparency reform measures and has
further elaborated on the other two IAB recommendations.
On the overall costs and benefits of this
proposal, the impact assessment carried out in the context of this proposal has
been subject to qualitative analysis and quantitative modelling. The impact
assessment concluded that implicit subsidies are significant, while they depend
on the size of the bank and the level of interconnectedness of the bank. While
taking due account of the clear benefits derived from the diversity of banking
models in Europe, this proposal intends to ensure that the delicate balance
between the prevention of systemic risks and the financing of sustainable
economic growth is maintained.

3.                      
LEGAL ELEMENTS OF THE PROPOSAL
3.1.                
Legal basis and subsidiarity

The
legal basis for this Regulation is Article 114(1) of the Treaty of the
Functioning of the European Union (the "TFEU"), which allows the
adoption of measures for the approximation of national provisions aiming at the
establishment and good functioning of the internal market.
Uniform
rules on banks’ structures will enhance financial stability within the Union,
better integrate financial markets, facilitate the orderly resolution and
recovery of the group, enhance the cross-border provision of services and the establishment
in other Member States, reduce distortions of competition and prevent
regulatory arbitrage.
Some
Member States have proposed or adopted structural reform measures for their
national banking systems. Inconsistent national legislation that does not
pursue the same policy goals, in a manner that is compatible and equivalent
with the mechanisms envisaged in this Regulation, increases chances that
capital movements and investment decisions are distorted. Without a Union-wide
approach banks will be forced to adapt their structure and operation along
national boundaries, thereby making them even more complex and increasing
fragmentation.
Inconsistent
national legislation would also undermine efforts to achieve a single rulebook
applicable throughout the internal market and the creation of an effective banking
union, as it would have the effect of limiting the effectiveness of the Single
Supervisory Mechanism ("SSM")[13] and a future Single Resolution
Mechanism ("SRM").[14]
Inconsistent legislation also makes the management of cross-border institutions
more difficult and costly.
Harmonisation at Union level
envisaged in this Regulation can ensure that Union banking groups, many of
which operate in several Member States, are regulated by a common framework of
structural requirements thereby ensuring a level playing field, reducing
regulatory complexity, avoiding unwarranted compliance costs for cross-border
activities, promoting further integration in the Union market place and
contributing to the elimination of regulatory arbitrage opportunities.
Consistent with the goals of
contributing to the functioning of the internal market, a Member State that has
previously adopted legislation prohibiting credit institutions taking deposits
from individuals and SMEs from engaging in the activity of dealing in
investments as a principal and hold trading assets may make a request to the
Commission to grant a derogation from the provisions laid down in Chapter III
(“separation of certain trading activities”) for a credit institution that is
subject to the national law compatible with provisions of that Chapter. This
would allow Member States that are found to have already implemented
“super-equivalent” measures to avoid costly alignment of existing, effective provisions
with these provisions. To ensure that the impact of the national legislation
does not jeopardize the aim or functioning of the internal market, the goals of
the national legislation must be the same as those set out in this proposal;
and the national legal, supervisory and enforcement arrangements must ensure
that the credit institution comply with legally binding requirements that are
compatible with this proposal.
This proposal takes due account of
the rapidly evolving financial markets and financial innovation as well the
evolution of the Union regulatory and supervisory frameworks. In order to
ensure the effective and consistent supervision and the development of the
single rule book in banking, this proposal envisages an important role for the
European Banking Authority ("EBA"). The EBA will be consulted by
competent authorities when taking certain decisions as set out in this proposal
and will prepare draft regulatory and implementing technical standards, and
submit reports to the Commission. This is particular important in the situations
described in Articles 9, 10, 13 and 21.

3.2.                
Proportionality

Under the principle of proportionality set
out in Article 5 of the TEU, the content and form of Union action must not
exceed what is necessary to achieve the objectives of the Treaties.
The proposed Regulation prohibits large Union
credit institutions and banking groups from carrying out proprietary trading
and certain related activities.
Ownership separation has the potential to
be the most effective structural reform tool in terms of achieving the specific
objectives of facilitating resolution and limiting moral hazard, conflicts of
interest and capital and resource misallocation. The potential benefits of prohibiting
proprietary trading activities would be particularly strong in terms of
mitigation of risks, complexity, interconnectedness and conflicts of interest.
However in view of the challenges derived from the difficult distinction
between proprietary trading and other similar trading activities, market making
in particular, a narrow definition of activities subject to the prohibition
underpins the proportionality of this measure. Excluding smaller banks from the
scope of the prohibition is justified because of the disproportionate effects
such a prohibition could entail for those banks if forced to divest parts of
their portfolios.
The proposed Regulation also requires the
competent authority to undertake a systematic review of certain other
activities – namely, market-making, investment in/sponsoring of securitization
and trading of certain derivatives. These have been identified as the
activities where there is the greatest risk that proprietary trading could be
performed in contravention of the prohibition, and which could give rise to
risks for the stability of the core credit institution and the Union financial
system. The competent authority is granted the power to require the separation.
This power to require separation is not imposed as a blanket measure: instead,
the competent authority is allowed to exercise judgment, using a set of harmonised
metrics. Only under certain circumstances, when risks exceed levels to be
defined using harmonised metrics, is the competent authority required to
enforce separation. This approach is considered to be proportionate because
separation is imposed only under certain conditions, and following an in-depth
review of the impact of those activities on the risk profile and behaviour of
the core credit institution.
The proposed Regulation targets large
credit institutions and banking groups. Given that the main purpose of the
proposal is to deal with residual systemic risks in the Union financial system,
extending the measures of the proposal to all credit institutions would be
disproportionate and could lead to non-justified costs, in particular for
smaller credit institutions.
Credit institutions falling below the
thresholds of the proposed Regulation are not subject to the structural
measures foreseen. This implies that Member States or the competent authorities
may decide to impose similar measures also on smaller credit institutions.
The proposed Regulation respects the
fundamental rights and observes the principles recognised in the Charter of
Fundamental Rights of the European Union, notably the right to the protection
of personal data, the freedom to conduct a business, the right to property, the
right to an effective remedy and to a fair trial, and has to be implemented in
accordance with those rights and principles.

3.3.                
Detailed explanation of the proposal 

This section briefly outlines the main
components of this regulation.

3.3.1.          
Objectives and subject matter of structural
separation

The proposed Regulation aims at enhancing
financial stability in the Union by means of structural reform of large banks,
thus complementing financial regulatory reforms already undertaken at Union level.
Article 1 outlines the aim and the objectives underpinning the reform.
Article 2 outlines the subject matter,
which is to lay down rules on structural changes on TBTF banks by imposing a
proprietary trading prohibition and potential separation of certain trading
activities.

3.3.2.          
Scope

Article 3 states that the proposed Regulation
applies to banks that meet certain criteria and exceed certain thresholds:
(1)                   
The requirements apply to the European banks
that are identified as being of global systemic importance.
(2)                   
The requirements apply to banks that exceed the
following thresholds for three consecutive years: (a) the bank's total assets
exceed €30 billion;[15]
and (b) the bank's total trading assets and liabilities exceed €70 billion or
10 percent of their total assets.
Articles 22 and 23 provide further detail
on how "trading activities" (for the purposes of competent authority review
leading to possible separation from the credit institution) should be
calculated. Given that the focus of bank structural reform is on banking
activities, Article 23(2) states that for financial conglomerates, the
activities of insurance and non-financial undertakings must not be included in
the calculation.
The proposed Regulation will apply to Union
credit institutions and their EU parents, their subsidiaries and branches,
including in third countries. It will also apply to branches and subsidiaries
in the Union of banks established in third countries. Such a broad territorial
scope is justified to ensure a level playing field and avoid the transfer of
activities outside the Union to circumvent these requirements. However, foreign
subsidiaries of Union banks and EU branches of foreign banks could be exempted
if they are subject to equivalent separation rules (Articles 4 and 27). Article
4(2) foresees another potential exemption: supervisors have been granted the power
to exempt from separation foreign subsidiaries of groups with autonomous
geographic decentralised structure pursuing a "Multiple Point of Entry"
resolution strategy.
By applying the separation requirement throughout
the global corporate group irrespective of geographic location, the potential
for banks circumventing separation by locating particular activities outside
the Union is eliminated. Furthermore, by supplementing the broad territorial
coverage with a third country equivalence regime the possible extraterritorial
concerns of third country jurisdictions are mitigated. By requiring foreign
banks to separate their operations in the Union, a level playing field in the
internal market is also ensured and thereby the risk of unfair competition is
minimised.

3.3.3.          
Prohibition of proprietary trading (Chapter II)

Article 6(1) of the proposed Regulation
provides that a credit institution and entities within the same group must not
engage in proprietary trading in financial instruments and commodities. While
consistent data at Union level with regard to specific banking activity is
scarce, available evidence suggests that proprietary trading represents a
limited part of banks’ balance sheets.[16]
However, the same evidence also highlights that such trading was significant
prior to the crisis and, in the absence of regulatory intervention, there is no
guarantee that it may not increase again in the future.
It is difficult to define proprietary
trading and distinguish it from market-making. According to Article 5(4), which
defines proprietary trading narrowly, desks’, units’, divisions’ or individual
traders’ activities specifically dedicated to taking positions for making a
profit for own account, without any connection to client activity or hedging
the entity’s risk, would be prohibited.
Article 6(2) clarifies that where credit
institutions falling within the scope of the proposed Regulation as defined in
Articles 3 and 4, operate dedicated structures for buying and selling money
market instruments for the purposes of cash management, they are not captured
by this prohibition. Trading in Union government bonds is also exempted from
the prohibition (Article 6(2)(a)) to prevent possible negative consequences in
these crucial markets. This exemption mirrors the one provided for trading in
government bonds in relation to the assessment of activities (Article 8(2)).
While in principle a proprietary trading prohibition
could extend to all banks, it is proposed to apply the ban only to banks
referred to in Article 3. To prevent banks from circumventing the prohibition
by e.g. owning or investing in hedge funds, Article 6(1)(b) states that banks
subject to the proprietary trading prohibition are also prohibited from
investing in or holding shares in hedge funds (or certificates/derivatives
linked to these), or entities that engage in proprietary trading or sponsor
hedge funds. Unleveraged and closed-ended funds– mainly private equity, venture
capital and social entrepreneurship funds – are exempted from this prohibition,
given their role in supporting the financing of the real economy (Article
6(3)). Credit institutions covered by these prohibitions will be able to
continue providing banking/custody services to hedge funds.

3.3.4.          
Potential separation of certain trading
activities (Chapter III)

Banks engage in a number of other trading
and investment banking activities, including market making, lending to venture
capital and private equity funds, investment and sponsorship of risky
securitisation, sales and trading of derivatives etc. Banking groups will be
allowed to continue engaging in those other activities subject to the
discretion of the competent authority who will be obliged to review trading
activities and will have the power (as well as an obligation under certain
circumstances) to separate a subset of activities (market making, risky
securitisation, complex derivatives) if certain metrics are exceeded. This aims
at avoiding the risk that banks would circumvent the ban in Article 6 by
engaging in hidden proprietary trading activities and that the non-prohibited
trading activities become too significant or highly leveraged. The basic
principle of the proposed Regulation is that "deposit taking entities"
within banking groups can only engage in these activities as long as the competent
authority does not decide that they need to be performed within a distinct "trading
entity."

3.3.4.1.    
Scope of activities subject to separation

Article 8 defines trading activities
broadly by stating that it means activities other than e.g. taking deposits
eligible for deposit insurance, lending, retail payment services and a number
of other activities. Article 8(2) furthermore exempts Union sovereign bonds
from the obligation to review and power to separate. Such an exemption is
consistent with the current practice of zero risk weights in the Capital
Requirement Regulation and Directive[17]
(the "CRR"/"CRDIV"). Nevertheless, Article 8(3) states that
the Commission may by delegated acts extend the scope of the exemption to non-Union
sovereign bonds if they conform to certain conditions.

3.3.4.2.    
Duty to review activities

The proposed Regulation will oblige competent
authority to review trading activities of banks exceeding the thresholds,
including in particular three activities that are either especially close to
proprietary trading, and hence susceptible to feature hidden proprietary
trading (market making), or have played a key role during the financial crisis
(e.g. investing and sponsoring activities in risky securitisation and trading
in derivatives other than those that are specifically allowed for the purpose
of prudent risk management). Competent authorities will assess these activities
in light of certain metrics to be adjusted using supervisory data. The metrics
indicate relative size, leverage, complexity, profitability, associated market
risk, as well as interconnectedness (Article 9(2)). To ensure that these
metrics are consistently measured and applied, Article 9(4) entrusts the EBA
with developing a binding implementing technical standard to be adopted by the
Commission.

3.3.4.3.    
Power to separate

Article 10(1) states that the competent
authorities must require separation if the trading activities of banks (market making,
investing in and sponsoring risky securitisation and trading in certain
derivatives) and the related risks are found to exceed certain thresholds and
meet certain conditions linked to the metrics. If the bank demonstrates to the
satisfaction of the competent authority that these activities do not endanger the
Union financial stability, taking into account the objectives of the proposed
Regulation, the competent authority may decide not to require separation.
Article 10(2) states that a competent
authority can require separation of a particular trading activity if it
considers that the activity in question threatens the financial stability of
the bank or of the Union, taking into account any of the objectives of the
proposed Regulation.
The competent authority should consult the
EBA prior to taking decisions referred to in Article 10 and should notify the
EBA of its final decision.
Article 10(5) empowers the Commission to
adopt a delegated act specifying the level not to be exceeded for each metrics
as well as the conditions, including the number of metrics that need to be
exceeded, for the separation to apply. In addition, the Commission will be
empowered to specify which type of securitisation is not considered to pose a
threat to financial stability according to a list of criteria and could
therefore be carried out by a core credit institution.

3.3.4.4.    
Management of banks’ own risks ("treasury
management")

If further separation materialises, Article
11(1) clarifies that the deposit-taking bank is still allowed to manage its own
risk. Nevertheless, as treasury management may give rise to proprietary trading
and given that liquidity management involves taking certain speculative
positions, this should be associated with certain safeguards.

3.3.4.5.    
Provision of risk management services to clients

Article 12 clarifies that the core credit
institution is still able to sell certain risk management products (i.e.,
derivatives) to non-financial, non-banking clients. However, the sale of
derivatives to clients exposes the bank to more risks, which may notably make its
resolution more complex and therefore it will be subject to different degrees
of safeguards and control. To address these risks, it is stated that interest
rate, foreign exchange, credit, emission allowance and commodity derivatives
eligible for central counterparty clearing can be sold by the core credit
institution to its non-financial clients, insurance undertakings and
institutions for occupational retirement provision, but only to hedge interest
rate, foreign exchange and credit risk, commodity risk and emission allowance
risk and subject to caps on the resulting position risk. Recognising certain
derivatives further encourages banks to standardise those derivatives and is
thus in line with the policy objectives of the European Market Infrastructure
Regulation ("EMIR").[18]

3.3.4.6.    
Rules on separation of trading activities

If competent authorities require the
separation of trading activities above and these activities will remain within
the banking group, then these would have to be transferred to a distinct legal
entity (a "trading entity"). The legal, economic, governance and
operational links of that entity with the rest of the group would have to be
curtailed to ensure effective separation. Article 13(3) states that if
separation occurs, the group must be organised into homogeneous functional
subgroups constituted on the one side by core credit institutions and on the
other trading entities. Article 13(5) to (13) and of the proposed Regulation
state the conditions that will apply to ensure a strong separation in legal,
economic, governance and operational terms. After separation, the prudential
requirements outlined in those Articles should apply on an individual or
sub-consolidated basis to the respective sub-groups.
Furthermore, Article 13(11) provides for
derogations to the CRR as regards waiving certain requirements to ensure that
prudential requirements (own funds, liquidity and disclosure) apply on a
sub-consolidated basis to the respective subgroups. Groups that qualify as
mutuals, cooperatives, savings institutions or the like do engage in risky
trading activities and therefore are subject to the requirements in this
proposal. However, these institutions have a very specific ownership and
economic structure and play an important role in financing the local and
regional economy. Imposing some of the rules related to separation could
require far-reaching changes to the structural organisation of such entities.
This could be disproportionate to the benefits if it would require these
entities to completely change their corporate identity. Thus, the competent
authority may decide to allow core credit institutions that meet the
requirements set out in Article 49(3)(a) or (b) of Regulation (EU) No 575/2013
to hold capital instruments or voting rights in a trading entity where the
competent authority considers that holding such capital instruments or voting
rights is indispensable for the functioning of the group and that has taken sufficient
measures in order to appropriately mitigate the relevant risks.
Another fundamental part of the economic
separation between the core credit institution and the trading entity are the
large exposure restrictions. Articles 14 to 17 accordingly lay down rules to
that effect. These rules refer to limits on both intra and extra-group, individual and aggregate large exposures.

3.3.4.7.    
Separation plan

The actual separation of trading activities
will be preceded by an obligation for relevant banks to submit a
"separation plan" to competent authorities. Article 18 provides that
this plan should be approved by the competent authority, with the latter having
the possibility to require changes to the plan as appropriate, or setting out
its own plan for separation in case of inaction by the relevant bank.

3.3.4.8.    
Cooperation between competent authorities and
resolution authorities

The BRRD foresees that resolution
authorities may, as part of their resolution planning, require banks to make
structural changes (e.g. to their legal and organisational structure) if the
resolution authority believes that it is necessary to address impediments to
effective resolution. While the proposed regulation addresses a broader range
of objectives going beyond resolution, it is necessary to ensure that the
respective authorities liaise with each other. Article 19 accordingly states that
if a competent authority decides to require separation, it must notify
resolution authorities (Article 19(1)) and take into account any ongoing or
pre-existing resolvability assessment by resolution authorities as per Articles
13 and 13a of the BRRD. Likewise, the resolution authority must take into
account the notification of a separation decision by a competent authority when
assessing the resolvability of an institution.

3.3.4.9.    
Prohibited activities for the trading entity

Article 20 provides that there are certain
activities that the trading entity may not carry out. Those are taking deposits
eligible for protection under deposit guarantee schemes and provide retail
payment services as defined in the Payment Services Directive[19].

3.3.4.10.  Derogation

Whereas the proposed Regulation sets out
uniform rules on the aim, objectives and instruments of structural reform of
banks in the internal market, Article 21 allows for a possible derogation from
the separation requirements in Chapter III for credit institutions being
covered by national legislation having an equivalent effect as the provisions
of Chapter III of the proposal. This derogation will be granted by the
Commission upon request of the Member State in question after the Member State
has obtained a positive opinion from the competent authority responsible for
the supervision of the banks for which the derogation is requested. To qualify
for the derogation, the national primary legislation must have been adopted
before 29 January 2014 and fulfil the criteria laid down in Article 21(1). This
means that the aim of the national law, its material scope and provisions
referring to the legal, economic and governance separation of the deposit
taking entity must be similar to those in the proposed Regulation.

3.3.5.          
Compliance: entities and competent authorities
(Chapter V)

Most banks covered by Article 3 are
operating in several countries both by means of branches and subsidiaries. They
are supervised by several different authorities, both home (parent,
subsidiaries in different Member States) and host (branches). In order to
ensure an effective and efficient group level application of structural reform,
Article 26 gives the final say over structural separation decisions to the lead
supervisor with responsibility over the consolidated group. This is the
approach chosen by some national reform proposals. The lead supervisor should,
prior to making any decisions, consult the home supervisor of significant group
subsidiaries.

3.3.6.          
Relationships with third countries (Chapter VI)

Article 27 provides for
the adoption of delegated acts to recognise third country structural reforms as
being equivalent when they meet certain conditions.

3.3.7.          
Administrative sanctions and measures (Chapter
VII)

 Chapter VII reflects
current horizontal policies in the financial services sector concerning
sanctions and measures. It defines a common approach to the main breaches of the
proposed Regulation and lays down the administrative sanctions and measures
that the competent authorities should be empowered to apply in case of the main
breaches. 

3.3.8.          
Report and Review (Chapter VIII)

The adoption of this proposal would
constitute the first set of structural separation rules applying to banks at Union
level. It is therefore important to assess whether the rules described above
have proved to be an effective and efficient way of achieving the aim and the objectives
of structural reform. To that end the final Chapter outlines a number of areas
where the Commission will review the framework in both general and specific
terms (Article 34). For example, reviews will focus on the application of
thresholds, the application and the effectiveness of the prohibition foreseen
in Article 6, the scope of activities subject to the review, and the
suitability and application of the metrics.

3.3.9.          
Timeline 

The following indicates the principal dates
relating to the adoption and implementation of the key provisions of this
proposal, on the basis that the final text of the Regulation is adopted by the EP
and Council by June 2015:
·                        
the Commission adopts the required delegated
acts for implementation of key provisions by 1 January 2016;
·                        
the list of covered and derogated  banks is
published 1 July 2016 and on a yearly basis thereafter;
·                        
the prohibition on proprietary trading becomes
effective on 1 January 2017;
·                        
the provisions on separation of trading activities
from credit institutions will become effective on July 1, 2018.

4.                      
Budgetary implications:

The financial and budgetary impact of the
proposal is indicated in the legislative financial statement attached.
2014/0020 (COD)
Proposal for a
REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL
on structural measures improving the
resilience of EU credit institutions
(Text with EEA relevance)
THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 114 thereof,
Having regard to the proposal from the
European Commission,
After transmission of the draft legislative
act to the national Parliaments,
Having regard to the opinion of the
European Economic and Social Committee[20],

Having regard to the opinion of the
European Central Bank[21],
After consulting the European Data
Protection Supervisor[22],
Acting in accordance with the ordinary
legislative procedure,
Whereas:
(1)              
The Union’s financial system includes over 8,000
banks of different sizes, corporate structures and business models, a few of
which exist in the form of large banking groups carrying out an
all-encompassing set of activities. Those groups comprise a complex web of
legal entities and intra-group relationships. They are highly connected to each
other through interbank borrowing and lending and through derivatives markets.
The impact of possible failures of these large banks can be extremely widespread
and significant.
(2)              
The financial crisis has demonstrated the
interconnected nature of Union banks and the resulting risk to the financial
system. As a result, resolution has to date been challenging, involved entire
banking groups, as opposed to only
the non-viable parts, and has
relied significantly on public support.
(3)              
Since the start of the financial crisis, the
Union and its Member States have engaged in a fundamental overhaul of bank
regulation and supervision including the setup of the first steps towards a banking
union. Given the depth of the financial crisis and the need to ensure that all
banks can be resolved, there was a need to assess whether more measures are
needed to further reduce the probability and impact of failure of the largest
and most complex banks. A High-Level Expert Group ("HLEG") chaired by
Erkki Liikanen was mandated for this purpose. The HLEG recommended the
mandatory separation of proprietary trading and other high-risk trading
activities into a separate legal entity within the banking group for the largest
and most complex banks.
(4)              
The on-going banking regulatory reform agenda
will significantly increase the resilience of both individual banks and the
banking sector as a whole. However, a limited subset of the largest and most
complex Union banking groups still remain too-big-to-fail, too-big-to-save and
too-complex to manage, supervise and resolve. Structural reform is therefore an
important complement to other regulatory initiatives and measures, as it would
offer one way of more directly addressing intra-group complexity, intra-group
subsidies, and excessive risk-taking incentives. A number of Member States have
adopted or are considering adopting measures to introduce structural reform in
their respective banking systems.
(5)              
On 3 July 2013, the European Parliament called
on the Commission to provide for a principles-based approach to structural
reform of the European banking sector.
(6)              
The legal basis for this Regulation is Article
114(1) of the Treaty of the Functioning of the European Union (TFEU), which
allows the adoption of measures for the approximation of national provisions
aiming at the establishment and good functioning of the internal market.
(7)              
Inconsistent national legislation that does not
pursue the same policy goals in a manner that is compatible and equivalent with
the mechanisms envisaged in this Regulation increases chances that capital
movements decisions of market participants are negatively affected because
different and inconsistent rules and practices may significantly raise
operational costs for credit institutions that are operating across borders and
hence lead to a less efficient allocation of resources and capital compared to
a situation where capital movement is subject to similar and consistent rules.
For the same reasons, different and inconsistent rules will also negatively
affect decisions of market participants relating to where and how to provide
cross-border financial services. Different and inconsistent rules may also
unintentionally encourage geographic arbitrage. The movement of capital and the
provision of cross-border services are essential elements for the proper
functioning of the Union internal market. Without a
Union-wide approach credit institutions will be forced to adapt their structure
and operations along national boundaries, thereby making them even more complex
and leading to increased fragmentation of the internal market.
(8)              
Inconsistent national legislation also undermines
efforts to achieve a single rulebook applicable throughout the internal market. Such a development would also have
the effect of limiting the effectiveness of the Single Supervisory Mechanism[23] (SSM) because the
European Central Bank (ECB) would have to apply a set of different and
inconsistent legislation to credit institutions that are under its supervision
which will increase supervisory costs and complexity. Inconsistent legislation
also makes the management of cross-border credit institutions more difficult
and costly, notably in terms of ensuring compliance with divergent and possibly
inconsistent rules. Similarly, the Single Resolution Mechanism[24] (SRM) would have to
resolve credit institutions subject to potentially different national
requirements regarding their organisational and operational structure.
(9)              
Harmonisation at Union level can ensure that
Union banking groups, many of which operate in several Member States, are
regulated by a common framework of structural requirements thereby avoiding
competitive distortions, reducing regulatory complexity, avoiding unwarranted
compliance costs for cross-border activities, promoting further integration in
the Union market place and contributing to the elimination of regulatory
arbitrage opportunities.
(10)          
Consistent with the goals of contributing to the
functioning of the internal market, it should be possible to grant a derogation
for a credit institution from the provisions on separation of certain trading
activities where a Member State has adopted national primary legislation prior
to 29 January 2014 (including secondary legislation subsequently adopted) prohibiting
credit institutions, which take deposits from individuals and Small and Medium
sized Enterprises (SMEs) from dealing in investments as a principal and holding
trading assets. The Member State should therefore be entitled to make a request
to the Commission to grant a derogation from the provisions on separation of
certain trading activities for a credit institution that is subject to the
national legislation compatible with those provisions. This would allow Member
States that already have primary legislation in place, the effects of which are
equivalent to and consistent with this Regulation, to avoid alignment of
existing, effective provisions. To ensure that the impact of that national
legislation, as well as of subsequent implementing measures, does not jeopardise
the aim or functioning of the internal market, the aim of that national
legislation and related supervisory and enforcement
arrangements must be able to ensure that credit institutions that take eligible
deposits from individuals and from SMEs comply with legally binding requirements that are equivalent and
compatible with the provisions provided in this Regulation. The competent authority supervising the credit institution subject
to the national legislation in question should be responsible for providing an
opinion that should accompany the request for the derogation.
(11)          
According to Article 4 (1)(i) of the Council
regulation (EU) No 1024/2013[25]
the ECB is empowered to carry out supervisory tasks in relation to structural
changes required from credit institutions to prevent financial stress or failure
when those tasks are explicitly stipulated by Union law for competent
authorities.
(12)          
 This Regulation intends to reduce excessive
risk taking and rapid balance sheet growth, difficult resolution, difficult
monitoring, conflicts of interest, competition distortions, and misallocation
of capital. It also intends to shield institutions carrying out activities that
deserve a public safety net from losses incurred as a result of other
activities. Necessary rules should
therefore contribute to refocusing banks on their core relationship-oriented
role of serving the real economy, and avoid that bank capital be excessively
allocated to trading at the expense of lending to the non-financial economy.
(13)          
This Regulation will apply only to credit
institutions and groups with trading activities that meet thresholds set out in
the Regulation. This is in line with the explicit focus on the limited subset
of the largest and most complex credit institutions and groups that in spite of
other legislative acts remain too-big-to-fail, too-big-to-save and too complex
to manage, supervise and resolve. The provisions of this Regulation should
accordingly only apply to those Union credit institutions and groups that
either are deemed of global systemic importance or exceed certain relative and
absolute accounting-based thresholds in terms of trading activity or absolute
size. Member States or the competent authorities may
decide to impose similar measures also on smaller credit institutions.
(14)          
The territorial scope of this Regulation should
be wide to ensure that competition is not distorted and circumvention is prevented.
However, if the subsidiaries of EU parents in third countries or EU branches of
credit institutions established in third countries falling within the scope of
this Regulation are subject to measures that in the opinion of the Commission are
deemed to have equivalent effect to those in this Regulation, they should be
exempted. Competent authorities should be able also to exempt foreign
subsidiaries of groups with an EU parent if those are autonomous and if the
impact of their failure would have limited effects on the group as a whole.
(15)          
Credit institutions and entities belonging to
the same group, should be prohibited from buying and selling financial
instruments and commodities for their own account, as this activity has limited
or no added value for the public good and is inherently risky.
(16)          
It is difficult to distinguish proprietary
trading from market making. To overcome this difficulty, the prohibition of
proprietary trading should be limited to desks, units, divisions or individual
traders specifically dedicated to proprietary trading. Banks should not be able
to circumvent the prohibition by running or benefiting from investments in
non-bank entities engaging in proprietary trading.
(17)          
To ensure that the entities subject to the prohibition
of proprietary trading can continue to contribute toward the financing of the
economy, they should be allowed to invest in a closed list of funds. This
exhaustive list should comprise closed-ended and unleveraged alternative
investment funds (AIFs), European Venture Capital Funds, European Social
Entrepreneurship Funds and European Long Term Investment Funds. To ensure that
these funds do not endanger the viability and financial soundness of the credit
institutions that invest in them, it is essential that closed-ended and
unleveraged AIFs in which credit institutions can still invest are managed by
AIF managers that are authorised and supervised in accordance with the relevant
provisions of Directive 2011/61/EU of the European
Parliament and of the Council[26], and that those AIFs are established in the
Union or, if they are not established in the Union, they are marketed in the
Union according to the rules of that Directive.
(18)          
The entities subject to the prohibition of proprietary
trading should be allowed to use their own capital to make investments in the
framework of their cash management. Cash management should be an activity aiming
at preserving the value of own capital while spreading credit risk across
multiple counterparties and maximising the liquidity of its own capital. In
managing its cash, entities subject to the prohibition of proprietary trading should
not pursue the objective of achieving returns greater than money market rates,
using as a benchmark the rate of return of a three-month high quality
government bond.
(19)          
Cash equivalent assets are instruments that are
normally dealt on the money market, such as treasury and local authority bills,
certificates of deposit, commercial paper, bankers' acceptances, short-term
notes or units or shares of regulated money market funds. In order to prohibit
short selling, a credit institution should hold cash equivalent assets before being
able to sell these assets.
(20)          
Remuneration policies which encourage excessive
risk-taking can undermine sound and effective risk management of banks. By
complementing relevant existing Union law in this area, remuneration provisions
should contribute to preventing circumvention of the prohibition of proprietary
trading. Similarly, it should curtail any residual or hidden proprietary
trading activity by core credit institutions when carrying out prudent risk
management.
(21)          
The management body of the entities subject to
the prohibition of proprietary trading should ensure compliance with this prohibition.
(22)          
Other than proprietary trading, large credit
institutions engage in numerous other trading activities, such as market
making, issuance, investment and sponsorship activity linked to risky
securitisation, or the structuring, arranging, or execution of complex
derivative transactions. These trading activities are often related to client activity
but may nevertheless give rise to concerns. Considering, however, the
potentially useful nature of these activities they should not be subject to a
direct prohibition. Instead, such activities should remain subject to an ex
post assessment by the competent authority and, potentially, to a
requirement to be separated from the rest of the groups’ activities.
(23)          
If, when assessing the trading activities, the
competent authority concludes that they exceed certain metrics in terms of
relative size, leverage, complexity, profitability, associated market risk, as
well as interconnectedness, it should require their separation from the core
credit institution unless the core credit institution can demonstrate to the
satisfaction of the competent authority that those trading activities do not
pose a threat to the financial stability of the core credit institution or to
the Union financial system as a whole, taking into account the objectives set
out in this Regulation.
(24)          
There are particular concerns in relation to
market making. The resolvability of a bank may be impeded by the presence of
trading and inventory within a large banking group, as individual trading
positions are treated the same way in a resolution process, whether they result
from client activity driven market making or from speculation. Additionally,
market makers are interconnected with other large banking groups. Furthermore,
market makers can be exposed to substantial counterparty risk and the concrete
functioning of market making can vary in relation to different financial
instruments and market models. Therefore, particular attention to those
activities should be made during the assessment of the competent authority.
(25)          
Certain activities involving securitisation have
allowed credit institutions to build up risks quickly, to concentrate risks
within the leveraged sector, to grow notably short-term debt reliance between
financial intermediaries, and to make financial intermediaries significantly
more interconnected. Unless securitisation fulfils certain minimum criteria to
be considered as high quality, credit institutions still run significant
liquidity risk. Further, investing in risky securitised products may give rise
to interconnectedness of financial institutions which impedes orderly and swift
resolution. As a consequence, these activities require particular attention
during the assessment of the competent authority.
(26)          
To ensure an effective separation in legal,
economic, governance and operational terms, core credit institutions and
trading entities should meet capital, liquidity, and large exposure rules on a
functional sub-group basis. They should have strong independent governance and
separate management bodies.
(27)          
Groups that qualify as mutuals, cooperatives,
savings institutions or similar have a specific ownership and economic
structure. Imposing some of the rules related to separation could require
far-reaching changes to the structural organisation of those entities the costs
of which could be disproportionate to the benefits. To the extent that those
groups fall within the scope of the Regulation, the competent authority may
decide to allow core credit institutions that meet the requirements set out in
Article 49(3)(a) or (b) of Regulation (EU) No 575/2013 to hold capital
instruments or voting rights in a trading entity where the competent authority
considers that holding such capital instruments or voting rights is
indispensable for the functioning of the group and that the core credit
institution has taken sufficient measures in
order to appropriately mitigate the relevant risks.
(28)          
Large exposure limits aim at protecting credit
institutions against the risk of incurring losses because of an excessive
concentration on one client or a group of connected clients. Applying those restrictions
between the separated parts within the credit institution or group, as well as
between the core credit institution and external entities carrying out trading
activities are an integral part of this Regulation. However, irrespective of
individual exposure limits, aggregate large exposures can still be substantial.
The individual limits should therefore be complemented by an aggregate large
exposure limit. In order to limit the application of the public safety net to
the activities subject to separation and to clearly distinguish the activities
of a trading entity from the core credit institution, the trading entities
should be prohibited from taking deposits eligible for deposit insurance. This
prohibition should not prevent the exchange of collateral strictly relating to
their trading activities. However, in order not to close down an additional
source of credit, the trading entity should be allowed to extend credit to all
clients. Furthermore, whereas the trading entity may need to provide wholesale
payment, clearing and settlement services, it should not be involved in retail
payment services.
(29)          
Irrespective of separation, the core credit
institution should still be able to manage its own risk. Certain trading
activities should therefore be allowed to the extent that they are aimed at the
prudent management of the core credit institution's capital, liquidity and
funding and do not pose concerns to its financial stability. Similarly, the core
credit institutions needs to be able to provide certain necessary risk
management services to its clients. However, that should be done without
exposing the core credit institution to unnecessary risk and without posing
concerns to its financial stability. Hedging activities eligible for the
purpose of prudently managing own risk and for the provision of risk management
services to clients can, but does not have to, qualify as hedge accounting
under the International Financial Reporting Standards.
(30)          
To enhance the effectiveness of the decision
making procedure envisaged by this Regulation as well as to ensure to greatest
extent possible that there is consistency between measures imposed under this
Regulation, Council Regulation (EU) No 1024/2013 of the European Parliament and
of the Council, Directive [BRRD] and Directive 2013/36/EU of the European
Parliament and of the Council[27],
competent authorities and relevant resolution authorities should closely
cooperate in all circumstances having all powers conferred upon them in
relevant Union law. The duty to cooperate should cover all stages of the
procedure leading up to a competent authority's final decision to impose
structural measures.
(31)          
Separation has a significant impact on banking
groups’ legal, organisational and operational structure. To insure an effective
and efficient application of separation and to prevent separation of groups
along geographic lines, separation decisions should be taken at group level by
the consolidating supervisor, having consulted the competent authorities of a
banking group’s significant subsidiaries as appropriate.
(32)          
In order to promote transparency and legal
certainty for the benefit of all market stakeholders, the European Banking Authority
(EBA) should publish and keep up-to-date on its website a list of credit
institutions and groups subject to the requirements concerning the ban of
proprietary trading and separation of certain trading activities.
(33)          
To the extent that the disclosure of information
relating to prudential supervision and for the application of this Regulation
involves processing of personal data, such data should be fully protected by
the Union legal framework. In particular, personal data shall be retained by
the competent authority only for the period necessary, in accordance with the
applicable data protection rules[28].
(34)          
Separation entails changes to the legal,
organisation and operational structure of affected banking groups, all of which
generate costs. In order to limit the risk of costs being passed on to clients and
grant the credit institutions the time necessary to execute a separation
decision in an orderly fashion, separation should not be applicable immediately
upon entry into force of the Regulation but apply as of [OP please enter the
exact date 18 months from the date of publication of this Regulation]. 
(35)          
The provision of all or part of the investment
services or activities as a regular occupation or business on a professional
basis by different entities identified under this Regulation as a result of
structural changes imposed on large, complex and interconnected credit
institutions, should be performed in accordance with the provisions of
Directive 2004/39/EC of the European Parliament and of the
Council[29]. Where this Regulation provides further restrictions on the ability
of these entities to perform investment services as compared to those defined
in Directive 2004/39/EC, the provisions of this Regulation should prevail. The
performance of these investment services or activities is subject to prior
authorisation in accordance with the provisions of Directive 2004/39/EC with the exception of credit institutions
that are authorised under Directive 2013/36/EU.
(36)          
The Commission should cooperate with
third-country authorities in order to explore mutually supportive solutions to
ensure consistency between the provisions in this Regulation and the
requirements established by third countries. To that end, the Commission should
be able to determine that a third country legal framework is equivalent to this
Regulation, also with respect to its legal, supervisory and enforcement
arrangements.
(37)          
In order to ensure that entities subject to this
Regulation comply with the obligations deriving from it and to ensure that they
are subject to similar treatment across the Union, administrative sanctions and
measures which are effective, proportionate and dissuasive should be ensured.
Therefore, administrative sanctions and measures set by this Regulation should
satisfy certain essential requirements in relation to addressees, the criteria
to be taken into account when applying a sanction or measure, publication of
sanctions or measures, key sanctioning powers and the levels of administrative
pecuniary sanctions.
(38)          
In order to specify the requirements set out in
this Regulation, the power to adopt acts in accordance with Article 290 of the TFEU should be delegated to the Commission in
respect of the following non-essential elements: expanding the type of government
bonds that should not prohibited under Article 6 and which competent
authorities do not have to review or consider for separation; setting the
relevant limits and conditions for when a competent authority shall presume
that certain trading activities must be separated; expanding the list of instruments
that are allowed for the management of a credit institution's own risk;
expanding the list of instruments that a credit institution may transact in to
manage clients' risks; calculating the limit above which derivatives may not be
sold nor recorded on the balance sheet of a core credit institution; large
exposures and the extent of recognition of credit risk mitigation techniques;
amending the components of the concept of "trading activities" used
for establishing the conditions of application of Chapter II and Chapter III of
this Regulation; specifying the types of securitisations that do not pose a
threat to the financial stability of a core credit institution or to the Union financial
system; the criteria for assessing the equivalence of third country legal and
supervisory frameworks. It is of
particular importance that the Commission carries out appropriate consultations
during its preparatory work, including at expert level. 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
to the Council.
(39)          
In order to ensure uniform conditions for the
implementation of this Regulation, in particular with
regard to the provisions set out in Articles 21 and 27, implementing powers should be
conferred on the Commission.
(40)          
Technical standards in financial services should
ensure consistent harmonisation and adequate protection of depositors,
investors and consumers across the Union. As bodies with highly specialised expertise, it is efficient and appropriate
to entrust the EBA with the elaboration of draft regulatory technical and
implementing standards, which do not involve policy choices. EBA should ensure
efficient administrative and reporting processes when drafting technical
standards.
(41)          
The Commission should adopt regulatory technical
standards developed by the EBA with regard to the methodology for the
consistent measurement and application of the metrics relative to the
calculation of the threshold above which separation of trading activities
should take place by means of delegated acts pursuant to Article 290 of the TFEU and in accordance with Articles 10 to 14
of Regulation (EU) No 1093/2010 of the European Parliament and of the Council[30]. The Commission and
the EBA should ensure that those standards can be applied by all institutions
concerned in a manner that is proportionate to the nature, scale and complexity
of those institutions and their activities.
(42)          
The Commission should be empowered to adopt
implementing technical standards developed by the EBA with regard to the
methodology for calculating the amount of trading activities engaged in by
credit institutions and groups, the uniform template for disclosure of total
amount and the components of credits institutions and parent companies' trading
activities and determining the procedures and forms for exchange of information
on sanctions with the EBA by means of implementing acts pursuant to Article 291
of the TFEU and in accordance with Article 15 of Regulation (EU) No 1093/2010.
(43)          
In accordance with the principle of
proportionality, it is necessary and appropriate for the achievement of the aim
of preventing systemic risk, financial stress or failure of large, complex and
interconnected credit institutions to lay down rules on prohibition on
proprietary trading and separation of certain trading activities. This
Regulation does not go beyond what is necessary in order to achieve the
objectives pursued in accordance with Article 5(4) of the Treaty on the
European Union.
(44)          
The freedom to conduct a business in accordance
with Union law and national laws and practices is recognised under Article 16
of the Charter of Fundamental Rights of the European Union (the Charter). Each person within the Union has
the right to start-up or to continue a business without being subject to either
discrimination or unnecessary restriction. Moreover, share ownership is
protected as property under Article 17 of the Charter. Shareholders have the
right to own, use, and dispose of their property, and the right not to be
deprived involuntarily of this property. The prohibition of proprietary trading
and the separation of certain trading activities provided for in this
Regulation may affect the freedom to conduct a business as well as the property
rights of shareholders who, in such situation, cannot freely dispose of their
property.
(45)          
The limitations on the freedom to conduct a
business and the rights of shareholders should comply with Article 52 of the
Charter. Interference with these rights should not be disproportionate.
Accordingly, the banning or separation of trading activities should only be
required when it is in the public interest promoting the good functioning of
the Union banking market and financial stability. Affected shareholders should
not be prevented from using their other legal rights, such as the right to an
effective remedy and to a fair trial.
(46)          
This Regulation respects the fundamental rights
and observes the principles recognised in the Charter, in
particular the right to respect for private and family life, the right to the
protection of personal data, the freedom to conduct a business, the right to
property, the right to an effective remedy and to a fair trial as well as the
right of defence and the respect of the ne bis in idem principle. This Regulation
must be applied according to these rights and principles.
(47)          
Because entities concerned by the prohibition of
proprietary trading will require sufficient time to implement the prohibition,
this Regulation foresees that the prohibition shall apply [OP please
introduce exact date 18 months after publication of this Regulation].
Similarly, the procedures foreseen in this Regulation with regard to the
provisions that lead to a decision by the competent authority that trading
activities need to be separated from the core credit institution, and the
procedures that apply to groups following the adoption of such a decision, are
complex and require time not only to carry out but also to implement those measures in a responsible and sustainable
manner. It is therefore appropriate
that such provisions apply [OP please introduce exact date 36 months
after publication of this Regulation].
HAVE ADOPTED THIS REGULATION:
Chapter I
General provisions
Article 1
Objectives
This Regulation aims at preventing systemic
risk, financial stress or failure of large, complex and interconnected entities
in the financial system, in particular credit institutions, and at meeting the
following objectives: 
(a)                   
to reduce excessive risk taking within the
credit institution;
(b)                   
to remove material conflicts of interest between
the different parts of the credit institution;
(c)                   
to avoid misallocation of resources and to
encourage lending to the real economy;
(d)                  
to contribute to undistorted conditions of
competition for all credit institutions within the internal market;
(e)                   
to reduce interconnectedness within the
financial sector leading to systemic risk;
(f)                    
to facilitate efficient management, monitoring
and supervision of the credit
institution; 
(g)                   
to facilitate the orderly resolution and
recovery of the group.
Article 2
Subject matter
This Regulation lays down rules on:
(a)                   
the prohibition of proprietary trading;
(b)                   
the separation of certain trading activities.
Article 3
Scope
1.                      
This Regulation shall apply to the following
entities: 
(a)         
any credit institution or an EU parent,
including all branches and subsidiaries irrespective of where they are located,
when it is identified as a global systemically important institution (G-SIIs)
in application of Article 131 of Directive 2013/36/EU;
(b)         
any of the following entities that for a period
of three consecutive years has total assets amounting at least to EUR 30
billion and has trading activities amounting at least to EUR 70 billion or 10
per cent of its total assets: 
(i)      any credit institution established in the Union which is neither a
parent undertaking nor a subsidiary, including all its branches irrespective of
where they are located;
(ii)     an EU parent, including all branches
and subsidiaries irrespective of where they are located, where one of the group
entities is a credit institution established in the Union;
(iii)    EU branches of credit institutions
established in third countries.
Article 4
Negative scope 
1.                       
This Regulation shall not apply to: 
(a)         
EU branches of credit institutions established
in third countries if they are subject to a legal framework deemed equivalent in
accordance with Article 27(1);
(b)         
subsidiaries of EU parents established in third
countries if they are subject to a legal framework deemed equivalent in
accordance with Article 27(1);
(c)         
entities referred to in points (2) to (23) of
Article 2(5) of Directive 2013/36/EU. 
2.                      
In addition to point (b) of
paragraph 1, a competent authority may exempt from the requirements of Chapter
III subsidiaries of EU parents established in third countries  where there are no rules deemed equivalent to Articles 10 to 16  and 20 if that competent authority is satisfied that:
(a)         
there is a resolution strategy agreed upon
between the group level resolution authority in the Union and the third country
host authority;
(b)         
the resolution strategy for the subsidiary of an
EU parent established in a third country has no adverse effect on the financial
stability of the Member State(s) where the EU parent and other group entities
are established.
Article 5
Definitions
For the purposes of this Regulation, the following definitions shall apply:

1.                      
"credit institution" means a credit institution as defined in point (1) of Article 4(1)
of Regulation (EU) No 575/2013 of the European Parliament and of the Council[31];
2.                      
"group" means a parent undertaking and
its subsidiaries;
3.                      
"resolution" means resolution as
defined in Article 2(1) of Directive [BRRD]; 
4.                      
"proprietary trading" means using own
capital or borrowed money to take positions in any type of transaction to
purchase, sell or otherwise acquire or dispose of any financial instrument or
commodities for the sole purpose of making a profit for own account, and
without any connection to actual or anticipated client activity or for the
purpose of hedging the entity’s risk as result of actual or anticipated client
activity, through the use of desks, units, divisions or individual traders
specifically dedicated to such position taking and profit making, including
through dedicated web-based proprietary trading platforms; 
5.                      
"EU parent" means a parent undertaking
in a Member State which is not a subsidiary of another undertaking within any
Member State;
6.                      
"subsidiary" means a subsidiary
undertaking as defined in point (10) of Article 2 of Directive 2013/34/EU of the European Parliament and of the Council[32];
7.                      
"competent authority" means a
competent authority as defined in point (40) of Article 4(1) of Regulation (EU)
No 575/2013, including the ECB in accordance with Council Regulation (EU) No
1024/2013;
8.                      
"institution" means an institution as
defined in point (3) of Article 4(1) of Regulation (EU) No 575/2013;
9.                      
"parent undertaking" means a parent
undertaking as defined in point (9) of Article 2 of Directive 2013/34/EU,
including an institution, a financial holding company, a mixed financial
holding company and a mixed activity holding company; 
10.                  
"financial instruments" means
financial instruments as defined in section C of Annex I of Directive
2004/39/EC;
11.                  
"management body" means a management
body as defined in point (7) of Article 3(1) of Directive 2013/36/EU or the
equivalent body when the entity concerned is not an institution; 
12.                  
"market making" means a financial
institution's commitment to provide market liquidity on a regular and on-going
basis, by posting two-way quotes with regard to a certain financial instrument,
or as part of its usual business, by fulfilling orders initiated by clients or
in response to clients’ requests to trade, but in both cases without being
exposed to material market risk; 
13.                  
"sponsor" means sponsor as defined in
point (14) of Article 4(1) of Regulation (EU) No 575/2013;
14.                  
"securitisation" means securitisation
as defined in point (61) of Article 4(1) of Regulation (EU) No 575/2013;
15.                  
"trading in derivatives" means to buy
or sell derivatives;
16.                  
"core credit institution" means a
credit institution that at the minimum takes deposits eligible under the
Deposit Guarantee Scheme in accordance with Directive 94/19/EC[33];
17.                  
"commodity" means commodity as defined
in point (1) of Article 2 of Commission Regulation (EC) No 1287/2006[34];
18.                  
"group entity" means a legal entity
that is part of a group;
19.                  
"financial entity" means an entity
which falls within one of the following categories: 
–              
financial sector entity, as defined in point
(27) of Article 4(1) of Regulation (EU) No 575/2013;
–              
closed-ended and unleveraged alternative
investment funds ("AIF")
as defined in Directive 2011/61/EU, where those AIFs are established in the Union or, if they are not
established in the Union, they are marketed in the Union according to Articles
35 or 40 of Directive 2011/61/EU of the European Parliament and of the Council[35], qualifying venture
capital funds as defined in Article 3(b) of Regulation (EU) No 345/2013 of the
European Parliament and of the Council[36],
qualifying social entrepreneurship funds as defined in Article 3(b) of
Regulation (EU) No 346/2013[37] and AIF authorized as
European long term investment funds (ELTIF) in accordance
with Regulation (EU) No [XXX/XXXX][38]];

–              
UCITS as defined by Article 1(2) of Directive
2009/65/EC[39];
–              
securitisation special purpose entity as defined
in point (66) of Article 4(1) of Regulation (EU) No 575/2013;
20.                  
"SME" means an undertaking which
employ fewer than 250 persons and which have an annual turnover not exceeding
EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43
million;
21.                  
"dealing in investments as a
principal" means buying, selling, subscribing for or underwriting
securities or contractually based investments as a principal; 
22.                  
"consolidating supervisor" means a
competent authority responsible for the exercise of supervision of an EU parent
and its subsidiaries on a consolidated basis as defined in point (48) of
Article 4(1) of Regulation (EU) No 575/2013.
Chapter II
Prohibited activities
Article 6
Prohibition of certain trading
activities
1.                      
Entities referred to in Article 3 shall not:
(a)         
engage in proprietary trading;
(b)         
with its own capital or borrowed money and for
the sole purpose of making a profit for own account: 
(i)      acquire or retain units or shares of AIFs
as defined by Article 4(1)(a) of Directive 2011/61/EU; 
(ii)     invest in derivatives, certificates,
indices or any other financial instrument the performance of which is linked to
shares or units of AIFs;
(iii)    hold any units or shares in an entity
that engages in proprietary trading or acquires units or shares in AIFs.
2.                      
The prohibition in point (a) of paragraph 1
shall not apply to:
(a)         
financial instruments issued by Member States central
governments or by entities listed in point (2) of Article 117 and in Article
118 of Regulation (EU) No 575/2013; 
(b)         
a situation where an entity referred to in
Article 3 meets all of the following conditions:
(i)      it uses its own capital as part of its cash management processes;
(ii)     it exclusively holds, purchases sells or
otherwise acquires or disposes of cash or cash equivalent assets. Cash equivalent
assets must be highly liquid investments held in the base currency of the own
capital, be readily convertible to a known amount of cash, be subject to an
insignificant risk of a change in value, have maturity which does not exceed
397 days and provide a return no greater than the rate of return of a three-month
high quality government bond.
3.                      
The restrictions laid down in point (b) of paragraph 1 shall not apply with regard
to closed-ended and unleveraged AIFs as defined in Directive 2011/61/EU where
those AIFs are established in the Union or, if they are not established in the
Union, they are marketed in the Union according to Articles 35 or 40 of
Directive 2011/61/EU , to qualifying venture capital funds as defined in
Article 3(b) of Regulation (EU) No 345/2013, to qualifying social
entrepreneurship funds as defined in Article 3(b) of Regulation (EU) No
346/2013, and to AIFs authorized as ELTIFs in accordance with Regulation (EU)
No [XXX/XXXX].
4.                      
The management body of each entity referred to
in Article 3 shall ensure that the requirements set out in paragraph 1 are
complied with.
5.                      
The requirements in paragraphs 1 to 4 shall
apply as of [OP please introduce exact date, 18 months after
publication of the Regulation].
6.                      
The Commission shall be empowered to adopt
delegated acts in accordance with Article 36 to exempt from the prohibition
referred to in point (a) of paragraph 1:
(a)         
financial instruments other than those referred
to in point (a) of paragraph 2 issued by governments of third countries that apply
supervisory and regulatory arrangements at least equivalent to those applied within
the Union, exposures to which are assigned a 0 per cent risk weight in
accordance with Article 115 of Regulation (EU) No 575/2013;
(b)         
financial instruments issued by Member States'
regional governments, exposures to which are assigned a 0 per cent risk weight
in accordance with Article 115 of Regulation (EU) No 575/2013.
Article 7
Rules on remuneration
Without prejudice to the remuneration rules
laid down in Directive 2013/36/EU, the remuneration policy of the entities
referred to in Article 3 shall be designed and implemented in such a way that
it does not, directly or indirectly, encourage or reward the carrying out by
any staff member of activities prohibited in Article 6(1).
Chapter III
Separation of certain trading activities
Article 8
Scope of activities 
1.                      
For the purposes of this Chapter, trading
activities shall include activities other than:
(a)         
taking deposits that are eligible under the
Deposit Guarantee Scheme in accordance with Directive 94/19/EC of the European
Parliament and of the Council[40];
(b)         
lending including, consumer credit, credit
agreements relating to immovable property, factoring with or without recourse,
financing of commercial transactions (including forfeiting);
(c)         
financial leasing;
(d)        
payment services as defined in Article 4(3) of
Directive 2007/64/EC of the European Parliament and of the Council[41];
(e)         
issuing and administering other means of payment
such as travellers' cheques and
bankers' drafts insofar as such activity is not covered by point (d);
(f)          
money broking, safekeeping and administration of
securities;
(g)         
credit reference services;
(h)         
safe custody services; 
(i)           
issuing electronic money.
2.                      
The requirements of this Chapter shall not apply
to the buying or selling of financial instruments issued by Member States’ central
governments or by entities listed in point (2) of Article 117 and in Article
118 of Regulation (EU) No 575/2013.
3.                      
The Commission shall be empowered to adopt
delegated acts in accordance with Article 35 to exempt financial instruments:
(a)         
other than those referred to in paragraph 2
issued by governments of third countries that apply supervisory and regulatory
arrangements at least equivalent to those applied within the Union, exposures
to which are assigned a 0 per cent risk weight in accordance with Article 115
of Regulation (EU) No 575/2013;
(b)         
issued by Member States' regional governments,
exposures to which are assigned a 0 per cent risk weight in accordance with
Article 115 of Regulation (EU) No 575/2013.
Article 9
Duty to review activities
1.                      
The competent authority shall assess trading
activities including in particular: market making, investments in and acting as
a sponsor for securitisation, and trading in derivatives other than those
derivatives permitted under Articles 11 and 12 of the following entities:
(a)         
a core credit institution established in the
Union, which is neither a parent undertaking nor a subsidiary, including all
its branches irrespective of where they are located;
(b)         
an EU parent, including all branches and subsidiaries
irrespective of where they are located, where one of the group entities is a
core credit institution established in the Union;
(c)         
EU branches of credit institutions established
in third countries.
2.                      
When performing the assessment referred to in
paragraph 1, the competent authority shall use the following metrics:
(a)         
the relative size of trading assets, as measured
by trading assets divided by total assets;
(b)         
the leverage of trading assets as measured by
trading assets divided by core Tier 1 capital;
(c)         
the relative importance of counterparty credit
risk, as measured by the fair value of derivatives divided by total trading
assets;
(d)        
the relative complexity of trading derivatives,
as measured by level 2 and 3 trading derivatives assets divided by trading
derivatives and by trading assets;
(e)         
the relative profitability of trading income, as
measured by trading income divided by total net income;
(f)          
the relative importance of market risk, as
measured by computing the difference between trading assets and liabilities in absolute
value and dividing it by the simple average between trading assets and trading
liabilities;
(g)         
the interconnectedness, as measured by the
methodology referred to in Article 131(18) of Directive 2013/36/EU;
(h)         
credit and liquidity risk arising from commitments
and guarantees provided by the core credit institution.
3.                      
The competent authority shall have finalised its
assessment by [OP – please introduce 18 months from the day of
publication of the Regulation], and shall carry out assessments on a regular basis,
at least yearly, thereafter.
4.                      
EBA shall develop draft regulatory technical
standards to specify how the metrics shall be measured and, where appropriate, specify
the details of the metrics referred to in paragraph 2 and their measurement
using supervisory data. The draft regulatory technical standards shall also
provide the competent authority with a methodology for the consistent
measurement and application of the metrics.
EBA shall submit those draft regulatory
technical standards to the Commission by [OP – please introduce 1 month from
the day of publication of the Regulation.]
Power is delegated to the Commission to adopt
the draft regulatory technical standards referred to in the first subparagraph
in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 10
Power of competent authority to
require that a core credit institution does not carry out certain activities 
1.                      
Where the competent authority concludes that, following the assessment
referred to in Article 9(1), the limits and conditions linked to the
metrics referred to in points (a) to (h) of Article 9(2) and specified in the delegated act referred to in paragraph 5 are met, and it therefore deems that there is a threat to the
financial stability of the core credit institution or to the Union financial
system as a whole, taking into account the objectives referred to in Article 1,
it shall, no later than two months after the finalisation of that
assessment, start the procedure leading to a decision as referred to in the
second subparagraph of paragraph 3.
2.                      
Where the limits and conditions referred to in
paragraph 1 are not met, the competent authority may still start the procedure
leading to a decision as referred to in the third subparagraph of paragraph 3
where it concludes, following the
assessment referred to in Article 9(1), that any trading activity, with the exception of trading in
derivatives other than those permitted under Article 11 and 12, carried out by
the core credit institution, poses a threat to the
financial stability of the core credit institution or to the Union financial
system as a whole taking into account the objectives referred to in Article 1.
3.                      
The competent authority shall notify its
conclusions referred to in paragraphs 1 or 2 to the core credit institution and
provide the core credit institution with the opportunity to submit written
comments within two months from the date of the notification. 
Unless the core
credit institution demonstrates, within the time limit referred to in the first
subparagraph, to the satisfaction of the competent authority, that the reasons leading to the conclusions
are not justified, the competent authority shall adopt a decision addressing
the core credit institution and requiring it not to carry out the trading
activities specified in those
conclusions. The competent authority shall state the reasons for its decision
and publicly disclose it.
For purpose of
paragraph 1, where the competent authority decides to
allow the core credit institution to carry out those
trading activities it shall also state the reasons for that decision and publicly disclose it.
For purpose of
paragraph 2, where the competent authority decides to allow the core credit institution to carry out trading activities the competent authority shall
adopt a decision addressed to the core credit institution to that effect.
Prior to
adopting any decision referred to in this paragraph the competent authority
shall consult the EBA on the reasons underlying its envisaged decision and on
the potential impact of such a decision on the financial stability of the Union
and the functioning of the internal market. The competent authority shall also
notify the EBA of its final decision.
The competent
authority shall adopt its final decision within two months from having received
the written comments referred to in the first subparagraph.
4.                      
The decisions referred to in the second
subparagraph of paragraph 3 will be subject to review by the competent
authority every 5 years.
5.                      
The Commission shall, [OP insert the correct
date by 6 months of publication of this Regulation] adopt delegated acts in
accordance with Article 35 to:
(a)         
specify, with regard to the metrics:
(a)          
the relevant limit of each of the metrics provided
in points (a) to (h) of Article 9(1), above which the risk level of the trading
activity concerned is deemed individually significant;
(ii)         
the conditions, including how many of the
metrics need to exceed the relevant limit, and in what combination, in order for
the competent authority to start the procedure referred to in Article 10(1).
(iii)       
The specification of the conditions in point
(ii) shall include an indication of the level of the aggregate significant risk
of the trading activity concerned that results from several metrics having
exceeded the relevant limits referred to in point (i);
(b)         
specify which type of securitisation is not
considered to pose a threat to the financial stability of the core credit
institution or to the Union financial system as a whole with regard to each of the
following aspects:
(i)      the structural features, such as the
embedded maturity transformation and simplicity of the structure;
(ii)     the quality of the underlying assets
and related collateral characteristics; 
(iii)    the listing and transparency features
of the securitisation and its underlying assets;
(iv)    the robustness and quality of the
underwriting processes.
Article 11 
Prudent management of own risk
1.                      
A core credit institution that has been subject
to a decision referred to in Article 10(3) may carry out trading activities to
the extent that the purpose is limited to only prudently managing its capital,
liquidity and funding.
As part of the
prudent management of its capital, liquidity and funding, a core credit
institution may only use interest rate derivatives, foreign exchange
derivatives and credit derivatives eligible for central counterparty clearing
to hedge its overall balance sheet risk. The core credit institution shall
demonstrate to the competent supervisor that the hedging
activity is designed to reduce, and demonstrably reduces or significantly
mitigates, specific, identifiable risks of individual or aggregated positions
of the core credit institution. 
2.                      
Without prejudice to the
remuneration rules laid down in Directive 2013/36/EU, the remuneration policy applicable to staff of the core credit institution
engaged in hedging activities shall:
(a)         
aim at preventing any residual or hidden
proprietary trading activities, whether disguised as risk management or
otherwise;
(b)         
reflect the legitimate hedging objectives of the
core credit institution as a whole and ensure that remuneration awarded is not
directly determined by reference to the profits generated by such activities
but takes account of the overall effectiveness of the activities in reducing or
mitigating risk.
The management
body shall ensure that the remuneration policy of the core credit institution is
in line with the provisions set out in the first subparagraph, acting on the
advice of the risk committee, where such a committee is established in
accordance with Article 76(3) of Directive 2013/36/EU.
3.                      
The Commission shall be empowered to adopt
delegated acts in accordance with Article 35 of this Regulation to supplement
the financial instruments referred to in paragraph 1 by adding other financial
instruments including other types of derivatives, in particular those subject
to the obligations set out in Article 11 of Regulation (EU) No 648/2012 of the European Parliament and of the Council[42], in order to take into account financial instruments, which have
the same effect on financial stability as those mentioned in paragraph 1 for
the purpose of prudent management of capital, liquidity and funding.
Article 12
Provision of risk management services
to customers
1.                      
A core credit institution that has been subject
to a decision referred to in Article 10(3) may sell interest rate derivatives,
foreign exchange derivatives, credit derivatives, emission allowances
derivatives and commodity derivatives eligible for central counterparty
clearing and emission allowances to its non-financial clients, to financial
entities referred to in the second and third indents of point (19) of Article
5, to insurance undertakings and to institutions providing
for occupational retirement benefits when the following conditions have been
satisfied:
(a)         
the sole purpose of the sale is to hedge
interest rate risk, foreign exchange risk, credit risk, commodity risk or
emissions allowance risk;
(b)         
the core credit institution's own funds
requirements for position risk arising from the derivatives and emission
allowances does not exceed a proportion of its total risk capital requirement
to be specified in a Commission delegated act in accordance with paragraph 2.
When the
requirement in point (b) is not fulfilled, the derivatives and emission
allowances may neither be sold by the core credit institution nor be recorded
on its balance sheet.
2.                      
The Commission shall be empowered to adopt
delegated acts in accordance with Article 35 to:
(a)         
permit other financial instruments than those
mentioned in paragraph 1, in particular those subject to the obligations set
out in Article 11 of Regulation (EU) No 648/2012,  for purpose of hedging risk
to be sold to the type of clients listed in paragraph 1 of this Article;
(b)         
specify the proportion of the core credit
institution's own funds requirements above which derivatives and emission
allowances referred to in paragraph 1 of this Article may not be sold nor recorded
on the balance sheet of the core credit institution.
Article 13
Rules on separate group entities 
1.                      
When a competent authority has made a decision
in accordance with Article 10(3) that a core credit institution cannot carry
out certain trading activities and if the core credit institution belongs to a
group, then the trading activities to be separated may be carried out only by a
group entity that is legally, economically and operationally separate
("trading entity") from the core credit institution.
2.                      
When an entity referred to in Article 9(1) has
decided on its own initiative to separate trading activities covered by Article
9 from the core credit institution and received the approval of its separation
plan in accordance with the procedure set out in Article 18, then the
requirements set out in paragraphs 3 to 13 of this Article and Articles 14 to 17
and 20 shall apply to the separated entities.
3.                      
The EU parent shall ensure that a group containing
core credit institutions and trading entities shall be structured so that on a
sub-consolidated basis two distinct sub-groups are created, only one of which
contains core credit institutions.
4.                      
The EU parent of the core credit institution
shall ensure to the extent necessary that the core credit institution can carry
on its activities in the event of the insolvency of the trading entity.
5.                      
The core credit institution shall not hold capital
instruments or voting rights in a trading entity.
Notwithstanding the first subparagraph, the
competent authority may decide to allow core credit institutions that meet the
requirements set out in Article 49(3)(a) or (b) of Regulation (EU) No 575/2013
to hold capital instruments or voting rights in a trading entity where the
competent authority considers that holding such capital instruments or voting
rights is indispensable for the functioning of the group and that the core
credit institution has taken sufficient measures in order to appropriately mitigate
the relevant risks.
A core credit institution, which is neither a
central nor a regional credit institution, shall not, in any case, be allowed
to directly hold capital instruments or voting rights in any trading entity.
Prior to adopting a decision in accordance with
this paragraph, the competent authority shall consult EBA.
The competent authority shall notify its
decision to EBA.EBA shall publish a list of those institutions to which this paragraph
has been applied.
6.                      
The core credit institution and the trading
entity shall issue their own debt on an individual or sub-consolidated basis provided that this is not inconsistent with
the resolution plan agreed by the relevant resolution authorities in accordance
with Directive [BRRD].
7.                      
All contracts and other transactions entered
into between the core credit institution and the trading entity shall be as favourable to the core credit institution as are comparable
contracts and transactions with or involving entities not belonging to the same
sub-group.
8.                      
A majority of the members of the management body
of the core credit institution and of the trading entity respectively shall
consist of persons who are not members of the management body of the other
entity. No member of the management body of either entity shall perform an
executive function in both entities with the exception for the risk management
officer of the parent undertaking.
9.                      
The management body of the core credit
institution, of the trading entity and of their parents shall have a duty to
uphold the objectives of the separation.
10.                  
In accordance with the applicable national law,
the name or the designation of the trading entity and of the core credit
institution shall be such that the public can easily identify which entity is a
trading entity and which entity is a core credit institution.
11.                  
The structurally separated institutions shall
comply with the obligations laid down in Parts Two, Three and Four and Parts Six, Seven and Eight of Regulation (EU) No 575/2013 and in Title VII of Directive
2013/36/EU on a sub-consolidated basis in conformity with paragraph 3 of this Article.
12.                  
By way of derogation from Article 6(1) and
Article 7 of Regulation (EU) No 575/2013, the obligations laid down in Parts
Two to Four and Eight of that Regulation shall apply on sub-consolidated basis
in conformity with paragraph 3 of this Article.
13.                   
By way of derogation from Article 6(4) and
Article 8 of Regulation (EU) No 575/2013, the requirements of Part Six of that
Regulation shall apply on sub-consolidated basis in conformity with paragraph 3
of this Article.
Article 14
Intra-group large exposure limits
1.                      
For the purpose of the calculation of the
intragroup large exposure limit under paragraph 2, all entities belonging to
the same subgroup pursuant to Article 13(3) are considered as one client or one group of connected clients
within the meaning of point (39) of Article 4(1) of
Regulation (EU) No 575/2013.
2.                      
When
measures have been imposed in accordance with this Chapter the core credit institution shall not incur an intra-group exposure
that exceeds 25 per cent of the core credit institution's eligible capital to
an entity that does not belong to the same sub-group as the core credit
institution. The intra-group exposure limit shall apply on a sub-consolidated
basis, and after taking into account the effect of the credit risk mitigation and
exemptions in accordance with Articles 399 to 403 of Regulation (EU) No 575/2013 and Article
16 of this Regulation.
Article 15
Extra-group large exposure limits
1.                      
In addition to the
provisions of paragraph 1 of Article 395 of Regulation
(EU) No 575/2013 when measures have been imposed in accordance with this Chapter
of this Regulation the core credit institution shall not incur the following
exposures:
(a)         
a large exposure that exceeds 25 per cent of the
core credit institution's eligible capital to a financial entity. That exposure limit shall
apply on an individual and on a sub-consolidated basis, and after taking into
account the effect of the credit risk mitigation and exemptions in accordance
with Articles 399 to 403 of Regulation (EU) No 575/2013 and Article 16 of this
Regulation;
(b)         
large exposures that in total exceed 200 per
cent of the core credit institution's eligible capital to financial entities. That exposure limit shall apply on an
individual and on a sub-consolidated basis, and after taking into account the
effect of the credit risk mitigation and exemptions in accordance with Articles
399 to 403 of Regulation (EU) No 575/2013 and Article 16 of this Regulation.
2.                      
The Commission shall be empowered to adopt
delegated acts in accordance with Article 35 to adjust the level of the extra-group aggregate large exposure limit
as set out in point (b) of paragraph 1, in line with the extent to which the
credit risk mitigation has been recognised.
Article 16
Credit risk mitigation techniques
In addition to the provisions of Articles 399
to 403 of Regulation (EU) No 575/2013, when measures have been imposed in
accordance with this Chapter of this Regulation, restrictions with respect to the recognition of credit mitigation
techniques shall apply to the computation of exposure values for the purposes of compliance with the large exposure limits as referred to in
Articles 14 and 15 of this Regulation.
The Commission shall be empowered to adopt
delegated acts in accordance with Article 35 to specify the extent to which
credit risk mitigation techniques including types of and limits to eligible credit protection shall be
recognised for the purposes of the first sub-paragraph with the purpose of
ensuring that credit risk mitigation techniques do not fail when risks
materialise so that there can be effective recovery of credit protection. 
Article 17
Derogation from transitional
provisions for large exposures
As an exception to paragraph 3 of Article 493
of Regulation (EU) No 575/2013, the derogations provided for in that paragraph
shall not apply to exposures incurred by core credit institutions that have
been subject to structural measures in accordance with this Regulation.
Article 18
Separation plan
1.                      
When a competent authority has made a decision
in accordance with Article 10(3) that a core credit institution cannot carry
out certain trading activities, the core credit institution or, where appropriate, its EU
parent shall submit a separation plan to the competent authority within 6
months from the date of the decision referred to in the second sub-paragraph of
Article 10(3).
Similarly, when an entity referred to in
Article 9(1) has decided to separate trading activities covered by the duty to
review in Article 9 from the core credit institution, it shall submit a plan
detailing its separation at the start of the assessment period referred to
Article 9. The plan shall contain at least the information required in points
(a) and (b) of paragraph 2 of this Article.
2.                      
The separation plan shall explain in detail how
the separation will be carried out.
That plan shall
contain at least the following:
(a)         
specification of assets and activities that will
be separated from the core credit institution; 
(b)         
details on how the rules referred to in Article
13 are applied;
(c)         
a timeline for the separation.
3.                      
The competent authority shall assess the plans
referred to in paragraph 1 and 2 and, within six months of its submission, adopt a decision approving the plan or require
changes to the separation plan.
4.                      
Where the competent authority requires changes to the separation plan the core
credit institution or, where appropriate its EU parent, shall resubmit the
separation plan with the required changes within three months from the request
of the competent authority.
5.                      
The competent authority shall adopt a decision
approving or rejecting the plan within one month of resubmission. Where the
competent authority rejects the plan it shall, within one month of the
rejection, adopt a decision setting out a plan for separation introducing any
necessary adjustments.
6.                      
Where the core credit institution or, where
appropriate, its EU parent does not submit a separation plan as required in
paragraph 1, the competent authority shall, no later than 3 months after the
deadline referred to in paragraph 1 has lapsed, adopt a decision setting out a
plan for separation.
7.                      
Where the core credit institution or, where
appropriate, its EU parents does not resubmit the separation plan with the
changes required by the competent authority, the competent authority shall
adopt a decision setting out a  plan for separation no later than one month
after the deadline in the first subparagraph of paragraph 4 has lapsed.
8.                      
The core credit institution or, where appropriate, its EU parent shall demonstrate
to the competent authority that it has implemented the approved plan.
9.                      
The management body of a credit institution or
an EU parent shall ensure that the separation plan has been implemented in
accordance with the approval of the competent authority.
Article 19
Cooperation between competent
authorities and relevant resolution authorities
1.                      
Before taking the decision referred to in
Article 10(3), the competent
authority shall notify the relevant resolution authority designated in
accordance with Article 3 of Directive [BRRD] thereof.
2.                      
When carrying out the assessment in accordance
with Article 9 and when requiring the core credit institution not to carry out
certain activities in accordance with Article 10, the competent authority shall
take into account any ongoing or pre-existing resolvability assessments carried
out by any relevant resolution authority pursuant to Article 13 and 13(a) of Directive [BRRD].
3.                      
The competent authority shall cooperate with the
relevant resolution authority and exchange relevant information that is deemed necessary in carrying out its duties.
4.                      
The competent authority shall ensure that
measures imposed pursuant to this Chapter,
are consistent with the measures imposed pursuant to Article 13(b) of
Regulation (EU) No 1024/2013, Article 8(9) of Regulation (EU) No [SRM], Article
13 and 13(a), Articles 14 and 15 of Directive [BRRD] and Article 104 of
Directive 2013/36/EU.
Article 20
Prohibited activities for the trading
entity 
The trading entity shall not:
(a)                   
take deposits that are eligible under the
Deposit Guarantee Scheme in accordance with Directive 94/19/EC except where the
said deposit relates to the exchange of collateral relating to trading
activities;
(b)                   
provide payment services as defined in Article
4(3) of Directive 2007/64/EC associated with the activities referred to in
point (a) except where the said
payment services are ancillary and strictly necessary for the exchange of
collateral relating to trading activities.
Article 21
Derogation from the requirements of
Chapter III
1.                      
At the request of a Member State, the Commission
may grant a derogation from the requirements of this Chapter to a credit
institution taking deposits from individuals and SMEs that are subject to
national primary legislation adopted before 29 January 2014 when the national
legislation complies with the following requirements:
(a)         
it aims at preventing financial stress or
failure and systemic risk referred to in Article 1;
(b)         
it prevents credit institutions taking eligible deposits
from individuals and SMEs from engaging in the regulated activity of dealing in
investments as principal and holding trading assets; however, the national legislation may provide for limited exceptions
to allow the credit institution taking deposits from individuals and SMEs to
undertake risk-mitigating activities for the purpose of prudently managing its
capital, liquidity and funding and to provide limited risk management services
to customers;
(c)         
if the credit institution taking eligible deposits
from individuals and SMEs belongs to a group, it ensures that the credit
institution is legally separated from group entities that engage in the
regulated activity of dealing in investments as a principal or hold trading
assets, and the national legislation specifies the following:
(i)      the credit institution taking eligible
deposits from individuals and SMEs is able to make decisions independently of
other group entities;
(ii)     the credit institution taking eligible
deposits from individuals and SMEs has a management body that is independent of
other group entities and independent of the credit institution itself;
(iii)    the credit institution taking eligible
deposits from individuals and SMEs is subject to capital and liquidity
requirements in its own right; 
(iv)    the credit institution taking eligible
deposits from individuals and SMEs may not enter into contracts or transactions
with other group entities other than on terms similar to those referred to in
Article 13(7).
2.                      
A Member State wishing to obtain a derogation
for a credit institution subject to the national legislation in question, shall
send a request for derogation, accompanied by a positive opinion issued by the
competent authority supervising the credit institution that is subject to the
request for derogation, to the Commission. That request shall provide all the
necessary information for the appraisal of the national legislation and specify
the credit institutions the derogation is applied for. Where the Commission
considers that it does not have all the necessary information, it shall contact
the Member State concerned within two months of receipt of the request and
specify what additional information is required.
Once the
Commission has all the information it considers necessary for appraisal of the
request for derogation, it shall within one month notify the requesting Member
State that it is satisfied with the information.
Within five
months of issuing the notification referred to in the second subparagraph, the
Commission shall, after having consulted the EBA on the
reasons underlying its envisaged decision and on the potential impact of such a
decision on the financial stability of the Union and the functioning of the
internal market, adopt an implementing decision declaring
the national legislation not incompatible with this Chapter and granting the derogation
to the credit institutions specified in the request referred to in paragraph 1.
Where the Commission intends to declare the national legislation incompatible
and to not grant the derogation it shall set out its objections in detail and
provide the requesting Member State with the opportunity to submit written
comments within one month from the date of notification of the Commission
objections. The Commission shall within three months from the end of the time
limit for submission adopt an implementing decision granting or rejecting the
derogation. 
Where the
national legislation is amended, the Member State shall notify the amendments
to the Commission. The Commission may review the implementing decision referred
to in the third subparagraph.
Where the
national legislation not declared incompatible with this Chapter no longer
applies to a credit institution that has been granted derogation from the
requirements of this Chapter, that derogation shall be withdrawn with regard to
that credit institution.
The Commission
shall notify its decisions to the EBA. The EBA shall
publish a list of the credit institutions that have been granted a derogation
in accordance with this Article. The list shall be continuously kept
up-to-date.
Chapter IV
Entities subject to the requirements of
Chapters II and III 
Article 22
Rules governing the calculation of
thresholds
1.                      
For the purpose of Article 3(b)(ii), the
calculation of the thresholds shall be based on the consolidated accounts of
the EU parent.
2.                      
For the purpose of Article 3(b)(iii), the
calculation of the thresholds shall be based on the activities carried out in
the Union.
3.                      
Assets and liabilities of insurance and
reinsurance undertakings and other non-financial undertakings shall not be
included in the calculation.
4.                      
By [OP insert the correct date by 12
months of publication of this Regulation], the competent authority shall
identify credit institutions and groups that are subject to this Regulation in
accordance with Article 3 and notify them immediately to the EBA.
After having
been notified by the competent authority, the EBA shall immediately publish the
list referred to in the first subparagraph. The list shall be continuously kept
up-to-date.
Article 23
Calculation of trading activities 
1.                      
For the purposes of Article 3, trading
activities shall be calculated as follows in accordance with the applicable
accounting regime.
Trading
Activities = (TSA + TSL + DA + DL)/2, where:
(a)         
Trading Securities Assets (TSA) are assets that
are part of a portfolio managed as a whole and for which there is evidence of a
recent actual pattern of short-term profit taking, excluding derivative assets;
(b)         
Trading Securities Liabilities (TSL) are
liabilities taken with the intent of repurchasing in the near term, part of a
portfolio managed as a whole, and for which there is evidence of a recent
actual pattern of short-term profit-taking, excluding derivative liabilities;
(c)         
Derivative Assets (DA) are derivatives with
positive replacement values not identified as hedging or embedded derivatives;
(d)        
Derivative Liabilities (DL) are derivatives with
negative replacement values not identified as hedging instruments.
2.                      
Assets and liabilities of insurance and
reinsurance undertakings and other non-financial undertakings shall not be
included in the calculation of trading activities.
3.                      
EBA shall draft implementing technical standards
to lay down the methodology for calculating the trading activities referred to
in paragraph 1 taking into account the differences in the applicable accounting
regimes.
EBA shall submit
those draft implementing technical standards to the Commission by [OP please
introduce exact date 1 month from the day of publication of the
Regulation.]
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.                      
The Commission shall be empowered to amend, by
means of delegated acts in accordance with Article 35, the components of
trading activities referred to in points (a) to (d) of paragraph 1 of this Article to take into account changes in
the applicable accounting regimes. 
Article 24
Submission of information on the
trading activities to the competent authority 
1.                      
Entities referred to in Article 3 shall submit,
for the first time [PO to insert a date 9 months after the date of
publication of this Regulation] and on a yearly basis thereafter, the relevant
information concerning the total amount of their trading activities and the
components thereof, as provided for in Article 23(1), to the competent authority. 
2.                      
EBA shall develop draft implementing technical
standards to determine the uniform template for the reporting referred to in
paragraph 1 and the instructions on how to use that template.
EBA shall submit
those draft implementing technical standards to the Commission by [OP please
introduce exact date, 1 month from the day of publication of the
Regulation].
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.
Chapter V
Compliance
section one
Entities
Article 25
Duties of entities subject to this
Regulation
1.                      
The entities subject to this Regulation shall
have appropriate measures in place to enable the competent authorities to
obtain information needed to assess the compliance with this Regulation.
2.                      
The entities subject to this Regulation shall
provide the competent authority with all the information necessary, including
the information necessary for the metrics-based assessment referred to in
Article 9(2), for the assessment of their compliance with this Regulation. Those
entities shall also ensure that their internal control mechanisms and
administrative and accounting procedures permit the monitoring of their
compliance with this Regulation at all times.
3.                      
The entities subject to this Regulation shall
register all their transactions and document systems and processes used for
purposes of this Regulation in such a manner that the competent authority is able
to monitor compliance with this Regulation at all times.
section two
Competent authorities
Article 26
Powers and
duties of competent authorities
1.                      
In carrying out the duties assigned to them
according to this Regulation, the competent authorities shall exercise the
powers assigned to them in accordance with relevant Union law.
2.                      
The competent authority shall monitor the
activities of the entities subject to this Regulation, and assess and ensure
compliance with this Regulation on a continuous basis.
3.                      
Competent authorities shall have the power to
request an EU parent, that is not a regulated entity but that has at least one
subsidiary which is a regulated entity, to ensure that its regulated
subsidiaries comply with this Regulation.
4.                      
For the purposes of this Regulation, the
consolidating supervisor shall be deemed to be the competent authority with
regard to all group entities that belong to the same group as the EU parent and
that are subject to this Regulation.
When the
subsidiary of an EU parent is established in another Member State and
supervised by a different supervisor than the EU parent and when the subsidiary
is significant in accordance with Article 6(4) of Regulation
(EU) No 1024/2013, the consolidating supervisor shall consult with the
competent authority of the home Member State of the significant subsidiary with
regard to any decision to be made by the consolidating supervisor pursuant to this
Regulation. 
Chapter VI
Relationships with third countries
Article 27 
Equivalence of the legal framework of
a third country 
1.                      
At the request of a competent authority of a
Member State or a third country, or on its own initiative,
the Commission may adopt implementing acts determining that:
(a)         
the legal, supervisory and enforcement arrangements
of a third country ensures that credit institutions and parent companies in
that third country comply with binding requirements which are equivalent to the
requirements laid down in Articles 6, 10 to 16 and 20;
(b)         
the legal framework of that third country provides
for an effective equivalent system for the recognition of structural measures
provided under third-country national law regimes.
2.                      
The Commission may amend or withdraw its decision
if the conditions on the basis of which the decision
has been taken are no longer fulfilled.
3.                      
The Commission shall be empowered to adopt
delegated acts in accordance with Article 35 of this Regulation to set the
criteria for assessing whether or not a third country legal and supervisory
framework is equivalent to this Regulation.
The Commission
shall adopt the delegated act [OP please introduce
the exact date within 24 months from the entry into
force of this Regulation].
4.                      
The EBA shall establish cooperation arrangements with the relevant competent
authorities of third countries whose legal and supervisory frameworks have been
considered equivalent to this Regulation in accordance with paragraphs 1 to 3.
Such arrangements shall specify at least a minimum
information sharing regime between relevant competent authorities of both
jurisdictions.
Chapter VII
Administrative sanctions and measures
Article 28
Administrative sanctions and measures
1.                      
Without prejudice to the supervisory powers of
competent authorities under Article 26 and the right of Member States to provide for and impose criminal sanctions, Member States shall, in conformity
with national law, provide for competent authorities to have the power to impose
administrative sanctions and other administrative measures in relation to at
least the following breaches:
(a)         
breach of the prohibition laid down in Article
6; 
(b)         
any manipulation of information to be submitted
in accordance with Article 24(1).
Member States
shall provide for competent authorities the power to impose administrative
sanctions and measures on a credit institution and on any
group entity, including a mixed activity holding company, an insurance undertaking or reinsurance undertaking. 
Where the
provisions referred to in the first subparagraph apply to legal persons, in
case of a breach Member States shall provide for competent authorities the
power to apply sanctions, subject to the conditions laid down in national law, to
members of the management body and to other individuals who under national law
are responsible for the breach.
2.                      
The administrative sanctions and measures taken for the purpose of paragraph 1 shall be
effective, proportionate and dissuasive.
3.                      
Where Member States have chosen to lay down
criminal sanctions for the breaches of the provisions referred to in paragraph
1, they shall ensure that appropriate measures are in place so that a competent
authority has all the necessary powers to liaise with judicial authorities
within their jurisdiction to receive specific information related to criminal
investigations or proceedings commenced for possible violations of Article 6 and
for manipulating  information to be submitted in accordance with 24(1), and to
provide the same to other competent authorities and EBA to fulfil their
obligation to cooperate with each other and, where relevant with EBA for the
purposes of paragraph 1.
Competent
authorities may also cooperate with competent authorities of other Member
States with respect to facilitating the exercise of their
sanctioning powers.
4.                      
Member States shall, in conformity with national
law, confer on competent authorities the power to apply at least the following
administrative sanctions and other measures in the event of the breaches
referred to in paragraph 1:
(a)         
an order requiring the person responsible for
the breach to cease the unlawful conduct
and to desist from a repetition of that conduct;
(b)         
the disgorgement of the profits gained or losses
avoided due to the breach in so far as they can be determined;
(c)         
a public warning which indicates the person
responsible and the nature of the breach;
(d)        
withdrawal or suspension of the authorisation;
(e)         
a temporary ban of any natural person, who is deemed
responsible, from exercising management functions of an entity referred to in
Article 3;
(f)          
in the event of repeated breaches, permanent ban
of any natural person who is deemed responsible, from exercising management functions
in an entity referred to in Article 3;
(g)         
maximum administrative pecuniary sanctions of at
least three times the amount of the profits gained or losses avoided because of
the breach where those can be determined;
(h)         
in respect of a natural person, a maximum
administrative pecuniary sanction of at least EUR 5 000 000 or in the Member
States whose currency is not the euro, the corresponding value in the national
currency on the date of entry to force of this Regulation;
(i)           
in respect of legal persons, maximum
administrative pecuniary sanctions of at least 10 per cent of the total annual
turnover of the legal person according to the last available accounts approved
by the management body; where the legal person is a parent undertaking or a
subsidiary of the parent undertaking which has to prepare consolidated
financial accounts according to Directive 2013/34/EU, the relevant total annual
turnover shall be the total annual turnover or the corresponding type of income
according to the relevant accounting regime according to the last available
consolidated accounts approved by the management body of the ultimate parent
undertaking.
Member States may provide that competent
authorities may have powers in
addition to those referred to in this paragraph and may provide for a wider scope of sanctions and higher levels of
sanctions than those established in this paragraph.
5.                      
By [OP please introduce the exact date 12
months after entry into force of this Regulation] Member States shall notify
the rules regarding paragraph 1 to the Commission and the EBA. They shall
notify the Commission and the EBA without delay of any subsequent amendment
thereto.
Article 29
Exercise of supervisory powers and
sanctions
1.                      
Member States shall ensure that when determining
the type and level of administrative sanctions and other measures, competent
authorities shall take into account all relevant circumstances, including,
where appropriate:
(a)         
the gravity and duration of the breach;
(b)         
the degree of responsibility of the person
responsible for the breach;
(c)         
the financial strength of the person responsible
for the breach, by considering factors such as the total turnover in the case of a legal person, or the
annual income in the case of a
natural person;
(d)        
the importance of the profits gained or losses
avoided by the person responsible for the breach, insofar as they can be
determined;
(e)         
the level of cooperation of the person
responsible for the breach with the competent authority, without prejudice to
the need to ensure disgorgement of profits gained or losses avoided by that
person;
(f)          
previous breaches by the person responsible for
the breach;
(g)         
measures taken by the person responsible for the
breach to prevent its repetition;
(h)         
any potential systemic consequences of the
breach.
Article 30
Reporting of breaches
1.                      
A competent authority shall establish effective
mechanisms to enable reporting of actual or potential breaches referred to in
Article 28(1).
2.                      
The mechanisms referred to in paragraph 1 shall
include at least:
(a)         
specific procedures for the receipt of reports
of breaches and their follow-up, including the establishment of secure
communication channels for such reports;
(b)         
appropriate protection for persons working under
a contract of employment, who report breaches or who are accused of breaches,
against retaliation, discrimination or other types of unfair treatment;
(c)         
protection of personal data both of the person
who reports the breach and the natural person who allegedly committed the
breach, including protection in relation to preserving the confidentiality of
their identity, at all stages of the procedure without prejudice to disclosure
of information being required by national law in the context of investigations
or subsequent judicial proceedings.
3.                      
Member States shall require employers to have in
place appropriate internal procedures for their employees to report breaches referred
to in Article 28(1).
4.                      
Member States may provide for financial
incentives to persons who offer relevant information about potential breaches
of this Regulation to be granted in accordance with national law where such
persons do not have other pre-existing legal or contractual duties to report
such information, and provided that the information is new, and it results in
the imposition of an administrative sanction or other measure taken for a breach of this Regulation or a criminal sanction. 
Article 31
Exchange of information with EBA
1.                      
Competent authorities shall provide the EBA annually
with aggregated information regarding all administrative measures and sanctions
imposed by them in accordance with Article 28. EBA shall publish that
information in an annual report. 
2.                      
Where Member States have chosen to lay down
criminal sanctions for the breaches of the provisions referred to in Article 28(1),
their competent authorities shall provide EBA annually with anonymised and
aggregated data regarding all criminal investigations undertaken and criminal sanctions
imposed. EBA shall publish that information in an annual report.
3.                      
Where the competent authority has disclosed
administrative sanctions, fines and other measures, as well as criminal
sanctions to the public, it shall simultaneously notify EBA thereof. 
4.                      
EBA shall develop draft implementing technical
standards to determine the procedures and forms for exchange of information as
referred to in paragraphs 1 and 2. 
EBA shall submit those draft implementing
technical standards to the Commission [OP please introduce exact date by
12 months after the publication of the Regulation].
Power is conferred to the Commission to adopt
the implementing technical standards referred to in the first subparagraph in
accordance with Article 15 of Regulation (EU) No 1095/2010. 
Article 32
Publication of decisions 
1.                      
Subject to the third subparagraph, a competent
authority shall publish any decision imposing an administrative sanction or
other measure in relation to a breach of Article 6 and for
manipulating financial reporting referred to in Article
28(1) on its website immediately after the person subject to that decision has
been informed of that decision. 
The information
published pursuant to the first subparagraphs shall specify at least the type and nature of the breach and the identity of the person
subject to the decision. 
The first and second subparagraphs do not apply to decisions imposing measures that are of an
investigatory nature. 
Where a
competent authority considers, following a case-by-case assessment, that the
publication of the identity of the legal person subject to the decision, or the
personal data of a natural person, would be disproportionate, or where such
publication would jeopardise an ongoing investigation or the stability of the
financial markets or an on-going investigation, it shall do one of the
following:
(a)         
defer publication of the decision until the
reasons for that deferral cease to exist;
(b)         
publish the decision on an anonymous basis in a
manner which is in accordance with national law where such publication ensures
the effective protection of the personal data concerned and, where appropriate,
postpone publication of the relevant data for a reasonable period of time where
it is foreseeable that the reasons for anonymous publication will cease to
exist during that period;
(c)         
not publish the decision in the event that the
competent authority is of the opinion that publication in accordance with point
(a) or (b) will be insufficient to ensure:
(i)      that the stability of financial
markets is not jeopardised; 
(ii)     the proportionality of the
publication of such decisions with regard to measures which are deemed to be of
a minor nature. 
2.                      
Where the decision is subject to an appeal
before a national judicial, administrative or other authority, a competent
authority shall also publish immediately on their website such information and
any subsequent information on the outcome of such an appeal. Moreover, any
decision annulling a decision subject to appeal shall also be published.
3.                      
A competent authority shall ensure that any
decision that is published in accordance with this Article shall remain
accessible on their website for a period of at least five years after its
publication. Personal data contained in those decisions shall be kept
on the website of the competent authority for the period which is necessary in
accordance with the applicable data protection rules.
Chapter VIII
Reports and review
Article 33
Reports by EBA
EBA
shall, in cooperation with ESMA, prepare the following reports and submit them
to the Commission within [OP please introduce exact date, 12 months from
the publication of the Regulation.]:
(a)                   
a report on the possible limit of the metrics in
points (a) to (h) in Article 9(2) and the types of securitisation that in the
view of EBA do not pose a threat to the financial stability of the core credit
institution or to the Union financial system; 
(b)                   
a report on whether other types of derivatives
and other types of financial instruments than those listed in Article 11(1)
should be included for the purpose of the prudent management of a core credit
institution’s own risk;
(c)                   
a report on whether other financial instruments
for hedging purposes than those listed in Article 12(1) could be permitted to
be sold to clients and the proportion of own funds requirements above which
derivatives may not be sold as referred to in point (b) of Article 12(2).
Article 34
Review
The
Commission shall, on a regular basis, monitor the effect of rules laid down in
this Regulation in respect of the achievement of the objectives referred to in
Article 1 and on the stability of the Union financial system as a whole, taking
into account market structure developments as well as the development and
activities of the entities regulated by this Regulation, and make any
appropriate proposals. The review shall in particular focus on the application
of the thresholds referred to in Article 3, the application and effectiveness
of the prohibition foreseen in Article 6, the scope of activities referred to
in Article 8 and the suitability of the metrics set out in Article 9. By 1 January 2020 and on a regular basis
thereafter, the Commission shall, after taking into
account the views of the competent authorities, submit to the European
Parliament and to the Council a report, including the issues mentioned above, if
appropriate accompanied by a legislative proposal. 
Chapter IX
Final provisions
Article 35
Exercise of delegated powers
1.                      
The power to adopt delegated acts is conferred
on the Commission subject to the conditions laid down in this Article.
2.                      
The delegation of power referred to in Articles
6(6), 8(3), 10(5), 11(3), 12(2), 15(2), second sub-paragraph of Article 16,
Articles 23(4) and 27(3) shall be
conferred on the Commission for an indeterminate period of time from the date
referred to in Article 38. 
3.                      
The delegation of power referred to in Articles
6(6), 8(3), 10(5), 11(3), 12(2), 15(2), second sub-paragraph of Article 16,
Article 23(4) and 27(3) 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. 
4.                      
As soon as it adopts a delegated act, the
Commission shall notify it simultaneously to the European Parliament and to the
Council.
5.                      
A delegated act adopted pursuant to Articles
6(6), 8(3), 10(5), 11(3), 12(2), 15(2), second sub-paragraph of Article 16,
Article 23(4) and 27(3) 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.
Article 36
Entry into force and date of
application
This Regulation shall enter into force on
the twentieth day following that of its publication in the Official Journal
of the European Union.
It shall apply from the
date of entry into force, with the exception of Article 6 that shall apply [OP please introduce exact
date, 18 months after publication of this Regulation] and Articles 13 to 18
and 20 that shall apply [OP please introduce exact date, 36
months after publication of this Regulation].
This Regulation
shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels,
For the European Parliament                        For the Council
The President                                                 The
President
LEGISLATIVE FINANCIAL STATEMENT
1.           FRAMEWORK OF THE
PROPOSAL/INITIATIVE 
              1.1.    Title of the proposal/initiative
              1.2.    Policy
area(s) concerned in the ABM/ABB structure
              1.3.    Nature
of the proposal/initiative 
              1.4.    Objective(s)
              1.5.    Grounds
for the proposal/initiative 
              1.6.    Duration
and financial impact 
              1.7.    Management
mode(s) envisaged 
2.           MANAGEMENT MEASURES 
              2.1.    Monitoring
and reporting rules 
              2.2.    Management
and control system 
              2.3.    Measures
to prevent fraud and irregularities 
3.           ESTIMATED FINANCIAL
IMPACT OF THE PROPOSAL/INITIATIVE 
              3.1.    Heading(s)
of the multiannual financial framework and expenditure budget line(s) affected 
              3.2.    Estimated
impact on expenditure 
              3.2.1. Summary of
estimated impact on expenditure 
              3.2.2. Estimated impact
on operational appropriations 
              3.2.3. Estimated impact
on appropriations of an administrative nature
              3.2.4. Compatibility
with the current multiannual financial framework
              3.2.5. Third-party
contributions 
              3.3.    Estimated impact on revenue
LEGISLATIVE FINANCIAL STATEMENT

1.                      
FRAMEWORK OF THE PROPOSAL/INITIATIVE 
1.1.                
Title of the proposal/initiative 

Regulation of the European Parliament and
of the Council on structural measures improving the
resilience of EU banks

1.2.                
Policy area(s) concerned in the ABM/ABB
structure[43]

Internal Market – Financial markets

1.3.                
Nature of the proposal/initiative 

ý The proposal/initiative relates to a new action

1.4.                
Objective(s)
1.4.1.          
The Commission's multiannual strategic
objective(s) targeted by the proposal/initiative 

Contribute to reducing the risks to
financial stability and restoring investor and other market participants'
confidence in financial markets 

1.4.2.          
Specific objective(s) and ABM/ABB activity(ies)
concerned 

In the light of the general objectives
above, the regulation aims at preventing systemic risk, financial stress or
failure large, complex and interconnected banks and to meet a number of
objectives:
·                        
To reduce excessive risk taking within the
credit institution;
·                        
To remove material conflicts of interest between
the different parts of the credit institution;
·                        
To avoid misallocation of resources and to
encourage lending to the real economy;
·                        
To ensure undistorted conditions of competition
for all institutions within the internal market;
·                        
To reduce interconnectedness within the
financial sector leading to systemic risk;
·                        
To facilitate efficient management, monitoring
and supervision of a credit institution; and
·                        
To facilitate the orderly resolution and
recovery of the group. 

1.4.3.          
Expected result(s) and impact

Specify the effects
which the proposal/initiative should have on the beneficiaries/groups targeted.
Reduction of risk taking within the credit
institution;
Reduction of conflicts of interest between
the different parts of the credit institution;
Reduced misallocation of resources and more
lending to the real economy;
Less distortion of competition within the
internal market;
Reduced interconnectedness within the
financial sector;
More efficient management, monitoring and
supervision of a credit institution;
More orderly resolution and recovery of the
largest and most complex banking groups. 

1.4.4.          
Indicators of results and impact 

Specify the
indicators for monitoring implementation of the proposal/initiative.
Relevant indicators to evaluate the
proposal could include:
·                        
Number and size of banks subjected to structural
separation requirements;
·                        
Allocation of activities to deposit-taking or
trading entity;
·                        
Transaction volumes, spreads or liquidity in
relevant markets;
·                        
Trends in market shares of banks subject to
structural separation;
·                        
Market concentration in activities subject to
structural separation;
·                        
New entrants in activities subject to structural
separation; 
·                        
Trends in profitability of banks subject to
structural separation;
·                        
Measures of the size of implicit public subsidies;
·                        
Measures of TBTF banks’ funding cost advantage;
·                        
Measures of trading and loan activity by TBTF
banks.

1.5.                
Grounds for the proposal/initiative 
1.5.1.          
Requirement(s) to be met in the short or long
term 

Since the start of the financial crisis,
the European Union (the "EU") and its Member States have engaged in a
fundamental overhaul of bank regulation and supervision. 
In the area of banking, the EU has
initiated a number of reforms to increase the resilience of banks and to reduce
the impact of potential bank failures, the objectives being to create a safer,
sounder, more transparent and responsible financial system that works for the
economy and society as a whole (see in particular the new Capital Requirement
Regulation and Directive (the "CRR"/"CRDIV") as well as the
proposed Bank Recovery and Resolution Directive (the "BRRD").
However, the EU banking sector and
individual banks remain large in absolute and relative terms. The largest banks
are also more active in complex trading activities and more active cross-border
through a very high number of legal entities. 
Several EU Member States as well as third
countries have therefore taken a step further and have enacted, or are in the
process of enacting, structural reforms of their respective banking sectors to
address concerns related to the largest and most complex financial
institutions. Also international institutions such as the G20, the Financial
Stability Board, the Bank for International Settlements, the International
Monetary Fund, and the Organisation for Economic Cooperation and Development
have highlighted the role of such reforms as regards e.g. resolvability and
have called for a broad and global debate on bank business models.

1.5.2.          
Added value of EU involvement 

In light of these developments, there is a
strong justification to act at EU level. While the national reforms broadly
share the same objective, they differ in detail. This will distort
establishment decisions, as TBTF banks may transfer activities to, or locate,
in another Member State. A common EU response would therefore be a more
effective response. The need for uniform rules is particularly important for
the banking union in order to facilitate the supervisory tasks of the SSM and
the resolution actions of the SRM.

1.5.3.          
Lessons learned from similar experiences in the
past 

n/a

1.5.4.          
Compatibility and possible synergy with other
appropriate instruments 

The EU has already initiated a number of
reforms to increase the resilience of banks and to reduce the probability and
impact of bank failure. These reforms include measures to strengthen banks'
solvency (the capital and liquidity requirements part of the CRR/CRDIV
package); measures to strengthen bank resolvability (the proposed BRRD);
measures to better guarantee deposits (the revision of the Deposit Guarantee
Schemes directive (the "DGS"); measures to improve transparency and
address the risks of derivatives and to improve market infrastructures
(European Market Infrastructure Regulation (the "EMIR") and related
revisions to the Markets in Financial Instruments Directive
("MiFID")). Additionally, in order to break the negative feedback
cycle between the sovereign and banking risks and to restore confidence in the
euro and the banking system, the European Commission has called for further
development of a Banking Union, building on the single rule book that will be
applicable to all banks in the entire EU. This include a Single Supervisory
Mechanism (“SSM”) and a Single Resolution Mechanism ("SRM), which will be
mandatory for members of the euro area but open to voluntary participation for
all other Member States.
Despite this broad-ranging reform agenda
further measures are needed to reduce the probability and impact of failure of
TBTF banks. Such measures have global support, as evidenced by recent
statements by G20 leaders and ministers. 
As regards impact of failure,
implementation of the BRRD will pave the way for the orderly resolution of
normal EU banks and thus significantly reduce the impact of failure of such
banks on public finances.  The resolution powers will be challenging to
exercise for TBTF banks, given their particularly large, complex and integrated
balance sheets and corporate structures. As a result, while the potential for
eventual public support is certainly reduced, it may still not be eradicated if
the powers are not in all instances fully applied. The impact of a failure of a
large and complex bank may therefore still be significant. All this may explain
market perceptions of remaining implicit subsidies and call for further clarity
as regards potential additional structural measures. Structural reform will
increase the options available to authorities when dealing with failing banking
groups. By increasing orderly resolution credibility, it will also improve
market discipline and bank balance sheet dynamics ex ante.  Structural reforms
could make the newly granted powers in BRRD more effective for TBTF banks, as
resolution authorities would deal with separate, segregated and simpler balance
sheets. This would make it easier to monitor and assess the different entities
of a banking group and it expands the range of options at the disposal of
resolution authorities. Additional measures for TBTF banks would be in line
with the BRRD’s proportionality principle.

1.6.                
Duration and financial impact 

ý Proposal/initiative of unlimited duration
Entry into force and start of application
foreseen for 2015/2017 with compliance with proprietary trading ban as of
January 2017 and potential separation requirements as of July 2018.

1.7.                
Management mode(s) planned[44] 

From the 2014 budget
¨ Direct management by the Commission
–     
¨ by its departments, including by its staff in the Union
delegations; 
–     
¨  by the executive agencies; 
¨ Shared management with the Member States 
ý Indirect management by delegating implementation tasks to:
–     
¨ third countries or the bodies they have designated;
–     
¨ international organisations and their agencies (to be specified);
–     
¨the EIB and the European Investment Fund;
–     
¨ bodies referred to in Articles 208 and 209 of the Financial
Regulation;
–     
¨ public law bodies;
–     
¨ bodies governed by private law with a public service mission to the
extent that they provide adequate financial guarantees;
–     
¨ bodies governed by the private law of a Member State that are
entrusted with the implementation of a public-private partnership and that
provide adequate financial guarantees;
–     
¨ persons entrusted with the implementation of specific actions in
the CFSP pursuant to Title V of the TEU, and identified in the relevant basic
act.
–       If more than one management mode is indicated,
please provide details in the "Comments" section.
Comments 
EBA is a regulatory agency acting under the
oversight of the Commission.

2.                      
MANAGEMENT MEASURES 
2.1.                
Monitoring and reporting rules 

The proposal foresees that the Commission
should review the effectiveness of the proposed measures on a periodic basis. 

2.2.                
Management and control system 
2.2.1.          
Risk(s) identified

In relation to the legal, economical,
efficient and effective use of appropriations resulting from the proposal, it
is expected that the proposal would not bring about new risks that would not be
currently covered by EBA's existing internal control framework.

2.2.2.          
Information concerning the internal control
system set up

n.a.

2.2.3.          
Estimate of the costs and benefits of the
controls and assessment of the expected level of risk of error

n.a.

2.3.                
Measures to prevent fraud and irregularities 

For the purposes of combating fraud,
corruption and any other illegal activity, the provisions of Regulation (EC) No
1073/1999 of the European Parliament and of the Council of 25 May 1999
concerning investigations conducted by the European Anti-Fraud Office (OLAF)
shall apply to the EBA without any restriction.
EBA shall accede to the Interinstitutional
Agreement of 25 May 1999 between the European Parliament, the Council of the
European Union and the Commission of the European Communities concerning
internal investigations by the European Anti-Fraud Office (OLAF) and shall
immediately adopt appropriate provisions for all EBA staff.
The funding decisions and the agreements
and the implementing instruments resulting from them shall explicitly stipulate
that the Court of Auditors and OLAF may, if need be, carry out on-the-spot
checks on the beneficiaries of monies disbursed by EBA as well as on the staff
responsible for allocating these monies.
Articles 64 and 65 of the Regulation
establishing EBA set out the provisions on implementation and control of the
EBA budget and applicable financial rules.

3.                      
ESTIMATED FINANCIAL IMPACT OF THE
PROPOSAL/INITIATIVE 
3.1.                
Heading(s) of the multiannual financial
framework and expenditure budget line(s) affected 

·      Existing budget lines 
In order of
multiannual financial framework headings and budget lines.
 Heading of multiannual financial framework || Budget line || Type of expenditure || Contribution 
   || Diff./non-diff. ([45])   || from EFTA countries[46]   || from candidate countries[47]   || from third countries || within the meaning of Article 21(2)(b) of the Financial Regulation 
 1.a || 12.0302 European Banking Authority (EBA)   || DIFF || YES || YES || NO || NO 
·      New budget lines requested 

3.2.                
Estimated impact on expenditure 

This legislative initiative will have the
following impacts on expenditures:
·                        
The hiring of two new temporary agents (TA) at
EBA (2 TA as from January 2016) - See in Annex for more information on their
roles and the way their costs were calculated (of which 40% will be funded by
the EU and 60% by the Member States).
·                        
The new tasks will be carried out with the human
resources available within the annual budgetary allocation procedure, in the
light of budgetary constraints which are applicable to all EU bodies and in
line with the financial programming for agencies. Notably, the resources needed
by the agency for the new tasks will be consistent and compatible with the
human and financing programming for EBA set by the recent Communication to the
European Parliament and the Council – Programming of human and financial
resources for decentralised agencies 2014-2020' (COM(2013)519).

3.2.1.          
Summary of estimated impact on expenditure

EUR million (to three decimal places)
 Heading of multiannual financial framework || Number || 1a Smart and Inclusive Growth – Economic, Social and Territorial Cohesion 
 DG: MARKT ||   ||   || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 
 Ÿ Operational appropriations ||   ||   ||   ||   ||   ||   ||   ||   
 12.0302 European Banking Authority (EBA) || Commitments || (1) || 0,00 || 0,00 || 0,16 || 0,15 || 0,15 || 0,15 || 0,15 || 0,76 
 Payments || (2) || 0,00 || 0,00 || 0,16 || 0,15 || 0,15 || 0,15 || 0,15 || 0,76 
 Appropriations of an administrative nature financed from the envelope of specific programmes[48]   ||   ||   ||   ||   ||   ||   ||   ||   
 Number of budget line ||   || (3) ||   ||   ||   ||   ||   ||   ||   ||   
 TOTAL appropriations for DG MARKT || Commitments || =1+1a +3 || 0,00 || 0,00 || 0,16 || 0,15 || 0,15 || 0,15 || 0,15 || 0,76 
 Payments || =2+2a +3 || 0,00 || 0,00 || 0,16 || 0,15 || 0,15 || 0,15 || 0,15 || 0,76 
 Ÿ TOTAL operational appropriations || Commitments || (4) ||   ||   ||   ||   ||   ||   ||   ||   
 Payments || (5) ||   ||   ||   ||   ||   ||   ||   ||   
 Ÿ TOTAL appropriations of an administrative nature financed from the envelope for specific programmes || (6) ||   ||   ||   ||   ||   ||   ||   ||   
 TOTAL appropriations for HEADING 1.a of the multiannual financial framework || Commitments || =4+ 6 || 0,00 || 0,00 || 0,16 || 0,15 || 0,15 || 0,15 || 0,15 || 0,76 
 Payments || =5+ 6 || 0,00 || 0,00 || 0,16 || 0,15 || 0,15 || 0,15 || 0,15 || 0,76 
 Payments || =5+ 6 ||   ||   ||   ||   ||   ||   ||   ||   
 Heading of multiannual financial framework || 5 || " Administrative expenditure " 
EUR million (to three decimal places)
   ||   ||   || Year N || Year N+1 || Year N+2 || Year N+3 || Enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL 
 DG: || 
 Ÿ Human resources ||   ||   ||   ||   ||   ||   ||   ||   
 Ÿ Other administrative expenditure ||   ||   ||   ||   ||   ||   ||   ||   
 TOTAL DG <…….> || Appropriations ||   ||   ||   ||   ||   ||   ||   ||   
 TOTAL appropriations for HEADING 5 of the multiannual financial framework || (Total commitments = Total payments) ||   ||   ||   ||   ||   ||   ||   ||   
EUR million (to three decimal places)
   ||   ||   || Year N[49]   || Year N+1 || Year N+2 || Year N+3 || Enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL 
 TOTAL appropriations under HEADINGS 1 to 5 of the multiannual financial framework || Commitments ||   ||   ||   ||   ||   ||   ||   ||   
 Payments ||   ||   ||   ||   ||   ||   ||   ||   

3.2.2.          
Estimated impact on operational appropriations 

–     
¨  The proposal/initiative does not require the use of operational
appropriations 
–     
ý  The proposal/initiative requires the use of operational
appropriations, as explained below:
Commitment appropriations in EUR million (to three
decimal places)
 Indicate objectives and outputs   ò ||   ||   || Year N || Year N+1 || Year N+2 || Year N+3 || Enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL 
 OUTPUTS 
 Type[50]   || Average cost || No || Cost || No || Cost || No || Cost || No || Cost || No || Cost || No || Cost || No || Cost || No total || Total cost 
 SPECIFIC OBJECTIVE No 1[51] ...   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 - Output ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 - Output ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 - Output ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Subtotal for specific objective No 1 ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 SPECIFIC OBJECTIVE NO 2 ... ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 - Output ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Subtotal for specific objective No 2 ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 TOTAL COST ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   

3.2.3.          
Estimated impact on appropriations of an
administrative nature
3.2.3.1.    
Summary 

–     
ý  The proposal/initiative does not require the use of appropriations
of an administrative nature 
–     
¨  The proposal/initiative requires the use of appropriations of an
administrative nature, as explained below:
EUR million (to
three decimal places)
   || Year N[52]   || Year N+1 || Year N+2 || Year N+3 || Enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL 
 HEADING 5 of the multiannual financial framework ||   ||   ||   ||   ||   ||   ||   ||   
 Human resources ||   ||   ||   ||   ||   ||   ||   ||   
 Other administrative expenditure ||   ||   ||   ||   ||   ||   ||   ||   
 Subtotal HEADING 5 of the multiannual financial framework ||   ||   ||   ||   ||   ||   ||   ||   
 Outside HEADING 5[53] of the multiannual financial framework   ||   ||   ||   ||   ||   ||   ||   ||   
 Human resources ||   ||   ||   ||   ||   ||   ||   ||   
 Other expenditure of an administrative nature ||   ||   ||   ||   ||   ||   ||   ||   
 Subtotal outside HEADING 5 of the multiannual financial framework ||   ||   ||   ||   ||   ||   ||   ||   
 TOTAL ||   ||   ||   ||   ||   ||   ||   ||   
The human resources
appropriations required will be met by appropriations from the DG that are
already assigned to management of the action and/or have been redeployed within
the DG, together if necessary with any additional allocation which may be
granted to the managing DG under the annual allocation procedure and in the
light of budgetary constraints.

3.2.3.2.    
 Estimated
requirements of human resources 

–     
ý  The proposal/initiative does not require the use of human
resources. 
–     
¨  The proposal/initiative requires the use of human resources, as
explained below:
Estimate to be expressed in full time
equivalent units
 ||   || Year N || Year N+1 || Year N+2 || Year N+3 || Enter as many years as necessary to show the duration of the impact (see point 1.6) 
 || Ÿ Establishment plan posts (officials and temporary staff) ||   ||   
 || XX 01 01 01 (Headquarters and Commission’s Representation Offices) ||   ||   ||   ||   ||   ||   ||   
 || XX 01 01 02 (Delegations) ||   ||   ||   ||   ||   ||   ||   
 || XX 01 05 01 (Indirect research) ||   ||   ||   ||   ||   ||   ||   
 || 10 01 05 01 (Direct research) ||   ||   ||   ||   ||   ||   ||   
 Ÿ External staff (in Full Time Equivalent unit: FTE)[54]   || 
 || XX 01 02 01 (CA, SNE, INT from the "global envelope") ||   ||   ||   ||   ||   ||   ||   
 || XX 01 02 02 (CA, LA, SNE, INT and JED in the delegations) ||   ||   ||   ||   ||   ||   ||   
 || XX 01 04 yy[55]   || - at Headquarters   ||   ||   ||   ||   ||   ||   ||   
 || - Delegations ||   ||   ||   ||   ||   ||   ||   
 || XX 01 05 02 (CA, SNE, INT - Indirect research) ||   ||   ||   ||   ||   ||   ||   
 || 10 01 05 02 (CA, INT, SNE - Direct research) ||   ||   ||   ||   ||   ||   ||   
 || Other budget lines (specify) ||   ||   ||   ||   ||   ||   ||   
 || TOTAL ||   ||   ||   ||   ||   ||   ||   
XX is the policy
area or budget title concerned.
The human resources
required will be met by staff from the DG who are already assigned to
management of the action and/or have been redeployed within the DG, together if
necessary with any additional allocation which may be granted to the managing
DG under the annual allocation procedure and in the light of budgetary
constraints.
Description of
tasks to be carried out:
 Officials and temporary staff ||   
 External staff ||   

3.2.4.          
Compatibility with the current multiannual
financial framework 

–     
ý  Proposal/initiative is compatible the current multiannual financial
framework.
–     
The resources needed by EBA for the new tasks
will be consistent and compatible with the MFF 2014-2020 and the human and
financing programming for EBA set by the recent Communication to the European
Parliament and the Council – Programming of human and financial resources for
decentralised agencies 2014-2020 (COM(2013)519)."
–     
¨  Proposal/initiative will entail reprogramming of the relevant
heading in the multiannual financial framework.
Explain what reprogramming is required,
specifying the budget lines concerned and the corresponding amounts.
[…]
–     
¨  Proposal/initiative requires application of the flexibility
instrument or revision of the multiannual financial framework[56].
Explain what is required, specifying the
headings and budget lines concerned and the corresponding amounts.
[…]

3.2.5.          
Third-party contributions 

–     
The proposal/initiative provides for the
co-financing estimated below:
Appropriations in EUR million (to 3 decimal places)
   || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || Total 
 Member States || 0,00 || 0,00 || 0,00 || 0,00 || 0,00 || 0,00 || 0,00 || 0,00 
 TOTAL appropriations cofinanced || 0,00 || 0,00 || 0,00 || 0,00 || 0,00 || 0,00 || 0,00 || 0,00 

3.3.                
Estimated impact on revenue 

–     
¨  Proposal/initiative has no financial impact on revenue.
–     
¨  Proposal/initiative has the following financial impact:
¨         on own resources 
¨         on miscellaneous revenue 
EUR million (to three decimal places)
 Budget revenue line: || Appropriations available for the current financial year || Impact of the proposal/initiative[57]   
 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 
 Article …………. ||   || 0.00 || 0.00 || 0.00 || 0.00 || 0.00 || 0.00 || 0.00 
For miscellaneous
‘assigned’ revenue, specify the budget expenditure line(s) affected.
[…]
Specify the method for
calculating the impact on revenue.
Annex on structural measures improving the
resilience of EU credit institutions 
Estimation for EBA
The
proposal of the Commission includes provisions for EBA to develop four
delegated acts and six technical standards that should ensure that provisions
of a highly technical nature are consistently implemented across the EU.
The
Commission should adopt regulatory technical standards developed by the EBA
with regard to the methodology for the consistent measurement and application
of the metrics relative to the calculation of the threshold above which
separation of trading activities should take place. The Commission and the EBA
should ensure that those standards can be applied by all institutions concerned
in a manner that is proportionate to the nature, scale and complexity of those
institutions and their activities. Additionally, the Commission should adopt
implementing technical standards developed by the EBA with regard to the
methodology for calculating the amount of trading activities engaged in by
credit institutions and parent companies and the uniform template for
disclosure of total amount and the components of credits institutions and
parent companies' trading activities by means of implementing acts. The work
foreseen requires bilateral and multilateral meetings with stakeholders,
analysis and assessment of options and drafting of consultation documents,
public consultation of stakeholders, setting up and management of standing
expert groups composed of supervisors from Member States, setting up and
management of ad hoc expert groups, analysis of the responses to consultations,
drafting of cost/benefit analysis and drafting of the legal text.
It
has been assumed that the Regulation will enter into force in the end of 2015.
The additional EBA resources are therefore only required from 2016. Two
temporary agents' posts will be needed to carry out the required tasks in the
long term:
Commission delegated acts:
·              
Metrics: rebuttable presumption level, number;
·              
Provision of risk management products : cap
above which RM products have to be provided by trading entity;
·              
Rules of separation – large exposures:  eligible
credit risk mitigation techniques.
·              
Territorial scope: criteria for equivalence
Commission Technical Standards:
·              
Propriety trading ban – methodology for
calculating trading activities for purposes of general threshold;
·              
Proprietary trading ban – uniform template for
disclosure of trading activities;
·              
Separation  - metrics: consistent measurement
and application.
·              
Reporting obligation details and entry into
force)
·              
Registration of trade repositories
·              
Authorities having access to trade repositories'
data.
Additional resources assumption:
·              
The two additional posts are assumed to be a
temporary agents of functional group and grade AD7.
·              
Average salary costs for different categories of
personnel are based on DG BUDG guidance;
·              
Salary correction coefficient for London is
1.344.
·              
Mission costs estimated
at €10,000.
·              
Recruiting-related costs
(travel, hotel, medical examinations, installation and other allowances,
removal costs, etc) estimated at €12,700.
The method of calculating the increase in
the required budget for the next three years is presented in more detail in
table below. The calculation reflects the fact that that the Union budget funds
40% of the costs.
 Cost type || Calculation || Amount (in thousands) 
 2016 || 2017 || 2018 || Total 
 Staff expenditure ||   ||   ||   ||   ||   
 11 Salaries and allowances || =2 x 132 x1.344 || 355 || 355 || 355 || 1.064 
 12 Expenditure related to recruitment || =2 x 13 || 25 ||   ||   || 25 
 13 Mission expenses || =2 x 10 || 20 || 20 || 20 || 60 
 Total : Staff expenditure ||   || 400 || 375 || 375 || 1.150 
   ||   ||   ||   ||   ||   
 Of which Community contribution (40%) ||   || 160 || 150 || 150 || 460 
 Of which Member State contribution (60%) ||   || 240 || 225 || 225 || 690 
[1]               For a mandate and list of members, see http://ec.europa.eu/internal_market/bank/docs/high-level_expert_group/mandate_en.pdf
[2]               The other recommendations of HLEG included (2) that a
separation of additional activities may be necessary conditional on the
recovery and resolution plan; (3) the use of bail-in as a resolution tool; (4)
a review of capital requirements on trading assets and real estate related
loans; and (5) measures aimed at strengthening the governance and control of
banks so as to strengthen bank scrutiny and market discipline. 
[3]               European Parliament (McCarthy 2013), Reforming the
structure of the EU banking sector, 2013/2021 (INI)
[4]               Too-big-to-fail is meant to cover
too-important-to-fail, too-interconnected-to-fail, and too-complex-to-fail as
well. See also European Commission (2013b).
[5]               Directive xx/xxxx/EU of the European Parliament and
of the Council establishing a framework for the recovery and resolution of
credit institutions and investments firms and amending Council Directives
77/91/EEC and 82/891/EC, Directives 2001/27/EC, 2002/47/EC, 2004/25/EC,
2005/56/EC, 2007/36/EC and 2011/35/EC and Regulation (EU) No 1093/2010 of the
European Parliament and of the Council (OJ L--xxx 
[6]               COM(2012) 102 final,
http://ec.europa.eu/internal_market/bank/docs/shadow/green-paper_en.pdf
[7]              This definition has been
developed by the FSB Report of 27 October 2011 on strengthening oversight and
regulation of shadow banking,
http://www.financialstabilityboard.org/publications/r_111027a.pdf
[8]               P7_TA(2012)0427,
http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P7-TA-2012-0427&language=EN
[9]               Communication from the Commission to the Council and
the European Parliament on Shadow Banking – Addressing New Sources of Risk in
the Financial Sector, COM(2013), 614 final 
[10]             Consultation by the HLEG on reforming the structure of
the EU banking sector, May/June 2012. http://ec.europa.eu/internal_market/consultations/2012/banking_sector_en.htm.
The HLEG received 83 responses, the large majority of which were from banks and
other financial institutions, followed by retail customers and their
associations and, lastly, corporate customers.
[11]             Consultation on the recommendations of the HLEG the
structure of the EU banking sector, http://ec.europa.eu/internal_market/consultations/2012/hleg-banking_en.htm.
Out of the 89 replies received, almost half came from the banking industry.
[12]             "Consultation by the Commission on the Structural
Reform of the Banking Sector," http://ec.europa.eu/internal_market/consultations/2013/banking-structural-reform/index_en.htm.
The Commission services received more than 500 replies. These came from banks
and other financial institutions, corporate clients, investors, public
authorities, and consumer associations and individuals- responses from
individuals (439) and consumer associations (11).
[13]             Established through the
adoption of Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring
specific tasks on the European Central Bank concerning policies relating to the
prudential supervision of credit institutions (OJ L287, 29.10.2013, p. 63).
[14]             Established through the adoption
of [SRM].
[15]             This is the threshold for "significant institutions"
used in Regulation (EU) No 1024/2013.
[16]             See Annex 6 of the IA.
[17]             Regulation (EU) No 575/2013/EU of the European
Parliament and of the Council on prudential requirements for credit institutions
and investments firms and amending Regulation (EU) No 648/2012, OJ L 176,
27.6.2013, p.1; Directive 2013/36/EU of the European Parliament and of the
Council on access to the activity of credit institutions and the prudential
supervision of credit institutions and investment firms, amending Directive
2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, OJ L 176,
27.6.2013, p. 338.
[18]             Regulation (EU) No 648/2012 of
the European Parliament and of the Council of 4 July 2012 (OJ L201, 27.7.2012, p.1).
[19]             Directive of the European Parliament and of the Council
of 13 November 2007 on payment services in the internal market (OJ L 319 of
5.12.2007, p. 1–36).
[20]             OJ C […], […],
p. […].
[21]             OJ C […], […], p. […].
[22]             OJ C […], […], p. […].
[23]             Established by Council
Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on
the European Central Bank concerning policies relating to the prudential
supervision of credit institutions (OJ L287, 29.10.2013, p. 63).
[24]             Established by [SRM].
[25]             Council Regulation (EU) No 1024/2013 of 15 October 2013
conferring specific tasks on the European Central Bank concerning policies
relating to the prudential supervision of credit institutions (OJ L 287,
29.10.2013, p. 63).
[26]             Directive 2011/61/EU of the
European Parliament and of the Council of 8 June 2011
                on
Alternative Investment Fund Managers and amending Directives 2003/41/EC and
2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010
[27]             Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and
the prudential supervision of credit institutions and investment firms, amending
Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L
176, 27.6.2013, p.338).
[28]             Regulation (EC) 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 Community institutions and bodies and
on the free movement of such data (OJ L 8, 12.1.2001, p.1).
[29]             Directive 2004/39/EC of the
European Parliament and of the Council of 21 April 2004 on markets in financial
instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive
2000/12/EC of the European Parliament and of the Council and repealing Council Directive
93/22/EEC, (OJ L 145, 30.4.2004,
p.1).
[30]             Regulation (EU) No 1093/2010 of the European Parliament
and of the Council of 24 November 2010 establishing a European Supervisory
Authority (European Banking Authority), amending Decision No 716/2009/EC and
repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12).
[31]             Regulation (EU) No 575/2013 of the European Parliament
and of the Council of 26 June 2013
on prudential requirements for credit institutions and investment
firms and amending Regulation (EU) No 648/2012 (OJ L176, 27.6.2013, p.1).
[32]             Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the
annual financial statements, consolidated financial statements and related reports
of certain types of undertakings, amending Directive 2006/43/EC of the European
Parliament and of the Council and repealing Council Directives 78/660/EEC and
83/349/EEC, OJ L 182, 29.6.2013, p. 19.
[33]          Directive
94/19/EC of the European Parliament and of the Council of 30 May 1994 on
deposit-guarantee schemes, OJ L 135, 31.05.1994 pages 0005 to 0014.
[34]             Commission Regulation (EC) No
1287/2006 of 10 August 2006 implementing Directive 2004/39/EC of the European
Parliament and of the Council as regards recordkeeping obligations for
investment firms, transaction reporting, market transparency, admission of financial
instruments to trading, and defined terms for the purposes of that Directive
(OJ L241, 2.9.2006, p. 1).
[35]             Directive 2011/61/EU of the European Parliament and of
the Council of 8 June 2011 on Alternative Investment Fund Managers and amending
Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU)
No 1095/2010 (OJ L 174, 1.7.2011, p.1).
[36]             Regulation (EU) No 345/2013 of the European Parliament
and of the Council of 17 April 2013 on European venture capital funds (OJ L
115, 25.4.2013, p.1).
[37]             Regulation (EU) No 346/2013 of
the European Parliament and of the Council of 17 April 2013 on European social
entrepreneurship funds (OJ L 115, 25.4.2013, p. 18).
[38]             Regulation (EU) No xx/xxxx of the European Parliament
and of the Council on European Long-term Investment funds, OJ L xx/xx. 
[39]             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) (OJ L302, 17.11.2009, p.32).
[40]             Directive 94/19/EC of the European Parliament and of
the Council of 30 May 1994 on deposit-guarantee schemes (OJ L 135, 31/05/1994,
pages 0005 to 0014).
[41]             Directive of the European Parliament and of the Council
of 13 November 2007 on payment services in the internal market (OJ L 319 of
5.12.2007, pages 1 to 36).
[42]             Regulation (EU) No 648/2012 of
the European Parliament and of the Council of 4 July 2012
on OTC
derivatives, central counterparties and trade repositories.
[43]             ABM: activity-based management – ABB: activity-based
budgeting.
[44]             Details of management modes and references to the
Financial Regulation may be found on the BudgWeb site: http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html
[45]             Diff. = Differentiated appropriations / Non-Diff. =
Non-differentiated appropriations.
[46]             EFTA: European Free Trade Association. 
[47]             Candidate countries and, where applicable, potential
candidate countries from the Western Balkans.
[48]             Technical and/or administrative assistance and
expenditure in support of the implementation of EU programmes and/or actions
(former "BA" lines), indirect research, direct research.
[49]             Year N is the year in which implementation of the
proposal/initiative starts.
[50]             Outputs are products and services to be supplied (e.g.:
number of student exchanges financed, number of km of roads built, etc.).
[51]             As described in point 1.4.2. ‘Specific objective(s)…’ 
[52]             Year N is the year in which implementation of the
proposal/initiative starts.
[53]             Technical and/or administrative assistance and
expenditure in support of the implementation of EU programmes and/or actions
(former "BA" lines), indirect research, direct research.
[54]             CA= Contract Staff; LA = Local Staff; SNE= Seconded
National Expert; INT = agency staff; JED= Junior Experts in Delegations). 
[55]             Sub-ceiling for external staff covered by operational
appropriations (former "BA" lines).
[56]             See points 19 and 24 of the Interinstitutional
Agreement (for the period 2007-2013).
[57]             As regards traditional own resources (customs duties,
sugar levies), the amounts indicated must be net amounts, i.e. gross amounts
after deduction of 25% for collection costs.