Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2013/36/EU as regards exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers and capital conservation measures
Date: 2016-11-23
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: auditing, bank, banking supervision, credit institution, financial services, holding company, investment company

EUROPEAN 
COMMISSION 

Brussels, 23.11.2016  
COM(2016) 854 final 

2016/0364 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Directive 2013/36/EU as regards exempted entities, financial holding 
companies, mixed financial holding companies, remuneration, supervisory measures 
and powers and capital conservation measures 

(Text with EEA relevance) 

{SWD(2016) 377} 
{SWD(2016) 378} 

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EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

The  proposed  amendment  to  Directive  2013/36/EU  (the  Capital  Requirements  Directive  or 
CRD) is part of a legislative package that includes also amendments to Regulation (EU) No 
575/2013 (the Capital Requirements Regulation or CRR), to Directive 2014/59/EU (the Bank 
Recovery  and  Resolution  Directive  or  BRRD),  and  to  Regulation  (EU)  No  806/2014  (the 
Single Resolution Mechanism Regulation or SRMR). 

Over  the  past  years  the  EU  implemented  a  substantial  reform  of  the  financial  services 
regulatory  framework  to  enhance  the  resilience  of  institutions  (i.e.  credit  institutions  and 
investment  firms)  operating  in  the  EU  financial  sector,  largely  based  on  global  standards 
agreed  with  the  EU’s  international  partners.  In  particular,  the  reform  package  included 
Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 
2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and 
supervision  of  institutions,  Directive  2014/59/EU  (the  Bank  Recovery  and  Resolution 
Directive  or  BRRD),  on  recovery  and  resolution  of  institutions  and  Regulation  (EU)  No 
806/2014 on the Single Resolution Mechanism (SRM).  

These measures were taken in response to the financial crisis that unfolded in 2007-2008 and 
reflect internationally agreed standards. While the reforms have rendered the financial system 
more stable and resilient against many types of possible future shocks and crises, they do not 
yet comprehensively address all identified problems. The present proposals therefore aim to 
complete  the  reform  agenda  by  tackling  remaining  weaknesses  and  implementing  some 
outstanding elements of the reform that are essential to ensure the institutions' resilience but 
have  only  recently  been  finalised  by  global  standard  setters  (i.e.  the  Basel  Committee  on 
Banking Supervision (BCBS) and the Financial Stability Board (FSB)): 

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a binding leverage ratio which will prevent institutions from excessively increasing 
leverage, e.g. to compensate for low profitability; 

a binding net stable funding ratio (NSFR) which will build on institutions’ improved 
funding profiles and establish a harmonised standard for how much stable, long-term 
sources  of  funding  an  institution  needs  to  weather  periods  of  market  and  funding 
stress;  

more risk sensitive own funds (i.e. capital) requirements for institutions that trade to 
an  important  extent  in  securities  and  derivatives  which  will  prevent  too  much 
divergence in those requirements that is not based on the institutions' risk profiles; 

last  but  not  least,  new  standards  on  the  total  loss-absorbing  capacity  (TLAC)  of 
global  systemically  important  institutions  (G-SIIs)  which  will  require  those 
institutions  to  have  more  loss-absorbing  and  recapitalisation  capacity,  tackle 
interconnections  in  the  global  financial  markets  and  further  strengthen  the  EU’s 
ability to resolve failing G-SIIs while minimising risks for taxpayers. 

The  Commission  recognised  the  need  for  further  risk  reduction  in  its  Communication  of  24 
November  2015  and  committed  to  bring  forward  a  legislative  proposal  that  builds  on  the 
international  agreements  listed  above.  Such  risk  reduction  measures  will  not  only  further 
strengthen  the  resilience  of  the  European  banking  system  and  the  markets'  confidence  in  it, 
but  will  also  provide  the  basis  for  further  progress  in  completing  the  Banking  Union.  The 

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need  for  further  concrete  legislative  steps  to  be  taken  in  terms  of  reducing  risks  in  the 
financial  sector  has  been  recognised  also  by  the  Ecofin  Council  Conclusions  from  17  June 
2016. The European Parliament resolution of 10 March 2016 on the Banking Union – Annual 
Report  2015  also  indicates  some  areas  in  the  current  regulatory  framework  that  could  be 
further addressed. 

At  the  same  time,  the  Commission  needed  to  take  account  of  the  existing  regulatory 
framework  and  the  new  regulatory  developments  at  international  level  and  respond  to 
challenges affecting the EU economy, especially the need to promote growth and jobs at times 
of uncertain economic outlook. Various major policy initiatives, such as the Investment Plan 
for Europe (EFSI) and the Capital Markets Union have been launched in order to strengthen 
the economy of the Union. The ability of institutions to contribute to financing the economy 
needs to be enhanced without impinging on the stability of the regulatory framework. In order 
to ensure that recent reforms in the financial sector interact smoothly with each other and with 
new  policy  initiatives,  but  also  with  broader  recent  reforms  in  the  financial  sector,  the 
Commission carried out, on the basis of a call for evidence, a thorough holistic assessment of 
the existing financial services framework (including the CRR, CRD, BRRD and SRMR). The 
upcoming  review  of  global  standards  was  also  assessed  from  a  wider  economic  impact 
perspective.  

Amendments  based  on  international  developments  represent  a  faithful  implementation  of 
international standards into Union law, subject to targeted adjustments in order to reflect EU 
specificities  and  broader  policy  considerations.  For  instance,  the  predominant  reliance  on 
bank  financing  by  EU  small-  and  medium-sized  enterprises  (SMEs)  or  for  infrastructure 
projects  prompts  specific  regulatory  adjustments  that  ensure  institutions  remain  capable  of 
funding them as they constitute the backbone of the single market. A smooth interaction with 
existing  requirements,  such  as  for  central  clearing  and  collateralisation  of  derivatives 
exposures,  or  a  gradual  transition  to  some  of  the  new  requirements  are  necessary.  Such 
adjustments,  limited  in  terms  of  scope  or  time,  do  therefore  not  impinge  on  the  overall 
soundness  of  the  proposals,  which  are  aligned  with  the  basic  level  of  ambition  of  the 
international standards. 

Moreover, based on the call for evidence, the proposals aim at improving existing rules. The 
analysis  of  the  Commission  showed  that  the  present  framework  can  be  applied  in  a  more 
proportionate way, taking into account in particular the situation of smaller and less complex 
institutions where some of the current disclosure, reporting and complex trading book-related 
requirements  appear  not  to  be  justified  by  prudential  considerations.  Furthermore,  the 
Commission has considered the risk attached to loans to SMEs and for funding infrastructure 
projects and found that for some of those loans, it would be justified to apply lower own funds 
requirements  than  are  applied  at  present.  Accordingly,  the  present  proposals  will  bring 
corrections  to  these  requirements  and  will  enhance  the  proportionality  of  the  prudential 
framework for institutions. Thereby, the ability of institutions to finance the economy will be 
enhanced without impinging on the stability of the regulatory framework.  

Finally, the Commission, in close cooperation with the Expert Group on Banking, Payments 
and Insurance has assessed the application of options and discretions set out in the CRD and 
the CRR. Based on this analysis, the present proposal is intending to eliminate some options 
and  discretions  concerning  the  provisions  on  the  leverage  ratio,  on  large  exposures  and  on 
own funds. It is proposed to end to the possibility to create new State guaranteed deferred tax 
assets  not  relying  on  future  profitability  that  would  be  exempted  from  deduction  from 
regulatory capital. 

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• 

Consistency with existing policy provisions in the policy area 

Several  elements  of  the  CRD  and  CRR  proposals  follows  inherent  reviews,  whilst  other 
adaptations  of  the  financial  regulatory  framework  have  become  necessary  in  light  of 
subsequent developments, such as the adoption of the BRRD, the establishment of the Single 
Supervisory Mechanism and the work undertaken by the European Banking Authority (EBA) 
and on international level. 

The proposal introduces amendments to the existing legislation and renders it fully consistent 
with the existing policy provisions in the field of prudential requirements for institutions, their 
supervision and recovery and resolution framework. 

• 

Consistency with other Union policies 

Four  years  after  the  European  Heads  of  State  and  Governments  agreed  to  create  a  Banking 
Union,  two  pillars  of  the  Banking  Union  –  single  supervision  and  resolution  –  are  in  place, 
resting on the solid foundation of a single rulebook for all EU institutions. While important 
progress has been made, further steps are needed to complete the Banking Union, including 
the creation of a single deposit guarantee scheme.  

The  review  of  the  CRR  and  the  CRD  is  part  of  risk  reducing  measures  that  are  needed  to 
further  strengthen  resilience  of  the  banking  sector  ad  that  are  parallel  to  the  staged 
introduction of the European Deposit Insurance Scheme (EDIS). The review aims at the same 
time to ensure a continued single rulebook for all EU institutions, whether inside or outside 
the  Banking  Union.  The  overall  objectives  of  this  initiative,  as  described  above,  are  fully 
consistent  and  coherent  with  the  EU's  fundamental  goals  of  promoting  financial  stability, 
reducing the likelihood and the extent of taxpayers' support in case an institution is resolved 
as well as contributing to a harmonious and sustainable financing of economic activity, which 
is conducive to a high level of competitiveness and consumer protection. 

These overall objectives are also in line with the objectives set by other major EU initiatives, 
as described above. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The  proposed  amendments  are  built  on  the  same  legal  basis  as  the  legislative  acts  that  are 
being amended, i.e. Article 114 TFEU for the proposal for a regulation amending CRR and 
Article 53(1) TFEU for the proposal for a directive amending CRD IV. 

• 

Subsidiarity (for non-exclusive competence)  

The objectives pursued by the proposed measures aim at supplementing already existing EU 
legislation  and  can  therefore  best  be  achieved  at  EU  level  rather  than  by  different  national 
initiatives.  National  measures  aimed  at,  for  example,  reducing  institutions’  leverage, 
strengthening  their  stable  funding  and  trading  book  capital  requirements  would  not  be  as 
effective  in  ensuring  financial  stability  as  EU  rules,  given  the  freedom  of  institutions  to 
establish and provide services in other Member States and the resulting degree of cross-border 
service  provision,  capital  flows  and  market  integration.  On  the  contrary,  national  measures 
could  distort  competition  and  affect  capital  flows.  Moreover,  adopting  national  measures 
would be legally challenging, given that the CRR already regulates banking matters, including 
leverage requirements (reporting), liquidity (specifically the liquidity coverage ratio or LCR) 
and trading book requirements. 

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The amendment of the CRR and CRD is thus considered to be the best option. It strikes the 
right balance between harmonising rules and maintaining national flexibility where essential, 
without  hampering  the  single  rulebook.  The  amendments  would  further  promote  a  uniform 
application of prudential requirements, the convergence of supervisory practices and ensure a 
level playing field throughout the single market for banking services. These objectives cannot 
be sufficiently achieved by Member States alone. This is particularly important in the banking 
sector  where  many  credit  institutions  operate  across  the  EU  single  market.  Full  cooperation 
and  trust  within  the  single  supervisory  mechanism  (SSM)  and  within  the  colleges  of 
supervisors and competent authorities outside the SSM is essential for credit institutions to be 
effectively  supervised  on  a  consolidated  basis.  National  rules  would  not  achieve  these 
objectives. 

• 

Proportionality 

Proportionality has been an integral part of the impact assessment accompanying the proposal. 
Not  only  have  all  the  proposed  options  in  different  regulatory  fields  been  individually 
assessed  against  the  proportionality  objective,  but  also  the  lack  of  proportionality  of  the 
existing  rules  has  been  presented  as  a  separate  problem  and  specific  options  have  been 
analysed aiming at reducing administrative and compliance costs for smaller institutions (see 
sections 2.9 and 4.9 of the impact assessment). 

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Choice of the instrument 

The measures are proposed to be implemented by amending the CRR and the CRD through a 
Regulation and a Directive, respectively. The proposed measures indeed refer to or develop 
further  already  existing  provisions  inbuilt  in  those  legal  instruments  (liquidity,  leverage, 
remuneration, proportionality). 

As regards the new FSB agreed standard on TLAC, it is suggested to incorporate the bulk of 
the standard into the CRR, as only a regulation can achieve the necessary uniform application, 
much in the same way as the existing risk-based own funds requirements. Shaping prudential 
requirements in the form of an amendment to the CRR would ensure that those requirements 
will  in  fact  be  directly  applicable  to  G-SIIs.  This  would  prevent  Member  States  from 
implementing diverging national requirements in an area where full harmonisation is desirable 
in order to prevent an un-level playing field. Fine-tuning of the current legal provisions within 
the  BRRD  will  however  be  necessary  to  make  sure  that  the  TLAC  requirement  and  the 
minimum  requirement  on  own  funds  and  eligible  liabilities  (MREL)  are  fully  coherent  and 
consistent with each other. 

Some of the proposed CRD amendments affecting proportionality would leave Member States 
with a certain degree of flexibility to maintain different rules at the stage of their transposition 
into national law. It would give Member States the option of imposing stricter rules on certain 
matters such as remuneration and reporting. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

The  Commission  carried  out  various  initiatives  in  order  to  assess  whether  the  existing 
prudential framework and the upcoming reviews of global standards were the most adequate 
instruments to ensure prudential objectives for EU  institutions and  also  whether they  would 
continue to provide the necessary funding to the EU economy.  

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In  July  2015  the  Commission  launched  a  public  consultation  on  the  possible  impact  of  the 
CRR  and  the  CRD  on  bank  financing  of  the  EU  economy  with  a  particular  focus  on  the 
financing  of  SMEs  and  of  infrastructure  and  in  September  2015  a  Call  for  Evidence  (CfE)1 
covering  EU  financial  legislation  as  a  whole.  The  two  initiatives  sought  empirical  evidence 
and  concrete  feedback  on  i)  rules  affecting  the  ability  of  the  economy  to  finance  itself  and 
growth,  ii)  unnecessary  regulatory  burdens,  iii)  interactions,  inconsistencies  and  gaps  in  the 
rules,  and  iv)  rules  giving  rise  to  unintended  consequences.  In  addition,  the  Commission 
gathered stakeholders' views in the framework of specific analyses carried out on provisions 
regulating remuneration2 and on the proportionality of the rules contained in the CRR and the 
CRD. Finally, a public consultation was launched in the context of the study contracted out by 
the Commission to assess the impact of the CRR on the bank financing of the economy3.  

All  the  initiatives  mentioned  above  have  provided  clear  evidence  of  the  need  to  update  and 
complete  the  current  rules  in  order  i)  to  reduce  further  the  risks  in  the  banking  sector  and 
thereby  reduce  the  reliance  on  State  aid  and  taxpayers'  money  in  case  of  a  crisis,  and  ii)  to 
enhance the ability of institutions to channel adequate funding to the economy. 

Annexes 1 and 2 of the impact assessment provide a summary of the consultations, reviews 
and reports. 

Impact assessment 

• 
The impact assessment4 was discussed with the Regulatory Scrutiny Board and rejected on 7 
September 2016. Following the rejection, the impact assessment was strengthened by adding 
i)  a  better  explanation  on  the  policy  context  of  the  proposal  (i.e.  it  relation  to  both 
international  and  EU  policy  developments),  ii)  more  details  on  stakeholders'  views  and  iii) 
further  evidence  on  the  impacts  (both  in  terms  of  benefits  and  costs)  of  the  various  policy 
options that are explored in the impact assessment. The Regulatory Scrutiny Board issued a 
positive opinion5 on 27 September 2016 on the resubmitted impact assessment. The proposal 
is  accompanied  by  the  impact  assessment.  The  proposal  remains  consistent  with  the  impact 
assessment. 

As shown by the simulation analysis and macroeconomic modelling developed in the impact 
assessment,  there  are  limited  costs  to  be  expected  from  the  introduction  of  the  new 
requirements, in particular the new Basel standards such as the leverage ratio and the trading 
book.  The  estimated  long-term  impact  on  gross  domestic  product  (GDP)  ranges  between  -
0.03% and -0.06% while the increase in funding costs for the banking sector is estimated to be 
under  3  basis  points  in  the  most  extreme  scenario.  On  the  benefits  side,  the  simulation 
exercise has shown that public resources required to support the banking system in case of a 

1 

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5 

See 
http://ec.europa.eu/finance/consultations/2015/long-term-finance/docs/consultation-
document_en.pdf  and  http://ec.europa.eu/finance/consultations/2015/financial-regulatory-framework-
review/docs/consultation-document_en.pdf.  The  Call  for  Evidence  was  intended  to  cover  the  entire 
spectrum of the financial services regulation. The impact assessment address issues limited to the areas 
of banking only. Other issues involving other segments of the EU financial legislation will be dealt with 
separately. 
Commission Report COM(2016)510 Report from the Commission to the European Parliament and the 
Council  of  28  July  2016  –  Assessment  of  the  remuneration  rules  under  Directive  2013/36/EU  and 
Regulation (EU) No 575/2013. 
The  public  consultation  is  available  at  http://ec.europa.eu/finance/consultations/2015/long-term-
finance/index_en.htm. 
Insert link to impact assessment. 
Insert link to opinion. 

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financial crisis  of the size similar to 2007 – 2008 would decrease by  32% –  a  decline from 
EUR 51 billion to EUR 34 billion. 

• 

Regulatory fitness and simplification 

The  retention  of  simplified  approaches  to  calculate  own  funds  requirements  are  expected  to 
ensure  continued  proportionality  of  the  rules  for  smaller  institutions.  Furthermore,  the 
additional  measures  to  increase  proportionality  of  some  of  the  requirements  (related  to 
reporting,  disclosure  and  remuneration)  should  decrease  the  administrative  and  compliance 
burden for those institutions. 

As far as SMEs are concerned, the proposed recalibration of the own funds requirements for 
institutions' exposures to SMEs is expected to have a positive effect on financing of SMEs. 
This would primarily affect SMEs which currently have exposures beyond EUR 1,5 million 
as these exposures do not benefit from the SME Supporting Factor under the existing rules. 

Other elements of the proposal, particularly those aimed at improving resilience of institutions 
to future crises, are expected to increase sustainability of lending to SMEs.  

Finally, measures aimed at reducing compliance costs for institutions, in particular the smaller 
and less complex institutions, are expected to reduce borrowing costs for SMEs. 

On  the  third  country  dimension,  the  proposal  will  enhance  the  stability  of  EU  financial 
markets thereby reducing the likelihood and costs of potential negative spillovers for global 
financial markets. Moreover, the proposed amendments will further harmonise the regulatory 
framework throughout the Union thereby reducing substantially administrative costs for third 
country institutions operating in the EU.  

The proposal is consistent with the Commission's priority for the Digital Single Market. 

• 

Fundamental rights 

The EU is committed to high standards of protection of fundamental rights and is signatory to 
a broad set of conventions on human rights. In this context, the proposal is not likely to have a 
direct  impact  on  these  rights,  as  listed  in  the  main  UN  conventions  on  human  rights,  the 
Charter  of  Fundamental  Rights  of  the  European  Union,  which  is  an  integral  part  of  the  EU 
Treaties and the European Convention on Human Rights (ECHR). 

4. 

BUDGETARY IMPLICATIONS 

The proposal does not have implications for the Union budget.   

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

It  is  expected  that  the  proposed  amendments  will  start  entering  into  force  in  2019  at  the 
earliest.  The  amendments  are  tightly  inter-linked  with  other  provisions  of  the  CRR  and  the 
CRD that are already in force and have been monitored since 2014.  

The BCBS and the EBA will continue to collect the necessary data for the monitoring of the 
leverage  ratio  and  the  new  liquidity  measures  in  order  to  allow  for  the  future  impact 
evaluation  of  the  new  policy  tools.  Regular  Supervisory  Review  and  Evaluation  Process 
(SREPs) and stress testing exercises will also help monitoring the impact of the new proposed 
measures  upon  affected  institutions  and  assessing  the  adequacy  of  the  flexibility  and 
proportionality provided for to cater for the specificities of smaller institutions. Additionally, 
the Commission services will continue to participate in the working groups of the BCBS and 

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the  joint  task  force  established  by  the  European  Central  Bank  (ECB)  and  by  EBA,  that 
monitor  the  dynamics  of  institutions'  own  funds  and  liquidity  positions,  globally  and  in  the 
EU, respectively. 

The set of indicators to monitor the progress of the results stemming from the implementation 
of the preferred options consists of the following: 

On Net Stable Funding Ratio (NSFR): 

Indicator 

NSFR for EU institutions 

Target 

As  of  the  date  of  application,  99%  of  institutions  taking  part  to 
the EBA Basel III monitoring exercise meet the NSFR at 100% 
(65% of group 1 and 89% of group 2 credit institutions meet the 
NSFR as of end-of December 2015) 

Source of data 

Semi-annual the EBA Basel III monitoring reports 

On leverage ratio: 

Indicator 

Leverage ratio for EU institutions 

Target 

As of the date of application, 99% of group 1 and group 2 credit 
institutions have a leverage ratio of at least 3% (93,4% of group 
1 institutions met the target as of June 2015) 

Source of data 

Semi-annual EBA Basel III monitoring reports 

On SMEs 

Indicator 

Target 

Financing  gap  to  SMEs  in  the  EU,  i.e.  difference  between  the 
need for external funds and the availability of funds 

As of two years after the date of application, < 13% (last known 
figure – 13% as of end 2014) 

Source of data 

European  Commission  /  European  Central  Bank  SAFE  Survey 
(data coverage limited to the euro area) 

On TLAC: 

Indicator 

TLAC in G-SIIs 

Target 

All EU Global Systemically Important Banks (G-SIBs) meet the 
target (>16% of risk weighted assets (RWA)/6% of the Leverage 
Ratio  Exposure  Measure  (LREM)  as  of  2019,  >  18%  Risk 
Weighted Assets (RWA)/6.75% LREM as of 2022) 

Source of data 

Semi-annual EBA Basel III monitoring reports 

On trading book: 

Indicator 

RWA for market risks for EU institutions 

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Target 

Observed  variability  of  risk-weighted  assets  of  aggregated 
portfolios applying the internal models approach. 

-  As  of  2023,  all  EU  institutions  meet  the  own  funds 
requirements for market risks under the final calibration adopted 
in the EU. 

- As of  2021,  unjustifiable variability (i.e. variability not driven 
by  differences  in  underlying  risks)  of  the  outcomes  of  the 
internal  models  across  EU  institutions  is  lower  than  the  current 
variability* of the internal models across EU institutions. 
_______________ 

*Reference  values  for  the  "current  variability"  of  value-at-risk 
(VaR) and incremental risk charge (IRC) requirements should be 
those estimated by the latest EBA "Report on variability of Risk 
Weighted  Assets  for  Market  Risk  Portfolios",  calculated  for 
aggregated portfolios, published before the entry into force of the 
new market risk framework. 

Source of data 

Semi-annual EBA Basel III monitoring reports 

EBA  Report  on  variability  of  Risk  Weighted  Assets  for  Market 
Risk  Portfolios.  New  values  should  be  calculated  according  to 
the same methodology. 

On remuneration: 

Indicator 

Use of deferral and pay-out in instruments by institutions 

Target 

99%  of  institutions  that  are  not  small  and  non-complex,  in  line 
with  the  CRD  requirements,  defer  at  least  40%  of  variable 
remuneration  over  3  to  5  years  and  pay  out  at  least  50%  of 
variable  remuneration  in  instruments  with  respect  to  their 
identified staff with material levels of variable remuneration. 

Source of data 

EBA remuneration benchmarking reports 

On proportionality: 

Indicator 

Reduced burden from supervisory reporting and disclosure 

Target 

80%  of  smaller  and  less  complex  institutions  report  reduced 
burden 

Source of data 

Survey to be developed and conducted by EBA by 2022 - 2023 

The  evaluation  of  the  impacts  of  this  proposal  will  be  done  five  years  after  the  date  of 
application of the proposed measures on the basis of the methodology that will be agreed with 
EBA  soon  after  adoption.  EBA  will  be  mandated  to  define  and  gather  the  data  needed  for 
monitoring  the  above  mentioned  indicators  as  well  as  other  indicators  needed  for  the 
evaluation  of  the  amended  CRR  and  CRD.  The  methodology  could  be  developed  for 

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individual  options  or  a  set  of  interlinked  options  depending  on  the  circumstances  present 
before launching the evaluation and depending on the output of monitoring indicators. 

Compliance and enforcement will be ensured on an ongoing basis where needed through the 
Commission  launching  infringement  proceedings  for  lack  of  transposition  or  for  incorrect 
transposition or application of the legislative measures. Reporting of breaches of EU law can 
be  channelled  through  the  European  System  of  Financial  Supervision  (ESFS),  including  the 
national competent authorities and EBA, as well as through the ECB. EBA will also continue 
publishing its regular reports of the Basel III monitoring exercise on the EU banking system. 
This exercise monitors the impact of the Basel III requirements (as implemented through the 
CRR and the CRD) on EU institutions in particular as regards institutions' capital ratios (risk-
based and non-risk-based) and liquidity ratios (LCR, NSFR). It is run in parallel with the one 
conducted by the BCBS. 

• 

Detailed explanation of the specific provisions of the proposal 

EXEMPTED ENTITIES 

Article 2(5) of the CRD is amended to add institutions in Croatia that were exempted from the 
application of the CRD and the CRR via the Accession Treaty.  

Public development banks and credit unions in certain Member States are already exempted 
from the CRD-CRR regulatory framework. To ensure a level playing field, all Member States 
should be able to benefit from the possibility of allowing such types of entities to operate only 
under national regulatory safeguards commensurate with the risks that they incur. To this end, 
the Commission has committed in its Action Plan on Building a Capital Markets Union of 30 
September  2015,  to  explore  the  possibility  for  all  Member  States  to  authorise  credit  unions 
that  would  operate  outside  the  EU's  capital  requirements  framework  for  banks.  In  line  with 
such commitments and, at the request of The Netherlands, credit unions in The Netherlands 
are  also  included  on  the  list  of  institutions  in  Article  2(5)  of  the  CRD.  Furthermore,  to 
facilitate  the  exemption  from  the  CRD-CRR  regulatory  framework  of  institutions  in  other 
Member  States  that  are  similar  to  the  ones  already  included  in  the  list,  Articles  2(5a)  and 
2(5b)  are  added  to  the  CRD.  These  Articles  empower  the  Commission  to  exempt  specific 
institutions or categories of institutions from the CRD, provided that they comply with clearly 
defined criteria. Such new exemptions may only be done on a case-by-case basis for public 
development-type of banks or for the entire credit union sector of a Member State.  

Paragraph  2  of  Article  9  is  amended  to  better  frame  the  exceptions  to  the  prohibition  that 
persons or undertakings other than credit institutions carry out the business of taking deposits 
or other repayable funds from the public. It is clarified that the prohibition does not apply to 
persons or undertakings the taking up and pursuit of business of which is subject to Union law 
other than the CRD, to the extent that their activities subject to such other Union law may be 
qualified  as  taking  of  deposits  or  other  repayable  funds  from  the  public.  This  should  not 
prevent  an  entity  from  being  subject  to  authorisation  under  both  the  CRD  and  such  other 
Union  legislation.  Furthermore,  it  is  clarified  that  only  entities  listed  in  Article  2(5)  of  the 
CRD are exempted from the prohibition in Article 9(1) of the CRD due to the fact that they 
are covered by specific national legal frameworks, thus removing the ambiguity in the current 
wording. 

PILLAR 2 CAPITAL REQUIREMENTS AND GUIDANCE 

The  current  wording  of  rules  concerning  additional  capital  requirements  set  by  competent 
authorities according to Article 104 allows for different interpretations of the cases in which 

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those  requirements  may  be  imposed  and  the  way  such  requirements  position  themselves  in 
relation to the minimum capital requirements set out in Article 92 of the Capital Requirement 
Regulation  (CRR)  and  the  combined  buffer  requirement  (Article  128).  These  diverse 
interpretations  have  resulted  in  substantially  different  amounts  of  capital  imposed  on 
individual  institutions  across  Member  States  and  in  different  triggering  points  for  the 
restrictions on distribution provided for in Article 141. Moreover, the current text is silent on 
the possibility for competent authorities to communicate their expectations for institutions to 
have  own  funds  in  excess  of  the  minimum  capital  requirements,  additional  own  funds 
requirements  and  the  combined  buffers  requirement.  The  amended  Article  104  lists  the 
possibility to impose additional own funds requirements amongst other competent authorities' 
powers.  A  new  Article  104a  clarifies  the  conditions  for  setting  additional  own  funds 
requirements  and  emphasises  the  institution-specific  nature  of  those  requirements.  A  new 
Article  104b  is  added  to  spell  out  the  main  features  of  capital  guidance  and  Article  113  is 
amended  to  provide  that  capital  guidance  should  also  be  dealt  with  in  the  framework  of 
colleges of supervisors. A new Article 141a is inserted to better clarify,  for the purposes of 
restrictions on distributions, the relation between the additional own funds requirements, the 
minimum  own  funds  requirements,  the  own  funds  and  eligible  liabilities  requirement,  the 
MREL  and  the  combined  buffers  requirement  (so  called  "stacking  order").  Finally,  Article 
141 is amended to reflect the stacking order in the calculation of the maximum distributable 
amount. 

PILLAR 2 REPORTING AND DISCLOSURE 

To reduce administrative burden and provide for a more proportionate Pillar 2 reporting and 
disclosure  regime,  the  proposal  amends  Article  104(1)  of  the  CRD  to  constrain  competent 
authorities'  discretion  when  imposing  additional  reporting  or  disclosure  obligations  on 
institutions. Competent authorities will only be entitled to use these supervisory powers when 
the legal grounds defined in the new paragraph (2) of Article 104 are met. 

CONFINING  THE  SUPERVISORY  REVIEW  AND  EVALUATION  PROCESS  (SREP)  AND  PILLAR  2 

TO MICRO-PRUDENTIAL PURPOSES 

Recent experience has shown that there would be merit in a clearer delineation of the areas of 
responsibility  between  competent  and  designated  authorities.  This  applies  notably  to  the 
supervisory  review  and  evaluation  process  (SREP)  and  the  corresponding  supervisory 
requirements.  Competent  authorities  are  responsible  for  the  SREP  and  the  imposition  of 
corresponding institution-specific supervisory requirements (so-called Pillar 2 requirements). 
In this context, they may also evaluate systemic risk stemming from a specific institution and 
could address such risk by imposing supervisory requirements to this institution. The use of 
Pillar  2  measures  may  in  this  context  undermine  the  effectiveness  and  efficiency  of  other 
macro-prudential instruments. Against this background, the proposal provides that the SREP 
and corresponding supervisory requirements should be confined to a purely micro-prudential 
perspective. Articles 97, 98, 99 and 105 are amended accordingly. Article 103 is deleted and a 
clarification  is  included  in  the  new  Article  104a(1)  providing  that  additional  own  funds 
requirements  referred  to  in  point  (a)  of  Article  104  shall  not  be  imposed  to  cover  macro-
prudential or systemic risk. 

INTRODUCING A MODIFIED FRAMEWORK FOR INTEREST RATE RISK 

Following  developments  at  international  level  on  the  measurement  of  interest  rate  risks, 
Articles  84  and  98  of  this  Directive  and  Article  448  of  the  CRR  are  amended  in  order  to 

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introduce  a  revised  framework  for  capturing  interest  rate  risks  for  banking  book  positions. 
The amendments include the introduction of a common standardised approach that institutions 
might use to capture these risks or that competent authorities may require the institution to use 
when  the  systems  developed  by  the  institution  to  capture  these  risks  are  not  satisfactory, 
improved  outlier  test  and  disclosure  requirements.  In  addition,  the  EBA  is  mandated,  in 
Article 84 of the CRD, to elaborate the details of the standardised methodology with regard to 
the  criteria  and  conditions  that  institutions  should  follow  to  identify,  evaluate,  manage  and 
mitigate interest rate risks. The EBA is also mandated, in Article 98 of the CRD, to define the 
six  supervisory  shock  scenarios  applied  to  interest  rates  and  the  common  assumption  that 
institutions have to implement for the outlier test. 

FINANCIAL HOLDING COMPANIES, MIXED FINANCIAL HOLDING COMPANIES 

New provisions are introduced and adjustments are made to several Articles in the CRD-CRR 
in order to bring financial holding companies and mixed financial holding companies directly 
in  the  scope  of  the  EU  prudential  framework.  An  authorisation  requirement  is  introduced 
along  with  direct  supervisory  powers  over  financial  holding  companies  and  mixed  financial 
holding companies (Article 21a of the CRD). Article 11 of the CRR is amended to clarify that 
-  where  requirements  are  applied  on  a  consolidated  basis  at  the  level  of  such  holding 
companies- it will be the holding company which is directly responsible for compliance, not 
the  institutions  that  are  subsidiaries  of  such  holdings.  Articles  13  and  18  of  the  CRR  are 
adjusted to reflect direct responsibility of the financial holding companies or mixed financial 
holding companies. 

INTERMEDIATE EU PARENT UNDERTAKING 

In  order  to  facilitate  the  implementation  of  the  internationally  agreed  standards  on  internal 
loss-absorbing capacity for non-EU G-SIIs in Union law and, more broadly, to simplify and 
strengthen the resolution process of third-country groups with significant activities in the EU, 
Article  21b  of  the  CRD  introduces  a  new  requirement  for  establishing  an  intermediate  EU 
parent  undertaking  where  two  or  more  institutions  established  in  the  EU  have  the  same 
ultimate parent undertaking in a third country. The intermediate EU parent undertaking can be 
either  a  holding  company  subject  to  the  requirements  of  the  CRR  and  the  CRD,  or  an  EU 
institution. The requirement will apply only to third-country groups that are identified as non-
EU G-SIIs or that have entities on the EU territory with total assets of at least EUR 30 billion 
(the assets of both subsidiaries and branches of those third-country groups will be taken into 
account in the calculation).  

REMUNERATION 

As required under Article 161(2) of the CRD, the Commission has reviewed the efficiency, 
implementation and enforcement of the CRD remuneration rules. The findings of this review, 
reflected in the Commission Report COM(2016) 510, were overall positive.  

The review however showed that some of the rules, namely the rules on deferral and pay-out 
in instruments, are not workable for the smallest and least complex institutions and for staff 
with low variable remuneration. The review also showed that proportionality  with regard to 
the smallest and least complex institutions as reflected in Article 92(2) of the CRD has been 
interpreted in different ways, leading to an uneven implementation of the rules in the Member 
States. A targeted amendment is therefore proposed to cater for the problems encountered in 
the application of the rules on deferral and pay-out in instruments in small and non-complex 

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institutions and towards staff  members with low variable remuneration. To this end, Article 
94 is amended to clarify that the rules apply to all institutions and their identified staff, except 
for those that are below the thresholds set for derogations. At the same time, some flexibility 
is offered to competent authorities to adopt a stricter approach. 

The amendments concerning provisions on remuneration also aim to address another need for 
more proportional rules identified by the Commission's review by allowing listed institutions 
requirements.
to 

for  meeting 

share-linked 

instruments 

CRD 

use 

the 

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2016/0364 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Directive 2013/36/EU as regards exempted entities, financial holding 
companies, mixed financial holding companies, remuneration, supervisory measures 
and powers and capital conservation measures 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

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

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Central Bank6 
Having regard to the opinion of the Committee of the Regions7, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

Directive 2013/36/EU of the European Parliament and of the Council8 and Regulation 
(EU) No 575/2013 of the European Parliament and of the Council9 have been adopted 
in  response  to  the  financial  crises  that  unfolded  in  2007-2008.  These  legislative 
measures  have  substantially  contributed  to  strengthening  the  financial  system  in  the 
Union  and  rendered  institutions  more  resilient  to  possible  future  shocks.  Although 
extremely  comprehensive,  these  measures  did  not  address  all  identified  weaknesses 
affecting  institutions.  Also,  some  of  the  initially  proposed  measures  have  been 
subjected  to  review  clauses  or  have  not  been  sufficiently  specified  to  allow  for  their 
smooth implementation. 

(2) 

This Directive aims to address issues raised in relation to provisions that proved not to 
be sufficiently clear and have therefore been subject to divergent interpretations or that 
have  been  found  to  be  overly  burdensome  for  certain  institutions.  It  also  contains 
adjustments to Directive 2013/36/EU that are necessary following either the adoption 

6 
7 
8 

9 

OJ C […], […], p. […]. 
OJ C , , p. . 
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). 
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 L 176, 27.6.2013, p. 1). 

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(3) 

(4) 

(5) 

of  other  relevant  Union  legislation,  such  as  Directive  2014/59/EU  of  the  European 
Parliament and of the Council10 or the changes proposed in parallel to Regulation (EU) 
No  575/2013.  Finally,  the  amendments  proposed  better  align  the  current  regulatory 
framework  to  international  developments  in  order  to  promote  consistency  and 
comparability among jurisdictions. 

Financial holding companies and mixed financial holding companies could be parent 
undertakings  of  banking  groups  and  the  application  of  prudential  requirements  is 
envisaged on the basis of the consolidated situation of such holding companies. As the 
institution  controlled  by  such  holding  companies  may  not  always  comply  with  the 
requirements on a consolidated basis, it is consistent with the scope of consolidation 
that financial holding companies and mixed financial holding companies are brought 
under  the  direct  scope  of  Directive  2013/36/EU  and  of  Regulation  (EU)  No 
575/2013.A  specific  authorisation  procedure  for  financial  holding  companies  and 
mixed  financial  holding  companies  is  therefore  necessary,  as  well  as  supervision  by 
the competent authorities. This would ensure that consolidated prudential requirements 
are  complied  with  directly  by  the  holding  company,  which  will  not  be  subject  to 
prudential requirements applied on a solo level.  

The  consolidating  supervisor  is  entrusted  with  the  main  responsibilities  as  regards 
supervision  on  a  consolidated  basis.  Therefore  it  is  necessary  that  the  prudential 
authorisation and supervision of the financial holding companies and mixed financial 
holding companies should also be given to the consolidating supervisor. The European 
Central  Bank,  when  performing  its  task  to  carry  out  supervision  on  a  consolidated 
basis over credit institutions' parents pursuant to Article 4(1)(g) of Council Regulation 
(EU) No 1024/201311 should also be responsible for the authorisation and supervision 
of financial holding companies and mixed financial holding companies. 

Commission  report  COM(2016)  510  of  28  July  2016  showed  that,  when  applied  to 
small and  non-complex institutions, some  of  the  principles,  namely the  requirements 
on deferral and pay-out in instruments set out in points (l) and (m) of Article 94(1) of 
Directive  2013/36/EU,  are  too  burdensome  and  not  commensurate  with  their 
prudential benefits. Similarly, it was found that the cost of applying these requirements 
exceeds  their  prudential  benefits  in  the  case  of  staff  with  low  levels  of  variable 
remuneration, since such levels of variable remuneration produce little or no incentive 
for staff to take excessive risk. Consequently, while all institutions should in general 
be  required  to  apply  all  the  principles  towards  all  of  their  staff  whose  professional 
activities have a material impact on their risk profile, it is necessary to exempt in the 
Directive  small  and  non-complex  institutions  and  staff  with  low  levels  of  variable 
remuneration from the principles on deferral and pay-out in instruments. 

(6) 

Clear,  consistent  and  harmonised  criteria  for  identifying  small  and  non-complex 
institutions  as  well  as  low  levels  of  variable  remuneration  are  necessary  to  ensure 
supervisory  convergence  and  to  foster  a  level-playing  field  for  institutions  and  an 

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Directive  2014/59/EU  of  the  European  Parliament  and  of  the  Council  of  15  May  2014  establishing  a 
framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and  amending 
Council  Directive  82/891/EEC,  and  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC, 
2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) 
No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190). 
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). 

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(7) 

(8) 

(9) 

adequate  protection  of  depositors,  investors  and  consumers  across  the  Union.  At  the 
same time, it is appropriate to offer some flexibility to competent authorities to adopt a 
stricter approach where they consider this necessary.  

Directive  2013/36/EU  requires  that  a  substantial  portion,  and  in  any  event  at  least 
50%,  of  any  variable  remuneration,  consist  of  a  balance  of  shares  or  equivalent 
ownership interests, subject to the legal structure of the institution concerned, or share-
linked  instruments  or  equivalent  non-cash  instruments,  in  the  case  of  a  non-listed 
institution; and, where possible, of alternative tier 1 or tier 2 instruments which meet 
certain  conditions.  This  principle  limits  the  use  of  share-linked  instruments  to  non-
listed  institutions  and  requires  listed  institutions  to  use  shares.  Commission  report 
COM(2016) 510 of 28 July 2016 found that the use of shares can lead to considerable 
administrative  burdens  and  costs  for  listed  institutions.  At  the  same  time,  equivalent 
prudential benefits can be achieved by allowing listed institutions to use share-linked 
instruments  that  track  the  value  of  shares.  The  possibility  of  using  share-linked 
instruments should therefore be extended to listed institutions. 

Own  funds  add-ons  imposed  by  competent  authorities  are  an  important  driver  of  an 
institution’s overall level of own funds and are relevant for market participants since 
the level of additional own funds imposed impacts the trigger point for restrictions on 
dividend  payments,  bonus  pay-outs  and  the  payments  on  Additional  Tier  1 
instruments.  A  clear  definition  of  the  conditions  under  which  capital  add-ons  should 
be  imposed  should  be  provided  to  ensure  that  rules  are  consistently  applied  across 
Member States and to ensure the proper functioning of the market.  

Own funds add-ons imposed by competent authorities should be set in relation to the 
specific  situation  of  an  institution  and  should  be  duly  justified.  These  requirements 
should not be used to address macroprudential risks and should be positioned, in the 
stacking  order  of  own  funds  requirements,  above  the  minimum  own  funds 
requirements and below the combined buffer requirement. 

(10)  The  leverage  ratio  requirement  is  a  parallel  requirement  to  the  risk-based  own  funds 
requirements. Therefore, any own funds add-ons imposed by competent authorities to 
address the risk of excessive leverage should be added to the minimum leverage ratio 
requirement and not to the minimum risk-based own funds requirement. Furthermore, 
any CET1 capital that institutions use to meet their leverage-related requirements can 
be  used  to  meet  their  risk-based  own  funds  requirements  as  well,  including  the 
combined buffer requirements. 

(11)  Competent authorities should have the possibility to communicate to an institution any 
further  adjustment  to  the  amount  of  capital  in  excess  of  minimum  own  funds 
requirements,  additional  own  funds  requirements  and 
the  combined  buffers 
requirement  that  they  expect  such  institution  to  hold  in  order  to  cope  with  forward 
looking and remote situations. Since this guidance constitutes a capital target, it should 
be  thought  of  as  being  positioned  above  the  own  funds  requirements  and  combined 
buffer requirement in the sense that the failure to meet such target does not trigger the 
restrictions  on  distributions  provided  for  in  Article  141  of  this  Directive  and  this 
Directive and Regulation (EU) No 575/2013 should not set out mandatory disclosure 
obligations for the guidance. Where an institution repeatedly fails to meet the capital 
target,  the  competent  authority  should  be  entitled  to  take  supervisory  measures  and, 
where appropriate, to impose additional own funds requirements.  

(12)  Respondents to the Commission's Call for Evidence on the EU regulatory framework 
for  financial  services  pointed  out  that  reporting  burden  is  increased  by  systematic 

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reporting required by competent authorities over and above the requirements set out in 
Regulation  (EU)  No  575/2013.  The  Commission  should  prepare  a  report  identifying 
those additional systematic reporting requirements and assess whether they are in line 
with the single rulebook on supervisory reporting. 

(13)  The  provisions  of  this  Directive  2013/36/EU  on  interest  rate  risk  arising  from  non-
trading  book  activities  are  linked  to  the  relevant  provisions  in  [Regulation  XX 
amending  Regulation  (EU)  No  575/2013,  which  require  a  longer  implementation 
period  for  institutions.  In  order  to  align  the  application  of  rules  on  interest  rate  risk 
arising from non-trading book activities, the provisions necessary to comply with the 
relevant provisions of this Directive should apply from the same date as the relevant 
provisions in Regulation (EU) No [XX]. 

(14) 

(15) 

In  order  to  harmonise  the  calculation  of  the  interest  rate  risk  of  non-trading  book 
activities  when  the  institutions'  internal  systems  for  measuring  this  risk  are  not 
satisfactory,  the  Commission  should  be  empowered  to  adopt  regulatory  technical 
standards  in  respect  of  developing  the  details  of  a  standardised  approach  via  the 
regulatory  technical  standards  set  out  in  Article  84(4)  of  this  Directive  by  means  of 
delegated acts pursuant to Article 290 TFEU and in accordance with Articles 10 to 14 
of Regulation (EU) No 1093/2010. 

In order to improve the competent authorities' identification of those institutions which 
may  be  subject  to  excessive  losses  in  their  non-trading  book  activities  as  a  result  of 
potential  changes  in  interest  rates,  the  Commission  should  be  empowered  to  adopt 
regulatory  technical  standards  in  respect  of  specifying  the  six  supervisory  shock 
scenarios  that  all  institutions  have  to  apply  in  order  to  calculate  changes  in  the 
economic value of equity as referred to in Article 98(5), the common assumptions that 
institutions  have  to  implement  in  their  internal  systems  for  the  purpose  of  the  same 
calculation  and  in  respect  of  determining  the  potential  need  for  specific  criteria  to 
identify the institutions for which supervisory measures may be warranted following a 
decrease in the net interest income attributed to changes in interest rates by means of 
delegated acts pursuant to Article 290 TFEU and in accordance with Articles 10 to 14 
of Regulation (EU) No 1093/2010  

(16) 

In  order  to  guide  competent  authorities  in  identifying  situations  where  institution-
specific capital add-ons should be imposed, the Commission should be empowered to 
adopt  regulatory  technical  standards  in  respect  of  how  risks  or  elements  of  risks  not 
covered  or  not  sufficiently  covered  by  the  own  funds  requirements  set  out  in 
Regulation  (EU)  No  575/2013  should  be  measured  by  means  of  delegated  acts 
pursuant to Article 290 TFEU and in accordance with Articles 10 to 14 of Regulation 
(EU) No 1093/2010.  

(17)  Public  development  banks  and  credit  unions  in  certain  Member  States  have  been 
historically exempted from Union legislation on credit institutions. In order to ensure a 
level playing field, it should be possible to allow also other public development banks 
and credit unions to be exempted from Union legislation on credit institutions and to 
operate  only  under  national  regulatory  safeguards  commensurate  with  the  risks  that 
they incur. To provide for legal certainty it is necessary to set out clear criteria for such 
additional exemptions and  to delegate to  the  Commission  the  power  to  adopt  acts  in 
accordance  with  Article  290  TFEU  in  respect  of  identifying  whether  specific 
institutions or categories of institutions fulfil those defined criteria.  

(18)  Before  the  adoption  of  acts  in  accordance  with  Article  290  TFEU,  it  is  of  particular 
importance  that  the  Commission  carry  out  appropriate  consultations  during  its 

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preparatory work, including at expert level, and that those consultations be conducted 
in  accordance  with  the  principles  laid  down  in  the  Interinstitutional  Agreement  on 
Better Law-Making of 13 April 2016. In particular, to ensure equal participation in the 
preparation  of  delegated  acts,  the  European  Parliament  and  the  Council  receive  all 
documents  at  the  same  time  as  Member  States'  experts,  and  their  experts 
systematically have access to meetings of Commission expert groups dealing with the 
preparation of delegated acts. 

(19)  Since the objectives of this Directive, namely to reinforce and refine already existing 
Union  legislation  ensuring  uniform  prudential  requirements  that  apply  to  credit 
institutions  and  investment  firms  throughout  the  Union,  cannot  be  sufficiently 
achieved by the Member States but can rather, by reason of their scale and effects, be 
better achieved at Union level, the Union may adopt measures, in accordance with the 
principle  of  subsidiarity  as  set  out  in  Article 5  of  the  Treaty  on  European  Union.  In 
accordance  with  the  principle  of  proportionality,  as  set  out  in  that  Article,  this 
Directive does not go beyond what is necessary in order to achieve those objectives. 

(20) 

In  accordance  with  the  Joint  Political Declaration  of  28  September  2011  of  Member 
States  and  the  Commission  on  explanatory  documents,  Member  States  have 
undertaken  to  accompany,  in  justified  cases,  the  notification  of  their  transposition 
measures  with  one  or  more  documents  explaining  the  relationship  between  the 
components  of  a  directive  and  the  corresponding  parts  of  national  transposition 
instruments. With regard to this Directive, the legislator considers the transmission of 
such documents to be justified. 

(21)  Directive 2013/36/EU should therefore be amended accordingly, 

HAVE ADOPTED THIS DIRECTIVE: 

Article 1 
Amendments to Directive 2013/36/EU 

Directive 2013/36/EU is amended as follows: 

(1) 

Article 2 is amended as follows: 

(a)  paragraph 5 is amended as follows: 

(1)  point (16) is replaced by the following:  

in 

the  Netherlands, 

"(16) 
voor 
Ontwikkelingslanden NV', the 'NV Noordelijke Ontwikkelingsmaatschappij', the 'NV 
the 
Industriebank  Limburgs 
'Overijsselse Ontwikkelingsmaatschappij NV' and kredietunies;". 

Instituut  voor  Ontwikkeling  en  Financiering', 

Investeringsbank 

'Nederlandse 

the 

(2) 

the following point (24) is added: 

"  (24)  in  Croatia,  the  “kreditne  unije”  and  the  “Hrvatska  banka  za  obnovu  i 
razvitak”,’ 

(b) 

the following paragraphs 5a and 5b are inserted: 

"5a.  This  Directive  shall  not  apply  to  an  institution  where  the  Commission 
establishes  in  a  delegated  act  adopted  pursuant  to  Article  148,  on  the  basis  of 
information available to it that the institution fulfils all of the following conditions, 
without prejudice to the application of state aid rules:  

EN 

18 

   EN 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

(i) 

it  has  been  established  under  public  law  by  a  Member  State's  central 
government, regional government or local authority; 
laws and provisions governing the institution confirm that its activity is 
limited to advancing specified objectives of financial, social or economic 
public policy in accordance with the laws and provisions governing that 
institution, on a non-competitive, not for profit basis. For these purposes, 
public  policy  objectives  may  include  the  provision  of  financing  for 
promotional or development purposes to specific economic activities, or 
geographical areas of the relevant Member State;  

it is subject to adequate and effective prudential requirements, including 
minimum  own  funds  requirements,  and  to  an  adequate  supervisory 
framework  which  has  similar  effect as the framework established under 
Union law;  

the  central  government,  regional  government  or  local  authority,  as 
applicable,  has  an  obligation  to  protect  the  institution's  viability  or 
directly  or  indirectly  guarantees  at  least  90%  of  the  institution's  own 
funds requirements, funding requirements or exposures; 

it is precluded from accepting covered deposits as defined in point (5) of 
Article 2(1) of Directive 2014/49/EU of the European Parliament and of 
the Council12;  

its  activities  are  confined  to  the  Member  State  where  its  head  office  is 
situated; 

the total value of the institution's assets is below EUR 30 billion; 

the ratio of the institution's total assets over the GDP of the Member State 
concerned is less than 20%;  

the institution is not of significant relevance with regard to the domestic 
economy of the Member State concerned.  

The Commission shall regularly review whether an institution subject to a delegated 
act  adopted  pursuant  to  Article  148  continues  to  fulfil  the  conditions  set  out  in  the 
first subparagraph. 

5b.  This Directive shall not apply to categories of institutions in a Member State, 
where the Commission establishes in a delegated act adopted pursuant to Article 148, 
on  the  basis  of  information  available  to  it,  that  the  institutions  falling  under  that 
category qualify as credit unions under the national law of a Member State and meet 
all of the following conditions:  

(a) 

(b) 

(c) 

they are financial institutions of a cooperative nature; 

their  membership  is  restricted  to  a  set  of  members  sharing  certain  pre-
defined common personal features or interests; 

they  are  only  permitted  to  provide  credit  and  financial  services  to  their 
members; 

12 

Directive  2014/49/EU  of  the  European  Parliament  and  of  the  Council  of  16  April  2014  on  deposit 
guarantee schemes (recast) (OJ L 173, 12.6.2014, p. 149) 

EN 

19 

   EN 

                                                 
(d) 

(e) 

(f) 

(g) 

they are only permitted to accept deposits or repayable funds from their 
members and such deposits qualify as covered deposits under point 5 of 
Article 2(1) of Directive 2014/49/EU; 

they are only permitted to perform the activities listed in points 1 to 6 and 
15 of Annex I to this Directive; 

they  are  subject  to  adequate  and  effective  prudential  requirements, 
including  minimum  capital  requirements,  and  a  supervisory  framework 
which has similar effect as the framework established under Union law;  

the aggregate value of the assets of this category of institutions does not 
exceed  3%  of  the  GDP  of  the  Member  State  concerned  and  the  total 
value  of  assets  of  individual  institutions  does  not  exceed  EUR  100 
million; 

(h) 

their activities are confined to the Member State where their head office 
is situated.  

The Commission shall regularly review whether a category of institutions subject to 
a delegated act adopted pursuant to Article 148 continues to fulfil the conditions set 
out in the first subparagraph.". 

(c)  paragraph 6 is replaced by the following: 

"6. The entities referred to in point (1) and points (3) to (24) of paragraph 5 and in 
the  delegated  acts  adopted  in accordance  with  paragraphs  5a  and  5b  of  this  Article 
shall be treated as financial institutions for the purposes of Article 34 and Title VII, 
Chapter 3.". 

(d) 

the following paragraph 7 is added: 

" By [5 years after entry into force], the Commission shall review the list set out in 
Article 2(5) by considering whether the reasons that led to the inclusion of entities in 
the list are still valid, the national legal framework and supervision applicable to the 
entities in the list, the type and quality of deposit coverage of the entities in the list 
and,  for  entities  of  the  type  specified  in  paragraphs  2(5a)  and  2(5b)  taking  into 
account also the criteria described therein.". 

(2) 

Article 3 is amended as follows: 

(a) 

in paragraph 1, the following points are added: 

"(60)  'resolution  authority'  means  a  resolution  authority  as  defined  in  point  (18)  of 
Article 2(1) of Directive 2014/59/EU; 

(61) "global systemically important institution" (G-SII) means a G-SII as defined in 
point (132) of Article 4(1) of Regulation (EU) No 575/2013; 

(62)  "non-EU  global  systemically  important  institution"  (non-EU  G-SII)  means  a 
non-EU  G-SII  as  defined  in  point  (133)  of  Article  4(1)  of  Regulation  (EU)  No 
575/2013 

(63) "group" means a group as defined in point (137) of Article 4(1) of Regulation 
(EU) No 575/2013. 

(64)  "third  country  group"  means  a  group  of  which  the  parent  undertaking  is 
established in a third country. 

(b) 

the following paragraph 3 is added: 

EN 

20 

   EN 

"3. For the purposes of applying the requirements of this Directive and of Regulation 
(EU)  No  575/2013  on  a  consolidated  basis  and  for  the  purposes  of  exercising 
supervision on a consolidated basis in accordance with this Directive and Regulation 
(EU) 575/2013, the terms "institution", "parent institution in a Member State", "EU 
parent  institution"  and  "parent  undertaking"  shall  also  apply  to  financial  holding 
companies  and  mixed  financial  holding  companies  that  are  subject  to  requirements 
laid down in this Directive and in Regulation 575/2013 on a consolidated basis and 
are authorised in accordance with Article 21a.". 

(3) 

In Article 4, paragraph 8 is replaced by the following:  

"8.  Member  States  shall  ensure  that  where  authorities  other  than  the  competent 
authorities have the power of resolution, those other authorities cooperate closely and 
consult  the  competent  authorities  with  regard  to  the  preparation  of  resolution  plans 
and  in  all  other  instances  where  this  is  required  in  this  Directive,  Directive 
2014/59/EU of the European Parliament and of the Council13 or in Regulation (EU) 
No 575/2013.". 

(4) 

Article 8(2) is amended as follows: 

(a)  point (a) is replaced by the following: 

" (a) the information to be provided to the competent authorities in the application for 
the  authorisation  of  credit  institutions,  including  the  programme  of  operations 
provided  for  in  Article  10  and  the  information  necessary  for  the  requirements  for 
authorisation laid down by Member States and notified to EBA in accordance with 
paragraph 1"; 

(b)  point (b) is replaced by the following: 

"(b)  the  requirements  applicable  to  shareholders  and  members  with  qualifying 
holdings, or, where there are no qualifying holdings, of the 20 largest shareholders or 
members, pursuant to Article 14; and". 

(5) 

In Article 9, paragraph 2 is replaced by the following: 

"2. Paragraph 1 shall not apply to the taking of deposits or other repayable funds by 
any of the following: 

(a) 

(b) 

a Member State; 

a Member State's regional or local authority; 

(c)  public  international  bodies  of  which  one  or  more  Member  States  are 

members; 

(d)  persons  or  undertakings  the  taking  up  and  pursuit  of  the  business  of 
which  is  explicitly  covered  by  Union  law,  other  than  this  Directive  and 
Regulation (EU) No 575/2013; 

(e) 

entities  referred  to  in  Article  2(5),  the  activity  of  which  is  governed  by 
national law.".  

13 

Directive  2014/59/EU  of  the  European  Parliament  and  of  the  Council  of  15  May  2014  establishing  a 
framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and  amending 
Council  Directive  82/891/EEC,  and  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC, 
2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) 
No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p.190). 

EN 

21 

   EN 

                                                 
(6) 

Article 10 is replaced by the following: 

"Article 10 
Programme of operations and structural organisation 

Member States shall require applications for authorisation to be accompanied by a programme 
of operations setting out the types of business envisaged and the structural organisation of the 
credit institution, including indication of the parent undertakings, financial holding companies 
and mixed financial holding companies within the group.".  

(7) 

In Article 14, paragraph 2 is replaced by the following: 

"2. The competent authorities shall refuse authorisation to commence the activity of a 
credit  institution  if,  taking  into  account  the  need  to  ensure  the  sound  and  prudent 
management of a credit institution, they are not satisfied as to the suitability of the 
shareholders  or  members  in  accordance  with  the  criteria  set  out  in  Article  23(1). 
Article 23(2) and (3) and Article 24 shall apply.".  

(8) 

In Article 18, point (d) is replaced by the following: 

"(d) no longer meets the prudential requirements set out in Parts Three, Four or Six, 
except for the requirements laid down in Articles 92a and 92b, of Regulation (EU) 
No 575/2013 or imposed under Article 104(1)(a) or Article 105 of this Directive or 
can  no  longer  be  relied  on  to  fulfil  its  obligations  towards  its  creditors,  and,  in 
particular, no longer provides security for the assets entrusted to it by its depositors.". 

(9) 

The following Articles 21a and 21b are inserted: 

"Article 21a 
Authorisation of financial holding companies and mixed financial holding companies 

1. 

Member  States  shall  require  financial  holding  companies  and  mixed  financial 
holding  companies  to  obtain  authorisation  from  the  consolidating  supervisor 
determined in accordance with Article 111. 

Where  the  consolidating  supervisor  is  different  than  the  competent  authority  in  the 
Member  State  where  the  financial  holding company  or  the  mixed  financial  holding 
company  was  set-up,  the  consolidating  supervisor  shall  consult  the  competent 
authority. 

2. 

The application for authorisation referred to in paragraph 1 shall contain information 
concerning the following: 

(a) 

the structural organisation of the group of which the financial holding company 
or  the  mixed  financial  holding  company  is  part,  clearly  indicating  the 
subsidiaries and, where applicable, parent undertakings; 

(b) 

compliance with effective direction of the business and place of the head office 
requirements set out in Article 13; 

(c) 

compliance with shareholder and member requirements set out in Article 14. 

3. 

The  consolidating  supervisor  may  only  grant  an  authorisation  where  it  is  satisfied 
that all of the following conditions are fulfilled:  

(a) 

the  financial  holding  company  or  mixed  financial  holding  company  that  is 
subject to requirements laid down in this Directive and in Regulation (EU) No 
575/2013 is capable of ensuring compliance with those requirements; 

EN 

22 

   EN 

4. 

5. 

1. 

2. 

3. 

4. 

(b) 

the  financial  holding  company  or  mixed  financial  holding  company  does  not 
obstruct  the  effective  supervision  of  the  subsidiary  institutions  or  parent 
institutions. 

Consolidating  supervisors  shall  require  financial  holding  companies  and  mixed 
financial  holding  companies  to  provide  them  with  the  information  they  require  to 
monitor  the  structural  organisation  of  the  group  and  compliance  with  the 
authorisation requirements referred to in this Article. 

The  consolidating  supervisors  may  only  withdraw  the  authorisation  granted  to  a 
financial  holding  company  or  mixed  financial  holding  company  where  such  a 
financial holding company or mixed financial holding company: 

(a)  does not make use of the authorisation within 12 months, expressly renounces 

the authorisation or has sold all its subsidiaries that are institutions; 

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

means; 

(c)  no longer fulfils the conditions under which authorisation was granted; 

(d) 

is subject to requirements laid down in this Directive and in Regulation (EU) 
No.  575/2013  on  a  consolidated  basis  and  no  longer  meets  the  prudential 
requirements  set  out  in  Parts  Three,  Four  or  Six  of  Regulation  (EU)  No 
575/2013 or imposed under Article 104(1)(a) or Article 105 of this Directive or 
can no longer be relied on to fulfil its obligations towards its creditors; 

(e) 

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

(f) 

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

Article 21b 
Intermediate EU parent undertaking  

Member  States  shall  require  that  two  or  more  institutions  in  the  Union,  which  are 
part  of  the  same  third  country  group,  have  an  intermediate  EU  parent  undertaking 
that is established in the Union. 

Member States shall require an intermediate EU parent undertaking in the Union to 
obtain authorisation as an institution in accordance with Article 8, or as a financial 
holding  company  or  mixed  financial  holding  company  in  accordance  with  Article 
21a. 

Paragraphs 1 and 2 shall not apply where the total value of assets in the Union of the 
third country group is lower than EUR 30 billion, unless the third country group is a 
non-EU G-SII. 

For  the  purposes  of  this  Article,  the  total  value  of  assets  in  the  Union  of  the  third 
country group shall include the following: 

(a) 

(b) 

the total  assets  of each institution in the  Union  of  the  third  country  group,  as 
resulting from their consolidated balance sheet; and 

the  total  assets  of  each  branch  of  the  third  country  group  authorised  in  the 
Union. 

5. 

Competent authorities shall notify to the EBA every authorisation granted pursuant 
to paragraph 2. 

EN 

23 

   EN 

6. 

EBA shall publish on its website the list of all intermediate EU parent undertakings 
that have been granted authorisation in the Union. 

Competent  authorities  shall  ensure  that  there  is  a  single  intermediate  EU  parent 
undertaking for all institutions that are part of the same third country group.".  

(10) 

In Article 23(1), point (b) is replaced by the following: 

"(b) the reputation, knowledge, skills and experience, as set out in Article 91(1), of 
any  member  of  the  management  body  who  will  direct  the  business  of  the  credit 
institution as a result of the proposed acquisition;". 

(11) 

In Article 47, paragraph 2 is replaced by the following: 

"2. The competent authorities shall notify the EBA of the following: 

(a) 

(b) 

all  authorisations  for  branches  granted  to  credit  institutions  having  their  head 
office in a third country; 

total  assets  and  liabilities  of  the  authorised  branches  of  credit  institutions 
having their head office in a third country, as periodically reported. 

EBA shall publish on its website the list of all third country branches authorised to 
operate  in  the  Member  States,  indicating  the  Member  State  and  the  total  assets  of 
each branch.". 

(12) 

In Article 75, paragraph 1 is replaced by the following: 

"1. Competent authorities shall collect the information disclosed in accordance with 
the criteria for disclosure established in points (g), (h), (i) and (k) of Article 450(1) of 
Regulation (EU) No 575/2013 and shall use it to benchmark remuneration trends and 
practices. The competent authorities shall provide EBA with that information." 

(13) 

Article 84 is replaced by the following: 

1. 

2. 

3. 

4. 

"Article 84 
Interest risk arising from non-trading book activities 

Competent authorities shall ensure that institutions implement internal systems or use 
the  standardised  methodology  to  identify,  evaluate,  manage  and  mitigate  the  risks 
arising from potential changes in interest rates that affect both the economic value of 
equity and the net interest income of an institution's non-trading book activities.  

Competent authorities shall ensure that institutions implement systems to assess and 
monitor the risks arising from potential changes in credit spreads that affect both the 
economic value of equity and the net interest income of an institution's non-trading 
book activities.  

Competent authorities may require institutions to use the standardised methodology 
referred to in paragraph 1 where the internal systems implemented by the institutions 
for the purposes of evaluating the risks referred to in paragraph 1 are not satisfactory.  

EBA shall develop draft regulatory technical standards to specify, for the purposes of 
this  Article,  the  details  of  a  standardised  methodology  that  institutions  may  use  for 
the purpose of evaluating the risks referred to in paragraph 1.  

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission  by 
[one year after entry into force]. 

EN 

24 

   EN 

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

5. 

EBA shall issue guidelines to specify: 

(a) 

(b) 

(c) 

(d) 

the  criteria  for  the  evaluation  by  an  institution's  internal  system  of  the  risks 
referred to in paragraph 1; 

the criteria for the identification, management and mitigation by institutions of 
the risks referred to in paragraph 1; 

the  criteria  for  the  assessment  and  monitoring  by  institutions  of  the  risks 
referred to in paragraph 2; 

the  criteria  for  determining  which  the  internal  systems  implemented  by  the 
institutions for the purposes of paragraph 1 are not satisfactory as referred to in 
paragraph 3; 

EBA shall issue those guidelines by [one year after entry into force]." 

(14) 

In Article 85, paragraph (1) is replaced by the following: 

"1.  Competent  authorities  shall  ensure  that  institutions  implement  policies  and 
processes to evaluate and manage the exposure to operational risk, including model 
risk and risks resulting from outsourcing, and to cover low-frequency high-severity 
events. Institutions shall articulate what constitutes operational risk for the purposes 
of those policies and procedures.". 

(15) 

Article 92 is amended as follows: 

(a)  paragraph 1 is deleted. 

(b) 

in paragraph 2, the introductory phrase is replaced by the following: 

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

(16) 

Article 94 is amended as follows: 

(a) 

in paragraph 1(l), point (i) is replaced by the following: 

"(i)  shares  or,  subject  to  the  legal  structure  of  the  institution  concerned,  equivalent 
ownership interests; or share-linked instruments or,  subject to the legal structure of 
the institution concerned, equivalent non-cash instruments;". 

(b) 

the following paragraphs are added: 

"3. By way of derogation from paragraph 1, the principles set out in points (l), (m) 
and in the second subparagraph of point (o) shall not apply to: 

(a) 

an institution the value of the assets of which is on average equal to or less than 
EUR  5  billion  over  the  four-year  period  immediately  preceding  the  current 
financial year;  

EN 

25 

   EN 

(b) 

a  staff  member  whose  annual  variable  remuneration  does  not  exceed  EUR 
50.000  and  does  not  represent  more  than  one  fourth  of  the  staff  member's 
annual total remuneration. 

By  way  of  derogation  from  point  (a),  a  competent  authority  may  decide  that 
institutions whose total asset value is below the threshold referred to in point (a) are 
not subject to the derogation because of the nature and scope of their activities, their 
internal organisation or, if applicable, the characteristics of the group to which they 
belong.  

By  way  of  derogation  from  point  (b),  a  competent  authority  may  decide  that  staff 
members  whose  annual  variable  remuneration  is  below  the  threshold  and  share 
referred to in point (b) are not subject to the derogation because of national market 
specificities  in  terms  of  remuneration  practices  or  because  of  the  nature  of  the 
responsibilities and job profile of those staff members. 

4. By [four years after entry into force of this Directive], the Commission, in close 
cooperation with EBA, shall review and report on the application of paragraph 3 and 
shall submit that report to the European Parliament and to the Council together with 
a legislative proposal if appropriate. 

5.  EBA  shall  adopt  guidelines  facilitating  the  implementation  of  paragraph  3  and 
ensuring its consistent application." 

(17) 

(18) 

In Article 97(1) point (b) is deleted. 

Article 98 is amended as follows: 

(a) 

in paragraph (1), point (j) is deleted; 

(b)  paragraph 5 is replaced by the following: 

"5. The review and evaluation performed by competent authorities shall include the 
exposure  of  institutions  to  the  interest  rate  risk  arising  from  non-trading  book 
activities. Supervisory measures shall be required at least in the case of institutions 
whose economic value of equity referred to in Article 84(1) declines by more than 15 
%  of  their  Tier  1  capital  as  a  result  of  a  sudden  and  unexpected  change  in  interest 
rates as set out in any of six supervisory shock scenarios applied to interest rates.". 

(c) 

the following paragraph 5a is inserted: 

"5a. EBA shall develop draft regulatory technical standards to specify for the purpose 
of paragraph 5: 

(a) 

(b) 

six  supervisory  shock  scenarios  to  be  applied  to  interest  rates  for  every 
currency; 

common modelling and parametric assumptions that institutions shall reflect in 
their calculation of the economic value of equity under paragraph 5; 

(c)  whether supervisory measures shall also be required in the case of a decline in 
the  institutions'  net  interest  income  referred  to  in  Article  84(1)  as  a  result  of 
potential changes in interest rates. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission  by 
[one year after entry into force]. 

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

EN 

26 

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(19) 

(20) 

(21) 

In Article 99(2), point (b) is deleted. 

Article 103 is deleted. 

Article 104 is amended as follows: 

(a)  paragraphs 1 and 2 are replaced by the following: 

"1. For the purposes of Article 97, Article 98(4), Article 101(4) and Article 102 and 
the application of Regulation (EU) No 575/2013, competent authorities shall have at 
least the following powers: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

(i) 

(j) 

(k) 

to  require  institutions  to  have  additional  own  funds  in  excess  of  the 
requirements  set  out  in  Regulation  (EU)  No  575/2013,  under  the 
conditions laid down in Article 104a; 

to require the reinforcement of the arrangements, processes, mechanisms 
and strategies implemented in accordance with Articles 73 and 74; 

to  require  institutions  to  present  a  plan  to  restore  compliance  with 
supervisory  requirements  pursuant  to  this  Directive  and  to  Regulation 
(EU)  No  575/2013  and  set  a  deadline  for  its  implementation,  including 
improvements to that plan regarding scope and deadline; 

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

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

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

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

to require institutions to use net profits to strengthen own funds; 

to restrict or prohibit distributions or interest payments by an institution 
to  shareholders,  members  or  holders  of  Additional  Tier  1  instruments 
where  the  prohibition  does  not  constitute  an  event  of  default  of  the 
institution; 

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

to  impose  specific  liquidity  requirements,  including  restrictions  on 
maturity mismatches between assets and liabilities; 

(l) 

to require additional disclosures on an ad hoc basis only 

2.  For  the  purposes  of  paragraph  1(j),  competent  authorities  may  only  impose 
additional  or  more  frequent  reporting  requirements  on  institutions  where  the 
information to be reported is not duplicative and one of the following conditions is 
met: 

(a) 

either of the conditions referred to in points (a) and (b) of Article 102(1) 
has been met;  

EN 

27 

   EN 

(b) 

(c) 

the competent authority deems reasonable to impose those requirements 
to gather the evidence referred in Article 102(1)(b):  

the additional information is required for the duration of the institution's 
supervisory examination programme in accordance with Article 99. 

Information that may be required from institutions shall be deemed as duplicative as 
referred  to  in  the  first  subparagraph  where  the  same  or  substantially  the  same 
information is already available to the competent authority, may be produced by the 
competent  authority  or  obtained  through  other  means  than  a  requirement  on  the 
institution to report it. Where information is available to the competent authority in a 
different format or level of granularity than the additional information to be reported, 
the  competent  authority  shall  not  require  the  additional  information  where  that 
different  format  or  granularity  does  not  prevent  it  from  producing  substantially 
similar information."; 

(b)  paragraph 3 is deleted. 

(22) 

The following Articles 104a, 104b and 104c are inserted: 

"Article 104a 
Additional own funds requirement 

1. 

Competent authorities shall impose the additional own funds requirement referred to 
in Article 104(1)(a) only where, on the basis of the reviews carried out in accordance 
with  Articles  97  and  101,  they  ascertain  any  of  the  following  situations  for  an 
individual institution: 

(a) 

(b) 

(c) 

(d) 

the institution is exposed to risks or elements  of  risks  that  are  not  covered  or 
not sufficiently covered by the own funds requirements set out in Parts Three, 
Four,  Five  and  Seven  of  Regulation  (EU)  No  575/2013  as  specified  in 
paragraph 2; 

the institution does not meet the requirements set out in Articles 73 and 74 of 
this Directive or in Article 393 of Regulation (EU) No 575/2013 and the sole 
application of other administrative measures is unlikely to sufficiently improve 
the arrangements, processes, mechanisms and strategies within an appropriate 
timeframe; 

the  adjustments  referred  to  in  Article  98(4)  are  deemed  to  be  insufficient  to 
enable  the  institution  to  sell  or  hedge  out  its  positions  within  a  short  period 
without incurring material losses under normal market conditions; 

the evaluation carried out in accordance to Article 101(4) reveals that the non-
compliance with the requirements for the application of the permitted approach 
will likely lead to inadequate own funds requirements; 

(e) 

the  institution  repeatedly  fails  to  establish  or  maintain  an  adequate  level  of 
additional own funds as set out in Article 104b(1).  

The  competent  authorities  shall  not  impose  the  additional  own  funds  requirement 
referred to in Article 104(1)(a) to cover macroprudential or systemic risks. 

2. 

For the purposes of paragraph 1(a), risks or elements of risk shall only be considered 
as not covered or not sufficiently covered by the own funds requirements set out in 
Parts  Three,  Four,  Five  and  Seven  of  Regulation  (EU)  No  575/2013  where  the 
amounts,  types  and  distribution  of  capital  considered  adequate  by  the  competent 

EN 

28 

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authority  following  the  supervisory  review  of  the  assessment  carried  out  by 
institutions in accordance with the first paragraph of Article 73, are higher than the 
institution's own funds requirements set out in Parts Three, Four, Five and Seven of 
Regulation (EU) No 575/2013.  

For  the  purposes  of  the  first  subparagraph,  the  capital  considered  adequate  shall 
cover all material risks or elements of such risks that are not subject to a specific own 
funds  requirement.  This  may  include  risks  or  elements  of  risks  that  are  explicitly 
excluded  from  the  own  funds  requirements  set  out  in  Parts  Three,  Four,  Five  and 
Seven of Regulation (EU) No 575/2013.  

Interest rate risk arising from non-trading positions shall only be considered material 
when the economic value of equity declines by more than 15 % of the institution Tier 
1  capital  as  a  result  of  any  of  the  six  supervisory  shock  scenarios  referred  to  in 
Article  98(5)  that  are  applied  to  interest  rates  or  any  other  case  identified  by  EBA 
pursuant to Article 98(5)(c).  

The risks referred to in paragraph 1(a) shall not include risks for which this Directive 
or Regulation (EU) No 575/2013 provide a transitional treatment, or risks which are 
subject to grandfathering provisions. 

Competent authorities shall determine the level of the additional own funds required 
under  Article  104(1)(a)  as  the  difference  between  the  capital  considered  adequate 
pursuant to paragraph 2 and the own funds requirements set out in Parts Three, Four, 
Five and Seven of Regulation (EU) No 575/2013.  

The institution shall meet the additional own funds requirement referred to in Article 
104(1)(a) with own funds instruments subject to the following conditions: 

(a) 

at  least  three  quarters  of  the  additional  own  funds  requirement  shall  be  met 
with Tier 1 capital; 

(b) 

at least three quarters of the Tier 1 capital shall be composed of CET 1 capital. 

Own funds used to meet the additional own funds requirement referred to in Article 
104(1)(a) shall not be used towards meeting any of the own funds requirements set 
out in points (a), (b) and (c) of Article 92(1) of Regulation (EU) No 575/2013 or the 
combined buffer requirement defined in Article 128(6) of this Directive. 

By  way  of  derogation  from  the  second  subparagraph,  own  funds  used  to  meet  the 
additional  own  funds  requirement  referred  to  in  Article  104(1)(a)  imposed  by 
competent authorities to address risks or elements of risks not sufficiently covered by 
Article 92(1)(d) of Regulation (EU) No 575/2013 may be used to meet the combined 
buffer requirement referred to in Article 128(6) of this Directive. 

The competent authority shall duly justify in writing to each institution the decision 
to  impose  an  additional  own  funds  requirement  under  Article  104(1)(a),  at least  by 
giving a clear account of the full assessment of the elements referred to in paragraphs 
1 to 4. This includes, in the case set out in paragraph 1(d), a specific statement of the 
reasons  for  which  the  imposition  of  capital  guidance  is  no  longer  considered 
sufficient. 

EBA shall develop draft regulatory technical standards specifying how the risks and 
elements of risks referred to in paragraph 2 shall be measured. 

EBA  shall  ensure  that  the  draft  regulatory  technical  standards  are  proportionate  in 
light of:  

3. 

4. 

5. 

6. 

EN 

29 

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(a) 

(b) 

the implementation burden on institutions and competent authorities; and  

the  possibility  that  the  general  higher  level  of  capital  requirements  that  apply 
where  institutions  do  not  use  internal  models  may  justify  the  imposition  of 
lower  capital  requirements  when  assessing  risks  and  elements  of  risks  in 
accordance with paragraph 2. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission  by 
[one year after entry into force]. 

Power  is  conferred  on  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in paragraph 6 in accordance with Articles 10-14 of Regulation (EU) No 
1093/2010. 

Article 104b 
Guidance on additional own funds 

Pursuant to the strategies and processes referred to in Article 73 and after consulting 
the  competent  authority,  institutions  shall  establish  an  adequate  level  of  own  funds 
that  is  sufficiently  above  the  requirements  set  out  in  Parts  Three,  Four,  Five  and 
Seven  of  Regulation  (EU)  No  575/2013  and  in  this  Directive,  including  the 
additional  own  funds  requirements  imposed  by  the  competent  authorities  in 
accordance with Article 104(1)(a), in order to ensure that: 

(a) 

(b) 

cyclical  economic  fluctuations  do  not  lead  to  a  breach  of  those  requirements; 
and  

the  institution’s  own  funds  can  absorb,  without  breaching  the  own  funds 
requirements set out in Parts Three, Four, Five and Seven of Regulation (EU) 
No  575/2013  and  the  additional  own  funds  requirements  imposed  by  the 
competent  authorities  in  accordance  with  Article  104(1)(a),  potential  losses 
identified pursuant to the supervisory stress test referred to in Article 100. 

Competent  authorities  shall  regularly  review  the  level  of  own  funds  set  by  each 
institution  in  accordance  with  paragraph  1  taking  into  account  the  outcome  of  the 
reviews  and  evaluations  carried  out  in  accordance  with  Articles  97  and  101, 
including the results of stress tests referred to in Article 100. 

Competent  authorities  shall  communicate  to  institutions  the  outcome  of  the  review 
provided  for  in  paragraph  2.  Where  appropriate,  competent  authorities  may 
communicate  to  institutions  any  expectation  for  adjustments  to  the  level  of  own 
funds established in accordance with paragraph 1. 

Competent authorities shall not communicate to institutions any expectation for the 
adjustments  to  the  level  of  own  funds  pursuant  to  paragraph  3  in  cases  where 
additional own funds requirement shall be imposed pursuant to Article 104a. 

An institution that fails to meet the expectations set out in paragraph 3 shall not be 
subject to the restrictions referred to in Article 141. 

Article 104c 
Cooperation with resolution authorities 

Competent  authorities  shall  consult  resolution  authorities  prior  to  determining  any 
additional  own  funds  requirement  referred  to  in  Article  104(1)(a)  and  prior  to 
communicating  to  institutions  any  expectation  for  adjustments  to  the  level  of  own 

1. 

2. 

3. 

4. 

5. 

1. 

EN 

30 

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2. 

(23) 

(24) 

(25) 

funds  in  accordance  with  Article  104b.  For  these  purposes,  competent  authorities 
shall provide resolution authorities with all available information. 

Competent  authorities  shall  inform  the  relevant  resolution  authorities  about  the 
additional  own  funds  requirement  imposed  on  institutions  pursuant  to  Article 
104(1)(a)  and  about  any  expectation  for  adjustments  to  the  level  of  own  funds 
communicated to institutions in accordance with Article 104b.". 

In Article 105, point (d) is deleted. 

In Article 108, paragraph 3 is deleted. 

In Article 109, paragraphs 2 and 3 are replaced by the following 

"2.  Competent  authorities  shall  require  the  parent  undertakings  and  subsidiaries 
subject to this Directive to meet the obligations set out in Section II of this Chapter 
on  a  consolidated  or  sub-consolidated  basis,  to  ensure  that  the  arrangements, 
processes and mechanisms required by Section II of this Chapter are consistent and 
well-integrated  and  that  any  data  and  information  relevant  to  the  purpose  of 
supervision can be produced. In particular, they shall ensure that parent undertakings 
and  subsidiaries  subject  to  this  Directive  implement  these  arrangements,  processes 
and  mechanisms  in  their  subsidiaries  not  subject  to  this  Directive,  including  those 
established  in  offshore  financial  centres.  Those  arrangements,  processes  and 
mechanisms shall also be consistent and well-integrated and those subsidiaries shall 
also  be  able  to  produce  any  data  and  information  relevant  to  the  purpose  of 
supervision. 

3.  Obligations  resulting  from  Section  II  of  this  Chapter  concerning  subsidiary 
undertakings,  not  themselves  subject  to  this  Directive,  shall  not  apply  if  the  EU 
parent institution can demonstrate to the competent authorities that the application of 
Section  II  is  unlawful  under  the  laws  of  the  third  country  where  the  subsidiary  is 
established." 

(26) 

Article 113 is replaced by the following: 

"Article 113 
Joint decisions on institution-specific prudential requirements 

1. 

The  consolidating  supervisor  and  the  competent  authorities  responsible  for  the 
supervision  of  subsidiaries  of  an  EU  parent  institution  or  an  EU  parent  financial 
holding company or EU parent mixed financial holding company in a Member State 
shall do everything within their power to reach a joint decision: 

(a)  on  the  application  of  Articles  73  and  97  to  determine  the  adequacy  of  the 
consolidated level of own funds held by the group of institutions with respect 
to its financial situation and risk profile and the required level of own funds for 
the  application  of  Article  104(1)(a)  to  each  entity  within  the  group  of 
institutions and on a consolidated basis; 

(b)  on measures to address any significant matters and material findings relating to 
liquidity supervision including relating to the adequacy of the organisation and 
the treatment of risks as required pursuant to Article 86 and relating to the need 
for institution-specific liquidity requirements in accordance with Article 105 of 
this Directive; 

EN 

31 

   EN 

(c)  on  any  expectation  for  adjustments  to  the  consolidated  level  of  own  funds  in 

accordance with Article 104b(3). 

2. 

The joint decisions referred to in paragraph 1 shall be reached: 

3. 

(a) 

(b) 

(c) 

for the purposes of paragraph 1(a), within four months after submission by the 
consolidating supervisor of a report containing the risk assessment of the group 
of institutions in accordance with Article 104a to the other relevant competent 
authorities; 

for the purposes of paragraph 1(b), within four months after submission by the 
consolidating supervisor of a report containing the assessment of the liquidity 
risk profile of the group of institutions in accordance with Articles 86 and 105; 

for the purposes of paragraph 1(c), within four months after submission by the 
consolidating supervisor of a report containing the risk assessment of the group 
of institutions in accordance with Article 104b. 

The  joint  decisions  shall  also  duly  consider  the  risk  assessment  of  subsidiaries 
performed by relevant competent authorities in accordance with Articles 73, 97, 104a 
and 104b. 

The joint decisions referred to in points (a) and (b) of paragraph 1 shall be set out in 
documents  containing  full  reasons  which  shall  be  provided  to  the  EU  parent 
institution  by  the  consolidating  supervisor.  In  the  event  of  disagreement,  the 
consolidating supervisor shall at the request of any of the other competent authorities 
concerned consult EBA. The consolidating supervisor may consult EBA on its own 
initiative. 

In the absence of such a joint decision between the competent authorities within the 
time periods referred to in paragraph 2, a decision on the application of Articles 73, 
86  and  97,  Article  104(1)(a),  Article  104b  and  Article  105  shall  be  taken  on  a 
consolidated  basis  by  the  consolidating  supervisor  after  duly  considering  the  risk 
assessment of subsidiaries performed by relevant competent authorities. If, at the end 
of  the  time  periods  referred  to  in  paragraph  2,  any  of  the  competent  authorities 
concerned  has  referred  the  matter  to  EBA  in  accordance  with  Article  19  of 
Regulation (EU) No 1093/2010, the consolidating supervisor shall defer its decision 
and await any decision that EBA may take in accordance with Article 19(3) of that 
Regulation, and shall take its decision in conformity with the decision of EBA. The 
time  periods  referred  to  in  paragraph  2  shall  be  deemed  the  conciliation  periods 
within  the  meaning  of  Regulation  (EU)  No  1093/2010.  EBA  shall  take  its  decision 
within  1  month.  The  matter  shall  not  be  referred  to  EBA  after  the  end  of  the  four 
month period or after a joint decision has been reached. 

The decision on the application of Articles 73, 86 and 97, Article 104(1)(a), Article 
104b  and  Article  105  shall  be  taken  by  the  respective  competent  authorities 
responsible for supervision of subsidiaries of an EU parent credit institution or a EU 
parent financial holding company or EU parent mixed financial holding company on 
an  individual  or  sub-consolidated  basis  after  duly  considering  the  views  and 
reservations  expressed  by  the  consolidating  supervisor.  If,  at  the  end  of  any  of  the 
time periods referred to in paragraph 2, any of the competent authorities concerned 
has referred the matter to EBA in accordance with Article 19 of Regulation (EU) No 
1093/2010,  the  competent  authorities  shall  defer  their  decision  and  await  any 
decision that EBA shall take in accordance with Article 19(3) of that Regulation, and 
shall  take  their  decision  in  conformity  with  the  decision  of  EBA.  The  time  periods 

EN 

32 

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referred  to  in  paragraph  2  shall  be  deemed  the  conciliation  periods  within  the 
meaning of that Regulation. EBA shall take its decision within 1 month. The matter 
shall not be referred to EBA after the end of the four-month or after a joint decision 
has been reached. 

The  decisions  shall  be  set  out  in  a  document  containing  full  reasons  and  shall  take 
into  account  the  risk  assessment,  views  and  reservations  of  the  other  competent 
authorities  expressed  during  the  time  periods  referred  to  in  paragraph  2.  The 
document  shall  be  provided  by  the  consolidating  supervisor  to  all  competent 
authorities concerned and to the EU parent institution. 

Where  EBA  has  been  consulted,  all  the  competent  authorities  shall  consider  its 
advice, and explain any significant deviation therefrom. 

4. 

The  joint  decisions  referred  to  in  paragraph  1  and  the  decisions  taken  by  the 
competent  authorities  in  the  absence  of  a  joint  decision  referred  to  in  paragraph  3 
shall be recognised as determinative and applied by the competent authorities in the 
Member States concerned. 

The  joint  decisions  referred  to  in  the  paragraph  1  and  any  decision  taken  in  the 
absence  of a joint decision  in accordance with paragraph 3, shall be updated on an 
annual  basis  or,  in  exceptional  circumstances,  where  a  competent  authority 
responsible for the supervision of subsidiaries of an EU parent institution or, an EU 
parent  financial  holding  company  or  EU  parent  mixed  financial  holding  company 
makes a written and fully reasoned request to the consolidating supervisor to update 
the decision on the application of Article 104(1)(a), Article 104b and Article 105. In 
the  latter  case,  the  update  may  be  addressed  on  a  bilateral  basis  between  the 
consolidating supervisor and the competent authority making the request. 

5. 

EBA  shall  develop  draft  implementing  technical  standards  to  ensure  uniform 
conditions of application of the joint decision process referred to in this Article, with 
regard  to  the  application  of  Articles  73,  86  and  97,  Article  104(1)(a),  Article  104b 
and Article 105 with a view to facilitating joint decisions. 

EBA  shall  submit  those  draft  implementing  technical  standards  to  the  Commission 
by 1 July 2014. 

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

(27) 

In the first subparagraph of Article 116, the following sentence is added: 

"Colleges  of  supervisors  shall  also  be  established  where  all  subsidiaries  of  an  EU 
parent  institution,  an  EU  parent  financial  holding  company  or  EU  parent  mixed 
financial holding company are located in a third country." 

(28) 

In Article 119, paragraph 1 is replaced by the following: 

"1.  Subject  to  Article  21a,  Member  States  shall  adopt  any  measures  necessary  to 
include  financial  holding  companies  and  mixed  financial  holding  companies  in 
consolidated supervision." 

(29) 

In Article 120, paragraph 2 is replaced by the following: 

"2.  Where  a  mixed  financial  holding  company  is  subject  to  equivalent  provisions 
under this Directive and under Directive 2009/138/EC, in particular in terms of risk-
based  supervision,  the  consolidating  supervisor  may,  in  agreement  with  the  group 

EN 

33 

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supervisor  in  the  insurance  sector,  apply  to  that  mixed  financial  holding  company 
only the provisions of the Directive relating to the most significant financial sector as 
defined in Article 3(2) of Directive 2002/87/EC.". 

(30) 

In Article 131, paragraph 1 is replaced by the following 

"1.  Member  States  shall  designate  the  authority  in  charge  of  identifying,  on  a 
consolidated  basis,  global  systemically  important  institutions  (G-SIIs),  and,  on  an 
individual, sub-consolidated or consolidated basis, as applicable, other systemically 
important institutions (O-SIIs), which have been authorised within their jurisdiction. 
That authority shall be the competent authority or the designated authority. Member 
States may designate more than one authority.  

G-SIIs shall be any of the following: 

(a) 

(b) 

a  group  headed  by  an  EU  parent  institution,  an  EU  parent  financial  holding 
company, or an EU parent mixed financial holding company; or  

an  institution  that  is  not  a  subsidiary  of  an  EU  parent  institution,  of  an  EU 
parent financial holding company or of an EU parent mixed financial holding 
company.  

O-SIIs  can  either  be  a  group  headed  by  an  EU  parent  institution,  an  EU  parent 
financial holding company, or an EU parent mixed financial holding company or an 
institution.". 

(31) 

In Article 141 paragraphs 1 to 6 are replaced by the following: 

"1.  An  institution  that  meets  the  combined  buffer  requirement  shall  not  make  a 
distribution in connection with Common Equity Tier 1 capital to an extent that would 
decrease  its  Common  Equity  Tier  1  capital  to  a  level  where  the  combined  buffer 
requirement is no longer met. 

2.  An  institution  that  fails  to  meet  the  combined  buffer  requirement  shall  calculate 
the  Maximum  Distributable  Amount  ('MDA')  in  accordance  with  paragraph  4  and 
shall notify the competent authority of that MDA. 

Where  the  first  subparagraph  applies,  the  institution  shall  not  undertake  any  of  the 
following actions before it has calculated the MDA: 

(a)  make a distribution in connection with Common Equity Tier 1 capital; 

(b) 

create  an  obligation  to  pay  variable  remuneration  or  discretionary  pension 
benefits or pay variable remuneration if the obligation to pay was created at a 
time when the institution failed to meet the combined buffer requirements; 

(c)  make payments on Additional Tier 1 instruments. 

3.  Where  an  institution  fails  to  meet  or  exceed  its  combined  buffer  requirement,  it 
shall  not  distribute  more  than  the  MDA  calculated  in  accordance  with  paragraph  4 
through any action referred to in points (a), (b) and (c) of the second subparagraph of 
paragraph 2. An institution shall not take any of the action referred to in points (a) or 
(b) of the second subparagraph of paragraph 2before having made the payments due 
on Additional Tier 1 instruments. 

4.  Institutions  shall  calculate  the  MDA  by  multiplying  the  sum  calculated  in 
accordance with paragraph 5 by the factor determined in accordance with paragraph 
6. The MDA shall be reduced by any of the actions referred to in point (a), (b) or (c) 
of the second subparagraph of paragraph 2. 

EN 

34 

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5. The sum to be multiplied in accordance with paragraph 4 shall consist of: 

interim  profits  not  included  in  Common  Equity  Tier  1  capital  pursuant  to 
Article 26(2) of Regulation (EU) No 575/2013 that have been generated since 
the  most  recent  decision  on  the  distribution  of  profits  or  any  of  the  actions 
referred to in point (a), (b) or (c) of the second subparagraph of paragraph 2 of 
this Article; 

(a) 

plus 

(a)  year-end  profits  not  included  in  Common  Equity  Tier  1  capital  pursuant  to 
Article 26(2) of Regulation (EU) No 575/2013 that have been generated since 
the  most  recent  decision  on  the  distribution  of  profits  or  any  of  the  actions 
referred to in point (a), (b) or (c) of the second subparagraph of paragraph 2 of 
this Article; 

minus 

(b) 

(amounts which would be payable by tax if the items specified in points (a) and 
(b) of this paragraph were to be retained. 

6. The factor shall be determined as follows: 

(a)  where the Common Equity Tier 1 capital maintained by the institution which is 
not  used  to  meet  any  of  the  own  funds  requirements  under  Article  92a  and 
points (a), (b) and (c) of Article 92(1) of Regulation (EU) No 575/2013, under 
Articles 45c and 45d of Directive 2014/59/EU and under Article 104(1)(a) of 
this  Directive  expressed  as  a  percentage  of  the  total  risk  exposure  amount 
calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013, 
is  within  the  first  (that  is,  the  lowest)  quartile  of  the  combined  buffer 
requirement, the factor shall be 0; 

(b)  where the Common Equity Tier 1 capital maintained by the institution which is 
not  used  to  meet  any  of  the  own  funds  requirements  under  Article  92a  and 
points (a), (b) and (c) of Article 92(1) of Regulation (EU) No 575/2013, under 
Articles 45c and 45d of Directive 2014/59/EU and under Article 104(1)(a) of 
this  Directive,  expressed  as  a  percentage  of  the  total  risk  exposure  amount 
calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013, 
is  within  the  second  quartile  of  the  combined  buffer  requirement,  the  factor 
shall be 0,2; 

(c)  where the Common Equity Tier 1 capital maintained by the institution which is 
not used to meet the own funds requirements under Article 92a and points (a), 
(b)  and  (c)  of  Article  92(1)  of  Regulation  (EU)  No  575/2013,  under  Articles 
45c  and  45d  of  Directive  2014/59/EU  and  under  Article  104(1)(a)  of  this 
Directive,  expressed  as  a  percentage  of  the  total  risk  exposure  amount 
calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013, 
is within the third quartile of the combined buffer requirement, the factor shall 
be 0,4; 

(d)  where the Common Equity Tier 1 capital maintained by the institution which is 
not used to meet the own funds requirements under Article 92a and points (a), 
(b)  and  (c)  of  Article  92(1)  of  Regulation  (EU)  No  575/2013,  under  Articles 
45c  and  45d  of  Directive  2014/59/EU  and  under  Article  104(1)(a)  of  this 
Directive,  expressed  as  a  percentage  of  the  total  risk  exposure  amount 
calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013, 

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35 

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is  within  the  fourth  (that  is,  the  highest)  quartile  of  the  combined  buffer 
requirement, the factor shall be 0,6; 

The  lower  and  upper  bounds  of  each  quartile  of  the  combined  buffer 

requirement shall be calculated as follows:  

(cid:1838)(cid:1867)(cid:1875)(cid:1857)(cid:1870) (cid:1854)(cid:1867)(cid:1873)(cid:1866)(cid:1856) (cid:1867)(cid:1858) (cid:1869)(cid:1873)(cid:1853)(cid:1870)(cid:1872)(cid:1861)(cid:1864)(cid:1857) =

(cid:1829)(cid:1867)(cid:1865)(cid:1854)(cid:1861)(cid:1866)(cid:1857)(cid:1856) (cid:1854)(cid:1873)(cid:1858)(cid:1858)(cid:1857)(cid:1870) 
(cid:1870)(cid:1857)(cid:1869)(cid:1873)(cid:1861)(cid:1870)(cid:1857)(cid:1865)(cid:1857)(cid:1866)(cid:1872)
4

× ((cid:1843)(cid:1866) − 1) 

(cid:1847)(cid:1868)(cid:1868)(cid:1857)(cid:1870) (cid:1854)(cid:1867)(cid:1873)(cid:1866)(cid:1856) (cid:1867)(cid:1858) (cid:1869)(cid:1873)(cid:1853)(cid:1870)(cid:1872)(cid:1861)(cid:1864)(cid:1857) =

(cid:1829)(cid:1867)(cid:1865)(cid:1854)(cid:1861)(cid:1866)(cid:1857)(cid:1856) (cid:1854)(cid:1873)(cid:1858)(cid:1858)(cid:1857)(cid:1870) 
(cid:1870)(cid:1857)(cid:1869)(cid:1873)(cid:1861)(cid:1870)(cid:1857)(cid:1865)(cid:1857)(cid:1866)(cid:1872)
4

× (cid:1843)(cid:1866) 

"Qn" indicates the ordinal number of the quartile concerned." 

(32) 

The following Article 141a is inserted: 

"Article 141a 
Failure to meet the combined buffer requirement 

1. 

An institution shall be considered as failing to meet the combined buffer requirement 
for  the  purposes  of  Article  141  where  it  does  not  have  own  funds  and  eligible 
liabilities  in  an  amount  and  of  the  quality  needed  to  meet  at  the  same  time  the 
requirement defined in Article 128(6) and each of the following requirements in: 

(a)  Article  92(1)(a)  of  Regulation  (EU)  No  575/2013  and  the  requirement  in 

Article 104(1)(a) of this Directive; 

(b)  Article  92(1)(b)  of  Regulation  (EU)  No  575/2013  and  the  requirement  in 

Article 104(1)(a) of this Directive; 

(c)  Article  92(1)(c)  of  Regulation  (EU)  No  575/2013  and  the  requirement  in 

Article 104(1)(a) of this Directive; 

(d)  Article  92a  of  Regulation  (EU)  No  575/2013  and  in  Articles  45c  and  45d  of 

Directive 2014/59/EU. 

2. 

By  way  of  derogation  from  paragraph  1,  an  institution  shall  not  be  considered  as 
failing  to  meet  the  combined  buffer  requirement  for  the  purposes  of  Article  141 
where all the following conditions are met: 

(a) 

(b) 

the institution meets the combined buffer requirement defined in Article 128(6) 
and each of the requirements referred to in points (a), (b) and (c) of paragraph 
1; 

the  failure  to  meet  the  requirements  referred  to  in  point  (d) of  paragraph  1  is 
exclusively  due  to  the  inability  of  the  institution  to  replace  liabilities  that  no 
longer  meet  the  eligibility  or  maturity  criteria  laid  down  in  Articles  72b  and 
72c of Regulation (EU) No 575/2013; 

(c) 

the failure to meet the requirements referred to in point (d) of paragraph 1 does 
not last longer than 6 months.". 

(33) 

In Article 145, the following points (j) and (k) are added: 

"(j)  supplementing  Articles  2(5a)  and  2(5b)  by  establishing,  on  the  basis  of  the 
information available to it  

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36 

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(i)  whether institutions or categories of institutions, meet the conditions set 

out in those Articles; or  

(ii)  whether institutions or categories of institutions, have ceased to meet the 

conditions laid down in those; 

(k) amendments to the list set out in Article 2(5):  

(i) 

by  deleting  institutions  or  categories  of  institutions,  where  the  relevant 
institution or category of institutions has ceased to exist;  

(ii)  by  making  the  necessary  changes  where  the  name  of  the  relevant 

institution or category of institutions has changed.". 

(34) 

(35) 

In Article 146, point (a) is deleted. 

In Article 161, the following paragraph 10 is added: 

"10.  By  31  December  2023,  the  Commission  shall  review  and  report  on  the 
implementation  and  application  of  the  supervisory  powers  referred  to  in  points  (j) 
and (l) of Article 104(1) and submit a report to the European Parliament and to the 
Council. ". 

Article 2 
Transposition 

1. 

Member  States  shall  adopt  and  publish,  by  [one  year  after  entry  into  force  of  this 
Directive] at the latest, the laws, regulations and administrative provisions necessary 
to comply with this Directive. They shall forthwith communicate to the Commission 
the text of those provisions. 

They shall apply those provisions from [one year + 1 day after entry into force of this 
Directive].  However,  the  provisions  necessary  to  comply  with  the  amendments  set 
out in points (13) and (18) of Article 1 containing amendments to Articles 84 and 98 
of  Directive  2013/36/EU  shall  apply  from  [two  years  after  entry  into  force  of  this 
Directive]. 

When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication. Member States shall determine how such reference is to be made. 

2. 

Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 

Article 3 
Entry into force 

This Directive shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

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37 

   EN 

Article 4 
Addressees 

This Directive is addressed to the Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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38 

   EN