EUROPEAN
COMMISSION

Brussels, 29.1.2014
COM(2014) 43 final
2014/0020 (COD)

Proposal for a
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
on structural measures improving the resilience of EU credit institutions

(Text with EEA relevance)
{SWD(2013) 30 final}
{SWD(2013) 31 final}

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EXPLANATORY MEMORANDUM
1.

CONTEXT OF THE PROPOSAL

Since the start of the financial crisis, the European Union ("Union") and its Member States
have engaged in a fundamental overhaul of financial regulation and supervision.
In the area of banking, the Union has initiated a number of reforms to create a safer, sounder,
more transparent and responsible financial system that works for the economy and society as
a whole. However, the Union banking sector remains large in absolute (EUR42.9 trillion) and
relative terms (nearly 350 per cent of Union GDP). The individual size of the largest Union
banks by assets is roughly similar or close to the GDP of its home country. These banks still
remain too-big-to-fail, too-big-to-save and too-complex-to-resolve.
In this context, Commissioner Barnier announced in November 2011 the setting up of a HighLevel Expert Group ("HLEG") with a mandate to assess the need for structural reform of the
Union banking sector, chaired by Erkki Liikanen, Governor of the Bank of Finland.1 The
report was presented in October 2012 stating that bank restructuring is necessary to
complement existing reforms and recommending the mandatory separation of proprietary
trading and other high-risk trading activities into a separate legal entity within the banking
group. The separation would be mandatory only for banks where the activities to be separated
amounted to a significant share of the banks business.2 On 3 July 2013, by large majority the
European Parliament ("EP") adopted an own initiative report called "Reforming the structure
of the EU banking sector"3 that welcomes structural reform measures at Union level to tackle
concerns on “Too-Big-To-Fail” ("TBTF") banks4.
This proposal represents a critical part of the Union response to tackling the TBTF dilemma.
It aims at preventing the residual unmanaged risks in the Union banking system from
materialising. It will curtail the artificial expansion of banks' balance sheets, particularly those
activities of a purely speculative nature, thereby reducing the risk that tax payers have to step
in to save failing banks, and reducing the cost and complexity of any resolution when
required. It is also an important complement to the Directive establishing a framework for the
recovery and resolution of credit institutions and investment firms ("BRRD").5
Structural reform has so far not been part of the international reform agenda agreed by the
G20. However, a number of jurisdictions around the world have enacted or proposed
measures to address the above concerns. In the last years a number of Member States have
engaged in reform initiatives (Germany, France, the United Kingdom and Belgium). The
United States has recently adopted the so-called "Volcker rule" prohibiting proprietary trading
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For a mandate and list of members, see http://ec.europa.eu/internal_market/bank/docs/highlevel_expert_group/mandate_en.pdf
The other recommendations of HLEG included (2) that a separation of additional activities may be
necessary conditional on the recovery and resolution plan; (3) the use of bail-in as a resolution tool; (4)
a review of capital requirements on trading assets and real estate related loans; and (5) measures aimed
at strengthening the governance and control of banks so as to strengthen bank scrutiny and market
discipline.
European Parliament (McCarthy 2013), Reforming the structure of the EU banking sector, 2013/2021
(INI)
Too-big-to-fail is meant to cover too-important-to-fail, too-interconnected-to-fail, and too-complex-tofail as well. See also European Commission (2013b).
Directive xx/xxxx/EU of the European Parliament and of the Council establishing a framework for the
recovery and resolution of credit institutions and investments firms and amending Council Directives
77/91/EEC and 82/891/EC, Directives 2001/27/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC
and 2011/35/EC and Regulation (EU) No 1093/2010 of the European Parliament and of the Council (OJ
L--xxx

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by banks. Furthermore, international organisations have called for a global debate on bank
structures and business models. In view of the proliferation of reform initiatives in this
context, and with a view to prevent overlapping or incompatible measures affecting
internationally active banks, the G20 leaders at the last summit in Saint Petersburg called on
the Financial Stability Board to assess cross-border consistencies and global financial stability
implications of structural banking reforms. This proposal takes careful note of emerging
international coordination efforts and recognises the need to prevent opportunities for
regulatory arbitrages.
This proposal is accompanied by a directly related proposal to tackle another conduit for
financial contagion – namely, interconnectedness among market participants including
systemic banks through opaque trading links in securities financing transactions. The Green
Paper on shadow banking presented by the Commission on 19 March 20126 recognises that
any reinforced banking regulation could drive a substantial part of banking activities beyond
the boundaries of traditional banking and towards “shadow banking” defined as "the system
of credit intermediation that involves entities and activities outside the regular banking
system"7. On 20 November 2012, the EP adopted a resolution on shadow banking8 where it
underlined the need to ensure greater transparency in the structure and activities of financial
institutions as well as the need for supervisors to have knowledge of the level of shadow
banking activities like repurchase agreements and securities lending. On 4 September 2013,
the Commission highlighted in its communication on shadow banking9 that strengthening
transparency of securities financing transactions, such as repurchase agreements and securities
lending, other equivalent transactions and re-hypothecation will be essential to monitor the
risks associated with interconnectedness, excessive leverage and pro-cyclical behaviours.
The remainder of this explanatory memorandum is confined to a presentation of the present
proposal relating to structural separation of credit institutions.
2.

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND
IMPACT ASSESSMENTS

Stakeholders have been consulted on a number of occasions. The HLEG met with a variety of
stakeholders during its mandate and held a public consultation targeting banks, corporate
customers and retail clients and their associations.10 The Commission also held a public
stakeholder consultation in October 2012.11 Structural bank reform and the need for a
coordinated action at Union level have also been subject to discussions with Member States.
In the course of preparing the Impact Assessment ("IA"), the Commission held an additional
public stakeholder consultation in the spring of 2013 inviting banks to model the impact of

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COM(2012) 102 final, http://ec.europa.eu/internal_market/bank/docs/shadow/green-paper_en.pdf
This definition has been developed by the FSB Report of 27 October 2011 on strengthening oversight
and regulation of shadow banking, http://www.financialstabilityboard.org/publications/r_111027a.pdf
P7_TA(2012)0427, http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P7-TA-20120427&language=EN
Communication from the Commission to the Council and the European Parliament on Shadow Banking
– Addressing New Sources of Risk in the Financial Sector, COM(2013), 614 final
Consultation by the HLEG on reforming the structure of the EU banking sector, May/June 2012.
http://ec.europa.eu/internal_market/consultations/2012/banking_sector_en.htm. The HLEG received 83
responses, the large majority of which were from banks and other financial institutions, followed by
retail customers and their associations and, lastly, corporate customers.
Consultation on the recommendations of the HLEG the structure of the EU banking sector,
http://ec.europa.eu/internal_market/consultations/2012/hleg-banking_en.htm. Out of the 89 replies
received, almost half came from the banking industry.

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different types of structural reform options.12 The 500 consultation responses highlighted the
divisions among banks, on the one hand, and consumers and non-bank financials on the other
hand. The former were to an overwhelming extent against structural separation; the latter
were largely in favour. The views of other categories were more balanced.
An Inter-service Steering Group ("ISG") on bank structural reform was established in March
2013 with representatives from the Directorate Generals COMP, ECFIN, EMPL, ENTR,
JUST, MARKT, SG, SJ, TAXUD and the JRC. This ISG met in March, April and September
2013 and supported the work on the IA.
The draft IA was submitted to the Impact Assessment Board (the “IAB”) of the Commission
on 19 September 2013 and discussed with the IAB on 16 October 2013. The IAB provided its
recommendations for improvement on 18 October 2013. The main recommendations were: (i)
to improve the problem description and baseline scenario; (ii) to better describe and explain
the reform options; (iii) to better assess impacts and better demonstrate the effectiveness of
the retained reform options; (iv) to better present stakeholder views; and (v) to add a glossary.
The Commission services resubmitted a revised IA on 18 December 2013, alongside with a
separate document explaining to the IAB how the IAB recommendations had been
incorporated. The IAB subsequently issued a positive opinion on 15 January 2014, whilst
providing recommendations for further improvements, asking in particular to strengthen the
analysis of the justification of the proposed measures, alternative reform options, impact, and
stakeholder views with respect to the transparency measures that had only been introduced in
the resubmission of the final IA. The IAB also recommended further strengthening the
structural reform options presentation and the assessment of the impact and effectiveness of
the retained reform options. The final version of the IA has significantly expanded the
analysis of the transparency reform measures and has further elaborated on the other two IAB
recommendations.
On the overall costs and benefits of this proposal, the impact assessment carried out in the
context of this proposal has been subject to qualitative analysis and quantitative modelling.
The impact assessment concluded that implicit subsidies are significant, while they depend on
the size of the bank and the level of interconnectedness of the bank. While taking due account
of the clear benefits derived from the diversity of banking models in Europe, this proposal
intends to ensure that the delicate balance between the prevention of systemic risks and the
financing of sustainable economic growth is maintained.
3.

LEGAL ELEMENTS OF THE PROPOSAL

3.1.

Legal basis and subsidiarity

The legal basis for this Regulation is Article 114(1) of the Treaty of the Functioning of the
European Union (the "TFEU"), which allows the adoption of measures for the approximation
of national provisions aiming at the establishment and good functioning of the internal
market.
Uniform rules on banks’ structures will enhance financial stability within the Union, better
integrate financial markets, facilitate the orderly resolution and recovery of the group,

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"Consultation by the Commission on the Structural Reform of the Banking Sector,"
The
http://ec.europa.eu/internal_market/consultations/2013/banking-structural-reform/index_en.htm.
Commission services received more than 500 replies. These came from banks and other financial
institutions, corporate clients, investors, public authorities, and consumer associations and individualsresponses from individuals (439) and consumer associations (11).

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enhance the cross-border provision of services and the establishment in other Member States,
reduce distortions of competition and prevent regulatory arbitrage.
Some Member States have proposed or adopted structural reform measures for their national
banking systems. Inconsistent national legislation that does not pursue the same policy goals,
in a manner that is compatible and equivalent with the mechanisms envisaged in this
Regulation, increases chances that capital movements and investment decisions are distorted.
Without a Union-wide approach banks will be forced to adapt their structure and operation
along national boundaries, thereby making them even more complex and increasing
fragmentation.
Inconsistent national legislation would also undermine efforts to achieve a single rulebook
applicable throughout the internal market and the creation of an effective banking union, as it
would have the effect of limiting the effectiveness of the Single Supervisory Mechanism
("SSM")13 and a future Single Resolution Mechanism ("SRM").14 Inconsistent legislation also
makes the management of cross-border institutions more difficult and costly.
Harmonisation at Union level envisaged in this Regulation can ensure that Union banking
groups, many of which operate in several Member States, are regulated by a common
framework of structural requirements thereby ensuring a level playing field, reducing
regulatory complexity, avoiding unwarranted compliance costs for cross-border activities,
promoting further integration in the Union market place and contributing to the elimination of
regulatory arbitrage opportunities.
Consistent with the goals of contributing to the functioning of the internal market, a Member
State that has previously adopted legislation prohibiting credit institutions taking deposits
from individuals and SMEs from engaging in the activity of dealing in investments as a
principal and hold trading assets may make a request to the Commission to grant a derogation
from the provisions laid down in Chapter III (“separation of certain trading activities”) for a
credit institution that is subject to the national law compatible with provisions of that Chapter.
This would allow Member States that are found to have already implemented “superequivalent” measures to avoid costly alignment of existing, effective provisions with these
provisions. To ensure that the impact of the national legislation does not jeopardize the aim or
functioning of the internal market, the goals of the national legislation must be the same as
those set out in this proposal; and the national legal, supervisory and enforcement
arrangements must ensure that the credit institution comply with legally binding requirements
that are compatible with this proposal.
This proposal takes due account of the rapidly evolving financial markets and financial
innovation as well the evolution of the Union regulatory and supervisory frameworks. In
order to ensure the effective and consistent supervision and the development of the single rule
book in banking, this proposal envisages an important role for the European Banking
Authority ("EBA"). The EBA will be consulted by competent authorities when taking certain
decisions as set out in this proposal and will prepare draft regulatory and implementing
technical standards, and submit reports to the Commission. This is particular important in the
situations described in Articles 9, 10, 13 and 21.

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Established through the adoption of Council Regulation (EU) No 1024/2013 of 15 October 2013
conferring specific tasks on the European Central Bank concerning policies relating to the prudential
supervision of credit institutions (OJ L287, 29.10.2013, p. 63).
Established through the adoption of [SRM].

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3.2.

Proportionality

Under the principle of proportionality set out in Article 5 of the TEU, the content and form of
Union action must not exceed what is necessary to achieve the objectives of the Treaties.
The proposed Regulation prohibits large Union credit institutions and banking groups from
carrying out proprietary trading and certain related activities.
Ownership separation has the potential to be the most effective structural reform tool in terms
of achieving the specific objectives of facilitating resolution and limiting moral hazard,
conflicts of interest and capital and resource misallocation. The potential benefits of
prohibiting proprietary trading activities would be particularly strong in terms of mitigation of
risks, complexity, interconnectedness and conflicts of interest. However in view of the
challenges derived from the difficult distinction between proprietary trading and other similar
trading activities, market making in particular, a narrow definition of activities subject to the
prohibition underpins the proportionality of this measure. Excluding smaller banks from the
scope of the prohibition is justified because of the disproportionate effects such a prohibition
could entail for those banks if forced to divest parts of their portfolios.
The proposed Regulation also requires the competent authority to undertake a systematic
review of certain other activities – namely, market-making, investment in/sponsoring of
securitization and trading of certain derivatives. These have been identified as the activities
where there is the greatest risk that proprietary trading could be performed in contravention of
the prohibition, and which could give rise to risks for the stability of the core credit institution
and the Union financial system. The competent authority is granted the power to require the
separation. This power to require separation is not imposed as a blanket measure: instead, the
competent authority is allowed to exercise judgment, using a set of harmonised metrics. Only
under certain circumstances, when risks exceed levels to be defined using harmonised
metrics, is the competent authority required to enforce separation. This approach is considered
to be proportionate because separation is imposed only under certain conditions, and
following an in-depth review of the impact of those activities on the risk profile and behaviour
of the core credit institution.
The proposed Regulation targets large credit institutions and banking groups. Given that the
main purpose of the proposal is to deal with residual systemic risks in the Union financial
system, extending the measures of the proposal to all credit institutions would be
disproportionate and could lead to non-justified costs, in particular for smaller credit
institutions.
Credit institutions falling below the thresholds of the proposed Regulation are not subject to
the structural measures foreseen. This implies that Member States or the competent authorities
may decide to impose similar measures also on smaller credit institutions.
The proposed Regulation respects the fundamental rights and observes the principles
recognised in the Charter of Fundamental Rights of the European Union, notably the right to
the protection of personal data, the freedom to conduct a business, the right to property, the
right to an effective remedy and to a fair trial, and has to be implemented in accordance with
those rights and principles.
3.3.

Detailed explanation of the proposal

This section briefly outlines the main components of this regulation.
3.3.1.

Objectives and subject matter of structural separation

The proposed Regulation aims at enhancing financial stability in the Union by means of
structural reform of large banks, thus complementing financial regulatory reforms already

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undertaken at Union level. Article 1 outlines the aim and the objectives underpinning the
reform.
Article 2 outlines the subject matter, which is to lay down rules on structural changes on
TBTF banks by imposing a proprietary trading prohibition and potential separation of certain
trading activities.
3.3.2.

Scope

Article 3 states that the proposed Regulation applies to banks that meet certain criteria and
exceed certain thresholds:
(1)

The requirements apply to the European banks that are identified as being of global
systemic importance.

(2)

The requirements apply to banks that exceed the following thresholds for three
consecutive years: (a) the bank's total assets exceed €30 billion;15 and (b) the bank's
total trading assets and liabilities exceed €70 billion or 10 percent of their total
assets.

Articles 22 and 23 provide further detail on how "trading activities" (for the purposes of
competent authority review leading to possible separation from the credit institution) should
be calculated. Given that the focus of bank structural reform is on banking activities, Article
23(2) states that for financial conglomerates, the activities of insurance and non-financial
undertakings must not be included in the calculation.
The proposed Regulation will apply to Union credit institutions and their EU parents, their
subsidiaries and branches, including in third countries. It will also apply to branches and
subsidiaries in the Union of banks established in third countries. Such a broad territorial scope
is justified to ensure a level playing field and avoid the transfer of activities outside the Union
to circumvent these requirements. However, foreign subsidiaries of Union banks and EU
branches of foreign banks could be exempted if they are subject to equivalent separation rules
(Articles 4 and 27). Article 4(2) foresees another potential exemption: supervisors have been
granted the power to exempt from separation foreign subsidiaries of groups with autonomous
geographic decentralised structure pursuing a "Multiple Point of Entry" resolution strategy.
By applying the separation requirement throughout the global corporate group irrespective of
geographic location, the potential for banks circumventing separation by locating particular
activities outside the Union is eliminated. Furthermore, by supplementing the broad territorial
coverage with a third country equivalence regime the possible extraterritorial concerns of
third country jurisdictions are mitigated. By requiring foreign banks to separate their
operations in the Union, a level playing field in the internal market is also ensured and thereby
the risk of unfair competition is minimised.
3.3.3.

Prohibition of proprietary trading (Chapter II)

Article 6(1) of the proposed Regulation provides that a credit institution and entities within
the same group must not engage in proprietary trading in financial instruments and
commodities. While consistent data at Union level with regard to specific banking activity is
scarce, available evidence suggests that proprietary trading represents a limited part of banks’
balance sheets.16 However, the same evidence also highlights that such trading was significant
prior to the crisis and, in the absence of regulatory intervention, there is no guarantee that it
may not increase again in the future.
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This is the threshold for "significant institutions" used in Regulation (EU) No 1024/2013.
See Annex 6 of the IA.

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It is difficult to define proprietary trading and distinguish it from market-making. According
to Article 5(4), which defines proprietary trading narrowly, desks’, units’, divisions’ or
individual traders’ activities specifically dedicated to taking positions for making a profit for
own account, without any connection to client activity or hedging the entity’s risk, would be
prohibited.
Article 6(2) clarifies that where credit institutions falling within the scope of the proposed
Regulation as defined in Articles 3 and 4, operate dedicated structures for buying and selling
money market instruments for the purposes of cash management, they are not captured by this
prohibition. Trading in Union government bonds is also exempted from the prohibition
(Article 6(2)(a)) to prevent possible negative consequences in these crucial markets. This
exemption mirrors the one provided for trading in government bonds in relation to the
assessment of activities (Article 8(2)).
While in principle a proprietary trading prohibition could extend to all banks, it is proposed to
apply the ban only to banks referred to in Article 3. To prevent banks from circumventing the
prohibition by e.g. owning or investing in hedge funds, Article 6(1)(b) states that banks
subject to the proprietary trading prohibition are also prohibited from investing in or holding
shares in hedge funds (or certificates/derivatives linked to these), or entities that engage in
proprietary trading or sponsor hedge funds. Unleveraged and closed-ended funds– mainly
private equity, venture capital and social entrepreneurship funds – are exempted from this
prohibition, given their role in supporting the financing of the real economy (Article 6(3)).
Credit institutions covered by these prohibitions will be able to continue providing
banking/custody services to hedge funds.
3.3.4.

Potential separation of certain trading activities (Chapter III)

Banks engage in a number of other trading and investment banking activities, including
market making, lending to venture capital and private equity funds, investment and
sponsorship of risky securitisation, sales and trading of derivatives etc. Banking groups will
be allowed to continue engaging in those other activities subject to the discretion of the
competent authority who will be obliged to review trading activities and will have the power
(as well as an obligation under certain circumstances) to separate a subset of activities (market
making, risky securitisation, complex derivatives) if certain metrics are exceeded. This aims
at avoiding the risk that banks would circumvent the ban in Article 6 by engaging in hidden
proprietary trading activities and that the non-prohibited trading activities become too
significant or highly leveraged. The basic principle of the proposed Regulation is that "deposit
taking entities" within banking groups can only engage in these activities as long as the
competent authority does not decide that they need to be performed within a distinct "trading
entity."
3.3.4.1. Scope of activities subject to separation
Article 8 defines trading activities broadly by stating that it means activities other than e.g.
taking deposits eligible for deposit insurance, lending, retail payment services and a number
of other activities. Article 8(2) furthermore exempts Union sovereign bonds from the
obligation to review and power to separate. Such an exemption is consistent with the current
practice of zero risk weights in the Capital Requirement Regulation and Directive17 (the
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Regulation (EU) No 575/2013/EU of the European Parliament and of the Council on prudential
requirements for credit institutions and investments firms and amending Regulation (EU) No 648/2012,
OJ L 176, 27.6.2013, p.1; Directive 2013/36/EU of the European Parliament and of the Council on
access to the activity of credit institutions and the prudential supervision of credit institutions and
investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and
2006/49/EC, OJ L 176, 27.6.2013, p. 338.

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"CRR"/"CRDIV"). Nevertheless, Article 8(3) states that the Commission may by delegated
acts extend the scope of the exemption to non-Union sovereign bonds if they conform to
certain conditions.
3.3.4.2. Duty to review activities
The proposed Regulation will oblige competent authority to review trading activities of banks
exceeding the thresholds, including in particular three activities that are either especially close
to proprietary trading, and hence susceptible to feature hidden proprietary trading (market
making), or have played a key role during the financial crisis (e.g. investing and sponsoring
activities in risky securitisation and trading in derivatives other than those that are specifically
allowed for the purpose of prudent risk management). Competent authorities will assess these
activities in light of certain metrics to be adjusted using supervisory data. The metrics indicate
relative size, leverage, complexity, profitability, associated market risk, as well as
interconnectedness (Article 9(2)). To ensure that these metrics are consistently measured and
applied, Article 9(4) entrusts the EBA with developing a binding implementing technical
standard to be adopted by the Commission.
3.3.4.3. Power to separate
Article 10(1) states that the competent authorities must require separation if the trading
activities of banks (market making, investing in and sponsoring risky securitisation and
trading in certain derivatives) and the related risks are found to exceed certain thresholds and
meet certain conditions linked to the metrics. If the bank demonstrates to the satisfaction of
the competent authority that these activities do not endanger the Union financial stability,
taking into account the objectives of the proposed Regulation, the competent authority may
decide not to require separation.
Article 10(2) states that a competent authority can require separation of a particular trading
activity if it considers that the activity in question threatens the financial stability of the bank
or of the Union, taking into account any of the objectives of the proposed Regulation.
The competent authority should consult the EBA prior to taking decisions referred to in
Article 10 and should notify the EBA of its final decision.
Article 10(5) empowers the Commission to adopt a delegated act specifying the level not to
be exceeded for each metrics as well as the conditions, including the number of metrics that
need to be exceeded, for the separation to apply. In addition, the Commission will be
empowered to specify which type of securitisation is not considered to pose a threat to
financial stability according to a list of criteria and could therefore be carried out by a core
credit institution.
3.3.4.4. Management of banks’ own risks ("treasury management")
If further separation materialises, Article 11(1) clarifies that the deposit-taking bank is still
allowed to manage its own risk. Nevertheless, as treasury management may give rise to
proprietary trading and given that liquidity management involves taking certain speculative
positions, this should be associated with certain safeguards.
3.3.4.5. Provision of risk management services to clients
Article 12 clarifies that the core credit institution is still able to sell certain risk management
products (i.e., derivatives) to non-financial, non-banking clients. However, the sale of
derivatives to clients exposes the bank to more risks, which may notably make its resolution
more complex and therefore it will be subject to different degrees of safeguards and control.
To address these risks, it is stated that interest rate, foreign exchange, credit, emission
allowance and commodity derivatives eligible for central counterparty clearing can be sold by

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the core credit institution to its non-financial clients, insurance undertakings and institutions
for occupational retirement provision, but only to hedge interest rate, foreign exchange and
credit risk, commodity risk and emission allowance risk and subject to caps on the resulting
position risk. Recognising certain derivatives further encourages banks to standardise those
derivatives and is thus in line with the policy objectives of the European Market Infrastructure
Regulation ("EMIR").18
3.3.4.6. Rules on separation of trading activities
If competent authorities require the separation of trading activities above and these activities
will remain within the banking group, then these would have to be transferred to a distinct
legal entity (a "trading entity"). The legal, economic, governance and operational links of that
entity with the rest of the group would have to be curtailed to ensure effective separation.
Article 13(3) states that if separation occurs, the group must be organised into homogeneous
functional subgroups constituted on the one side by core credit institutions and on the other
trading entities. Article 13(5) to (13) and of the proposed Regulation state the conditions that
will apply to ensure a strong separation in legal, economic, governance and operational terms.
After separation, the prudential requirements outlined in those Articles should apply on an
individual or sub-consolidated basis to the respective sub-groups.
Furthermore, Article 13(11) provides for derogations to the CRR as regards waiving certain
requirements to ensure that prudential requirements (own funds, liquidity and disclosure)
apply on a sub-consolidated basis to the respective subgroups. Groups that qualify as mutuals,
cooperatives, savings institutions or the like do engage in risky trading activities and therefore
are subject to the requirements in this proposal. However, these institutions have a very
specific ownership and economic structure and play an important role in financing the local
and regional economy. Imposing some of the rules related to separation could require farreaching changes to the structural organisation of such entities. This could be disproportionate
to the benefits if it would require these entities to completely change their corporate identity.
Thus, the competent authority may decide to allow core credit institutions that meet the
requirements set out in Article 49(3)(a) or (b) of Regulation (EU) No 575/2013 to hold capital
instruments or voting rights in a trading entity where the competent authority considers that
holding such capital instruments or voting rights is indispensable for the functioning of the
group and that has taken sufficient measures in order to appropriately mitigate the relevant
risks.
Another fundamental part of the economic separation between the core credit institution and
the trading entity are the large exposure restrictions. Articles 14 to 17 accordingly lay down
rules to that effect. These rules refer to limits on both intra and extra-group, individual and
aggregate large exposures.
3.3.4.7. Separation plan
The actual separation of trading activities will be preceded by an obligation for relevant banks
to submit a "separation plan" to competent authorities. Article 18 provides that this plan
should be approved by the competent authority, with the latter having the possibility to
require changes to the plan as appropriate, or setting out its own plan for separation in case of
inaction by the relevant bank.

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Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 (OJ L201,
27.7.2012, p.1).

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3.3.4.8. Cooperation between competent authorities and resolution authorities
The BRRD foresees that resolution authorities may, as part of their resolution planning,
require banks to make structural changes (e.g. to their legal and organisational structure) if the
resolution authority believes that it is necessary to address impediments to effective
resolution. While the proposed regulation addresses a broader range of objectives going
beyond resolution, it is necessary to ensure that the respective authorities liaise with each
other. Article 19 accordingly states that if a competent authority decides to require separation,
it must notify resolution authorities (Article 19(1)) and take into account any ongoing or preexisting resolvability assessment by resolution authorities as per Articles 13 and 13a of the
BRRD. Likewise, the resolution authority must take into account the notification of a
separation decision by a competent authority when assessing the resolvability of an
institution.
3.3.4.9. Prohibited activities for the trading entity
Article 20 provides that there are certain activities that the trading entity may not carry out.
Those are taking deposits eligible for protection under deposit guarantee schemes and provide
retail payment services as defined in the Payment Services Directive19.
3.3.4.10. Derogation
Whereas the proposed Regulation sets out uniform rules on the aim, objectives and
instruments of structural reform of banks in the internal market, Article 21 allows for a
possible derogation from the separation requirements in Chapter III for credit institutions
being covered by national legislation having an equivalent effect as the provisions of Chapter
III of the proposal. This derogation will be granted by the Commission upon request of the
Member State in question after the Member State has obtained a positive opinion from the
competent authority responsible for the supervision of the banks for which the derogation is
requested. To qualify for the derogation, the national primary legislation must have been
adopted before 29 January 2014 and fulfil the criteria laid down in Article 21(1). This means
that the aim of the national law, its material scope and provisions referring to the legal,
economic and governance separation of the deposit taking entity must be similar to those in
the proposed Regulation.
3.3.5.

Compliance: entities and competent authorities (Chapter V)

Most banks covered by Article 3 are operating in several countries both by means of branches
and subsidiaries. They are supervised by several different authorities, both home (parent,
subsidiaries in different Member States) and host (branches). In order to ensure an effective
and efficient group level application of structural reform, Article 26 gives the final say over
structural separation decisions to the lead supervisor with responsibility over the consolidated
group. This is the approach chosen by some national reform proposals. The lead supervisor
should, prior to making any decisions, consult the home supervisor of significant group
subsidiaries.
3.3.6.

Relationships with third countries (Chapter VI)

Article 27 provides for the adoption of delegated acts to recognise third country structural
reforms as being equivalent when they meet certain conditions.

19

EN

Directive of the European Parliament and of the Council of 13 November 2007 on payment services in
the internal market (OJ L 319 of 5.12.2007, p. 1–36).

11

EN

3.3.7.

Administrative sanctions and measures (Chapter VII)

Chapter VII reflects current horizontal policies in the financial services sector concerning
sanctions and measures. It defines a common approach to the main breaches of the proposed
Regulation and lays down the administrative sanctions and measures that the competent
authorities should be empowered to apply in case of the main breaches.
3.3.8.

Report and Review (Chapter VIII)

The adoption of this proposal would constitute the first set of structural separation rules
applying to banks at Union level. It is therefore important to assess whether the rules
described above have proved to be an effective and efficient way of achieving the aim and the
objectives of structural reform. To that end the final Chapter outlines a number of areas where
the Commission will review the framework in both general and specific terms (Article 34).
For example, reviews will focus on the application of thresholds, the application and the
effectiveness of the prohibition foreseen in Article 6, the scope of activities subject to the
review, and the suitability and application of the metrics.
3.3.9.

Timeline

The following indicates the principal dates relating to the adoption and implementation of the
key provisions of this proposal, on the basis that the final text of the Regulation is adopted by
the EP and Council by June 2015:
•

the Commission adopts the required delegated acts for implementation of key
provisions by 1 January 2016;

•

the list of covered and derogated banks is published 1 July 2016 and on a yearly
basis thereafter;

•

the prohibition on proprietary trading becomes effective on 1 January 2017;

•

the provisions on separation of trading activities from credit institutions will become
effective on July 1, 2018.

4.

BUDGETARY IMPLICATIONS:

The financial and budgetary impact of the proposal is indicated in the legislative financial
statement attached.

EN

12

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2014/0020 (COD)
Proposal for a
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
on structural measures improving the resilience of EU credit institutions
(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the Functioning of the European Union, and in particular
Article 114 thereof,
Having regard to the proposal from the European Commission,
After transmission of the draft legislative act to the national Parliaments,
Having regard to the opinion of the European Economic and Social Committee20,
Having regard to the opinion of the European Central Bank21,
After consulting the European Data Protection Supervisor22,
Acting in accordance with the ordinary legislative procedure,
Whereas:
(1)

The Union’s financial system includes over 8,000 banks of different sizes, corporate
structures and business models, a few of which exist in the form of large banking
groups carrying out an all-encompassing set of activities. Those groups comprise a
complex web of legal entities and intra-group relationships. They are highly connected
to each other through interbank borrowing and lending and through derivatives
markets. The impact of possible failures of these large banks can be extremely
widespread and significant.

(2)

The financial crisis has demonstrated the interconnected nature of Union banks and the
resulting risk to the financial system. As a result, resolution has to date been
challenging, involved entire banking groups, as opposed to only the non-viable parts,
and has relied significantly on public support.

(3)

Since the start of the financial crisis, the Union and its Member States have engaged in
a fundamental overhaul of bank regulation and supervision including the setup of the
first steps towards a banking union. Given the depth of the financial crisis and the need
to ensure that all banks can be resolved, there was a need to assess whether more
measures are needed to further reduce the probability and impact of failure of the
largest and most complex banks. A High-Level Expert Group ("HLEG") chaired by
Erkki Liikanen was mandated for this purpose. The HLEG recommended the

20

OJ C […], […], p. […].
OJ C […], […], p. […].
OJ C […], […], p. […].

21
22

EN

13

EN

mandatory separation of proprietary trading and other high-risk trading activities into a
separate legal entity within the banking group for the largest and most complex banks.
(4)

The on-going banking regulatory reform agenda will significantly increase the
resilience of both individual banks and the banking sector as a whole. However, a
limited subset of the largest and most complex Union banking groups still remain toobig-to-fail, too-big-to-save and too-complex to manage, supervise and resolve.
Structural reform is therefore an important complement to other regulatory initiatives
and measures, as it would offer one way of more directly addressing intra-group
complexity, intra-group subsidies, and excessive risk-taking incentives. A number of
Member States have adopted or are considering adopting measures to introduce
structural reform in their respective banking systems.

(5)

On 3 July 2013, the European Parliament called on the Commission to provide for a
principles-based approach to structural reform of the European banking sector.

(6)

The legal basis for this Regulation is Article 114(1) of the Treaty of the Functioning of
the European Union (TFEU), which allows the adoption of measures for the
approximation of national provisions aiming at the establishment and good functioning
of the internal market.

(7)

Inconsistent national legislation that does not pursue the same policy goals in a
manner that is compatible and equivalent with the mechanisms envisaged in this
Regulation increases chances that capital movements decisions of market participants
are negatively affected because different and inconsistent rules and practices may
significantly raise operational costs for credit institutions that are operating across
borders and hence lead to a less efficient allocation of resources and capital compared
to a situation where capital movement is subject to similar and consistent rules. For the
same reasons, different and inconsistent rules will also negatively affect decisions of
market participants relating to where and how to provide cross-border financial
services. Different and inconsistent rules may also unintentionally encourage
geographic arbitrage. The movement of capital and the provision of cross-border
services are essential elements for the proper functioning of the Union internal market.
Without a Union-wide approach credit institutions will be forced to adapt their
structure and operations along national boundaries, thereby making them even more
complex and leading to increased fragmentation of the internal market.

(8)

Inconsistent national legislation also undermines efforts to achieve a single rulebook
applicable throughout the internal market. Such a development would also have the
effect of limiting the effectiveness of the Single Supervisory Mechanism23 (SSM)
because the European Central Bank (ECB) would have to apply a set of different and
inconsistent legislation to credit institutions that are under its supervision which will
increase supervisory costs and complexity. Inconsistent legislation also makes the
management of cross-border credit institutions more difficult and costly, notably in
terms of ensuring compliance with divergent and possibly inconsistent rules.
Similarly, the Single Resolution Mechanism24 (SRM) would have to resolve credit
institutions subject to potentially different national requirements regarding their
organisational and operational structure.

23

Established by Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on
the European Central Bank concerning policies relating to the prudential supervision of credit
institutions (OJ L287, 29.10.2013, p. 63).
Established by [SRM].

24

EN

14

EN

EN

(9)

Harmonisation at Union level can ensure that Union banking groups, many of which
operate in several Member States, are regulated by a common framework of structural
requirements thereby avoiding competitive distortions, reducing regulatory
complexity, avoiding unwarranted compliance costs for cross-border activities,
promoting further integration in the Union market place and contributing to the
elimination of regulatory arbitrage opportunities.

(10)

Consistent with the goals of contributing to the functioning of the internal market, it
should be possible to grant a derogation for a credit institution from the provisions on
separation of certain trading activities where a Member State has adopted national
primary legislation prior to 29 January 2014 (including secondary legislation
subsequently adopted) prohibiting credit institutions, which take deposits from
individuals and Small and Medium sized Enterprises (SMEs) from dealing in
investments as a principal and holding trading assets. The Member State should
therefore be entitled to make a request to the Commission to grant a derogation from
the provisions on separation of certain trading activities for a credit institution that is
subject to the national legislation compatible with those provisions. This would allow
Member States that already have primary legislation in place, the effects of which are
equivalent to and consistent with this Regulation, to avoid alignment of existing,
effective provisions. To ensure that the impact of that national legislation, as well as of
subsequent implementing measures, does not jeopardise the aim or functioning of the
internal market, the aim of that national legislation and related supervisory and
enforcement arrangements must be able to ensure that credit institutions that take
eligible deposits from individuals and from SMEs comply with legally binding
requirements that are equivalent and compatible with the provisions provided in this
Regulation. The competent authority supervising the credit institution subject to the
national legislation in question should be responsible for providing an opinion that
should accompany the request for the derogation.

(11)

According to Article 4 (1)(i) of the Council regulation (EU) No 1024/201325 the ECB
is empowered to carry out supervisory tasks in relation to structural changes required
from credit institutions to prevent financial stress or failure when those tasks are
explicitly stipulated by Union law for competent authorities.

(12)

This Regulation intends to reduce excessive risk taking and rapid balance sheet
growth, difficult resolution, difficult monitoring, conflicts of interest, competition
distortions, and misallocation of capital. It also intends to shield institutions carrying
out activities that deserve a public safety net from losses incurred as a result of other
activities. Necessary rules should therefore contribute to refocusing banks on their
core relationship-oriented role of serving the real economy, and avoid that bank capital
be excessively allocated to trading at the expense of lending to the non-financial
economy.

(13)

This Regulation will apply only to credit institutions and groups with trading activities
that meet thresholds set out in the Regulation. This is in line with the explicit focus on
the limited subset of the largest and most complex credit institutions and groups that in
spite of other legislative acts remain too-big-to-fail, too-big-to-save and too complex
to manage, supervise and resolve. The provisions of this Regulation should
accordingly only apply to those Union credit institutions and groups that either are

25

Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European
Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287,
29.10.2013, p. 63).

15

EN

deemed of global systemic importance or exceed certain relative and absolute
accounting-based thresholds in terms of trading activity or absolute size. Member
States or the competent authorities may decide to impose similar measures also on
smaller credit institutions.

EN

(14)

The territorial scope of this Regulation should be wide to ensure that competition is
not distorted and circumvention is prevented. However, if the subsidiaries of EU
parents in third countries or EU branches of credit institutions established in third
countries falling within the scope of this Regulation are subject to measures that in the
opinion of the Commission are deemed to have equivalent effect to those in this
Regulation, they should be exempted. Competent authorities should be able also to
exempt foreign subsidiaries of groups with an EU parent if those are autonomous and
if the impact of their failure would have limited effects on the group as a whole.

(15)

Credit institutions and entities belonging to the same group, should be prohibited from
buying and selling financial instruments and commodities for their own account, as
this activity has limited or no added value for the public good and is inherently risky.

(16)

It is difficult to distinguish proprietary trading from market making. To overcome this
difficulty, the prohibition of proprietary trading should be limited to desks, units,
divisions or individual traders specifically dedicated to proprietary trading. Banks
should not be able to circumvent the prohibition by running or benefiting from
investments in non-bank entities engaging in proprietary trading.

(17)

To ensure that the entities subject to the prohibition of proprietary trading can continue
to contribute toward the financing of the economy, they should be allowed to invest in
a closed list of funds. This exhaustive list should comprise closed-ended and
unleveraged alternative investment funds (AIFs), European Venture Capital Funds,
European Social Entrepreneurship Funds and European Long Term Investment Funds.
To ensure that these funds do not endanger the viability and financial soundness of the
credit institutions that invest in them, it is essential that closed-ended and unleveraged
AIFs in which credit institutions can still invest are managed by AIF managers that are
authorised and supervised in accordance with the relevant provisions of Directive
2011/61/EU of the European Parliament and of the Council26, and that those AIFs are
established in the Union or, if they are not established in the Union, they are marketed
in the Union according to the rules of that Directive.

(18)

The entities subject to the prohibition of proprietary trading should be allowed to use
their own capital to make investments in the framework of their cash management.
Cash management should be an activity aiming at preserving the value of own capital
while spreading credit risk across multiple counterparties and maximising the liquidity
of its own capital. In managing its cash, entities subject to the prohibition of
proprietary trading should not pursue the objective of achieving returns greater than
money market rates, using as a benchmark the rate of return of a three-month high
quality government bond.

(19)

Cash equivalent assets are instruments that are normally dealt on the money market,
such as treasury and local authority bills, certificates of deposit, commercial paper,
bankers' acceptances, short-term notes or units or shares of regulated money market

26

Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011
on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and
Regulations (EC) No 1060/2009 and (EU) No 1095/2010

16

EN

funds. In order to prohibit short selling, a credit institution should hold cash equivalent
assets before being able to sell these assets.

EN

(20)

Remuneration policies which encourage excessive risk-taking can undermine sound
and effective risk management of banks. By complementing relevant existing Union
law in this area, remuneration provisions should contribute to preventing
circumvention of the prohibition of proprietary trading. Similarly, it should curtail any
residual or hidden proprietary trading activity by core credit institutions when carrying
out prudent risk management.

(21)

The management body of the entities subject to the prohibition of proprietary trading
should ensure compliance with this prohibition.

(22)

Other than proprietary trading, large credit institutions engage in numerous other
trading activities, such as market making, issuance, investment and sponsorship
activity linked to risky securitisation, or the structuring, arranging, or execution of
complex derivative transactions. These trading activities are often related to client
activity but may nevertheless give rise to concerns. Considering, however, the
potentially useful nature of these activities they should not be subject to a direct
prohibition. Instead, such activities should remain subject to an ex post assessment by
the competent authority and, potentially, to a requirement to be separated from the rest
of the groups’ activities.

(23)

If, when assessing the trading activities, the competent authority concludes that they
exceed certain metrics in terms of relative size, leverage, complexity, profitability,
associated market risk, as well as interconnectedness, it should require their separation
from the core credit institution unless the core credit institution can demonstrate to the
satisfaction of the competent authority that those trading activities do not pose a threat
to the financial stability of the core credit institution or to the Union financial system
as a whole, taking into account the objectives set out in this Regulation.

(24)

There are particular concerns in relation to market making. The resolvability of a bank
may be impeded by the presence of trading and inventory within a large banking
group, as individual trading positions are treated the same way in a resolution process,
whether they result from client activity driven market making or from speculation.
Additionally, market makers are interconnected with other large banking groups.
Furthermore, market makers can be exposed to substantial counterparty risk and the
concrete functioning of market making can vary in relation to different financial
instruments and market models. Therefore, particular attention to those activities
should be made during the assessment of the competent authority.

(25)

Certain activities involving securitisation have allowed credit institutions to build up
risks quickly, to concentrate risks within the leveraged sector, to grow notably shortterm debt reliance between financial intermediaries, and to make financial
intermediaries significantly more interconnected. Unless securitisation fulfils certain
minimum criteria to be considered as high quality, credit institutions still run
significant liquidity risk. Further, investing in risky securitised products may give rise
to interconnectedness of financial institutions which impedes orderly and swift
resolution. As a consequence, these activities require particular attention during the
assessment of the competent authority.

(26)

To ensure an effective separation in legal, economic, governance and operational
terms, core credit institutions and trading entities should meet capital, liquidity, and

17

EN

large exposure rules on a functional sub-group basis. They should have strong
independent governance and separate management bodies.

EN

(27)

Groups that qualify as mutuals, cooperatives, savings institutions or similar have a
specific ownership and economic structure. Imposing some of the rules related to
separation could require far-reaching changes to the structural organisation of those
entities the costs of which could be disproportionate to the benefits. To the extent that
those groups fall within the scope of the Regulation, the competent authority may
decide to allow core credit institutions that meet the requirements set out in Article
49(3)(a) or (b) of Regulation (EU) No 575/2013 to hold capital instruments or voting
rights in a trading entity where the competent authority considers that holding such
capital instruments or voting rights is indispensable for the functioning of the group
and that the core credit institution has taken sufficient measures in order to
appropriately mitigate the relevant risks.

(28)

Large exposure limits aim at protecting credit institutions against the risk of incurring
losses because of an excessive concentration on one client or a group of connected
clients. Applying those restrictions between the separated parts within the credit
institution or group, as well as between the core credit institution and external entities
carrying out trading activities are an integral part of this Regulation. However,
irrespective of individual exposure limits, aggregate large exposures can still be
substantial. The individual limits should therefore be complemented by an aggregate
large exposure limit. In order to limit the application of the public safety net to the
activities subject to separation and to clearly distinguish the activities of a trading
entity from the core credit institution, the trading entities should be prohibited from
taking deposits eligible for deposit insurance. This prohibition should not prevent the
exchange of collateral strictly relating to their trading activities. However, in order not
to close down an additional source of credit, the trading entity should be allowed to
extend credit to all clients. Furthermore, whereas the trading entity may need to
provide wholesale payment, clearing and settlement services, it should not be involved
in retail payment services.

(29)

Irrespective of separation, the core credit institution should still be able to manage its
own risk. Certain trading activities should therefore be allowed to the extent that they
are aimed at the prudent management of the core credit institution's capital, liquidity
and funding and do not pose concerns to its financial stability. Similarly, the core
credit institutions needs to be able to provide certain necessary risk management
services to its clients. However, that should be done without exposing the core credit
institution to unnecessary risk and without posing concerns to its financial stability.
Hedging activities eligible for the purpose of prudently managing own risk and for the
provision of risk management services to clients can, but does not have to, qualify as
hedge accounting under the International Financial Reporting Standards.

(30)

To enhance the effectiveness of the decision making procedure envisaged by this
Regulation as well as to ensure to greatest extent possible that there is consistency
between measures imposed under this Regulation, Council Regulation (EU) No
1024/2013 of the European Parliament and of the Council, Directive [BRRD] and
Directive 2013/36/EU of the European Parliament and of the Council27, competent

27

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the
activity of credit institutions and the prudential supervision of credit institutions and investment firms,
amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176,
27.6.2013, p.338).

18

EN

authorities and relevant resolution authorities should closely cooperate in all
circumstances having all powers conferred upon them in relevant Union law. The duty
to cooperate should cover all stages of the procedure leading up to a competent
authority's final decision to impose structural measures.
(31)

Separation has a significant impact on banking groups’ legal, organisational and
operational structure. To insure an effective and efficient application of separation and
to prevent separation of groups along geographic lines, separation decisions should be
taken at group level by the consolidating supervisor, having consulted the competent
authorities of a banking group’s significant subsidiaries as appropriate.

(32)

In order to promote transparency and legal certainty for the benefit of all market
stakeholders, the European Banking Authority (EBA) should publish and keep up-todate on its website a list of credit institutions and groups subject to the requirements
concerning the ban of proprietary trading and separation of certain trading activities.

(33)

To the extent that the disclosure of information relating to prudential supervision and
for the application of this Regulation involves processing of personal data, such data
should be fully protected by the Union legal framework. In particular, personal data
shall be retained by the competent authority only for the period necessary, in
accordance with the applicable data protection rules28.

(34)

Separation entails changes to the legal, organisation and operational structure of
affected banking groups, all of which generate costs. In order to limit the risk of costs
being passed on to clients and grant the credit institutions the time necessary to
execute a separation decision in an orderly fashion, separation should not be
applicable immediately upon entry into force of the Regulation but apply as of [OP
please enter the exact date 18 months from the date of publication of this Regulation].

(35)

The provision of all or part of the investment services or activities as a regular
occupation or business on a professional basis by different entities identified under this
Regulation as a result of structural changes imposed on large, complex and
interconnected credit institutions, should be performed in accordance with the
provisions of Directive 2004/39/EC of the European Parliament and of the Council29.
Where this Regulation provides further restrictions on the ability of these entities to
perform investment services as compared to those defined in Directive 2004/39/EC,
the provisions of this Regulation should prevail. The performance of these investment
services or activities is subject to prior authorisation in accordance with the provisions
of Directive 2004/39/EC with the exception of credit institutions that are authorised
under Directive 2013/36/EU.

(36)

The Commission should cooperate with third-country authorities in order to explore
mutually supportive solutions to ensure consistency between the provisions in this
Regulation and the requirements established by third countries. To that end, the
Commission should be able to determine that a third country legal framework is
equivalent to this Regulation, also with respect to its legal, supervisory and
enforcement arrangements.

28

Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on
the protection of individuals with regard to the processing of personal data by the Community
institutions and bodies and on the free movement of such data (OJ L 8, 12.1.2001, p.1).
Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in
financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive
2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC,
(OJ L 145, 30.4.2004, p.1).

29

EN

19

EN

EN

(37)

In order to ensure that entities subject to this Regulation comply with the obligations
deriving from it and to ensure that they are subject to similar treatment across the
Union, administrative sanctions and measures which are effective, proportionate and
dissuasive should be ensured. Therefore, administrative sanctions and measures set by
this Regulation should satisfy certain essential requirements in relation to addressees,
the criteria to be taken into account when applying a sanction or measure, publication
of sanctions or measures, key sanctioning powers and the levels of administrative
pecuniary sanctions.

(38)

In order to specify the requirements set out in this Regulation, the power to adopt acts
in accordance with Article 290 of the TFEU should be delegated to the Commission in
respect of the following non-essential elements: expanding the type of government
bonds that should not prohibited under Article 6 and which competent authorities do
not have to review or consider for separation; setting the relevant limits and conditions
for when a competent authority shall presume that certain trading activities must be
separated; expanding the list of instruments that are allowed for the management of a
credit institution's own risk; expanding the list of instruments that a credit institution
may transact in to manage clients' risks; calculating the limit above which derivatives
may not be sold nor recorded on the balance sheet of a core credit institution; large
exposures and the extent of recognition of credit risk mitigation techniques; amending
the components of the concept of "trading activities" used for establishing the
conditions of application of Chapter II and Chapter III of this Regulation; specifying
the types of securitisations that do not pose a threat to the financial stability of a core
credit institution or to the Union financial system; the criteria for assessing the
equivalence of third country legal and supervisory frameworks. It is of particular
importance that the Commission carries out appropriate consultations during its
preparatory work, including at expert level. The Commission, when preparing and
drawing up delegated acts, should ensure a simultaneous, timely and appropriate
transmission of relevant documents to the European Parliament and to the Council.

(39)

In order to ensure uniform conditions for the implementation of this Regulation, in
particular with regard to the provisions set out in Articles 21 and 27, implementing
powers should be conferred on the Commission.

(40)

Technical standards in financial services should ensure consistent harmonisation and
adequate protection of depositors, investors and consumers across the Union. As
bodies with highly specialised expertise, it is efficient and appropriate to entrust the
EBA with the elaboration of draft regulatory technical and implementing standards,
which do not involve policy choices. EBA should ensure efficient administrative and
reporting processes when drafting technical standards.

(41)

The Commission should adopt regulatory technical standards developed by the EBA
with regard to the methodology for the consistent measurement and application of the
metrics relative to the calculation of the threshold above which separation of trading
activities should take place by means of delegated acts pursuant to Article 290 of the
TFEU and in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010 of
the European Parliament and of the Council30. The Commission and the EBA should
ensure that those standards can be applied by all institutions concerned in a manner

30

Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010
establishing a European Supervisory Authority (European Banking Authority), amending Decision No
716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12).

20

EN

that is proportionate to the nature, scale and complexity of those institutions and their
activities.

EN

(42)

The Commission should be empowered to adopt implementing technical standards
developed by the EBA with regard to the methodology for calculating the amount of
trading activities engaged in by credit institutions and groups, the uniform template for
disclosure of total amount and the components of credits institutions and parent
companies' trading activities and determining the procedures and forms for exchange
of information on sanctions with the EBA by means of implementing acts pursuant to
Article 291 of the TFEU and in accordance with Article 15 of Regulation (EU) No
1093/2010.

(43)

In accordance with the principle of proportionality, it is necessary and appropriate for
the achievement of the aim of preventing systemic risk, financial stress or failure of
large, complex and interconnected credit institutions to lay down rules on prohibition
on proprietary trading and separation of certain trading activities. This Regulation does
not go beyond what is necessary in order to achieve the objectives pursued in
accordance with Article 5(4) of the Treaty on the European Union.

(44)

The freedom to conduct a business in accordance with Union law and national laws
and practices is recognised under Article 16 of the Charter of Fundamental Rights of
the European Union (the Charter). Each person within the Union has the right to startup or to continue a business without being subject to either discrimination or
unnecessary restriction. Moreover, share ownership is protected as property under
Article 17 of the Charter. Shareholders have the right to own, use, and dispose of their
property, and the right not to be deprived involuntarily of this property. The
prohibition of proprietary trading and the separation of certain trading activities
provided for in this Regulation may affect the freedom to conduct a business as well as
the property rights of shareholders who, in such situation, cannot freely dispose of
their property.

(45)

The limitations on the freedom to conduct a business and the rights of shareholders
should comply with Article 52 of the Charter. Interference with these rights should not
be disproportionate. Accordingly, the banning or separation of trading activities should
only be required when it is in the public interest promoting the good functioning of the
Union banking market and financial stability. Affected shareholders should not be
prevented from using their other legal rights, such as the right to an effective remedy
and to a fair trial.

(46)

This Regulation respects the fundamental rights and observes the principles recognised
in the Charter, in particular the right to respect for private and family life, the right to
the protection of personal data, the freedom to conduct a business, the right to
property, the right to an effective remedy and to a fair trial as well as the right of
defence and the respect of the ne bis in idem principle. This Regulation must be
applied according to these rights and principles.

(47)

Because entities concerned by the prohibition of proprietary trading will require
sufficient time to implement the prohibition, this Regulation foresees that the
prohibition shall apply [OP please introduce exact date 18 months after publication of
this Regulation]. Similarly, the procedures foreseen in this Regulation with regard to
the provisions that lead to a decision by the competent authority that trading activities
need to be separated from the core credit institution, and the procedures that apply to
groups following the adoption of such a decision, are complex and require time not
only to carry out but also to implement those measures in a responsible and sustainable

21

EN

manner. It is therefore appropriate that such provisions apply [OP please introduce
exact date 36 months after publication of this Regulation].
HAVE ADOPTED THIS REGULATION:

Chapter I
General provisions
Article 1
Objectives
This Regulation aims at preventing systemic risk, financial stress or failure of large, complex
and interconnected entities in the financial system, in particular credit institutions, and at
meeting the following objectives:
(a)

to reduce excessive risk taking within the credit institution;

(b)

to remove material conflicts of interest between the different parts of the credit
institution;

(c)

to avoid misallocation of resources and to encourage lending to the real economy;

(d)

to contribute to undistorted conditions of competition for all credit institutions within
the internal market;

(e)

to reduce interconnectedness within the financial sector leading to systemic risk;

(f)

to facilitate efficient management, monitoring and supervision of the credit
institution;

(g)

to facilitate the orderly resolution and recovery of the group.
Article 2
Subject matter

This Regulation lays down rules on:
(a)

the prohibition of proprietary trading;

(b)

the separation of certain trading activities.
Article 3
Scope

1.

This Regulation shall apply to the following entities:
(a)

EN

any credit institution or an EU parent, including all branches and subsidiaries
irrespective of where they are located, when it is identified as a global
systemically important institution (G-SIIs) in application of Article 131 of
Directive 2013/36/EU;

22

EN

(b)

any of the following entities that for a period of three consecutive years has
total assets amounting at least to EUR 30 billion and has trading activities
amounting at least to EUR 70 billion or 10 per cent of its total assets:
(i)

any credit institution established in the Union which is neither a parent
undertaking nor a subsidiary, including all its branches irrespective of
where they are located;

(ii)

an EU parent, including all branches and subsidiaries irrespective of
where they are located, where one of the group entities is a credit
institution established in the Union;

(iii) EU branches of credit institutions established in third countries.
Article 4
Negative scope
1.

2.

This Regulation shall not apply to:
(a)

EU branches of credit institutions established in third countries if they are
subject to a legal framework deemed equivalent in accordance with Article
27(1);

(b)

subsidiaries of EU parents established in third countries if they are subject to a
legal framework deemed equivalent in accordance with Article 27(1);

(c)

entities referred to in points (2) to (23) of Article 2(5) of Directive 2013/36/EU.

In addition to point (b) of paragraph 1, a competent authority may exempt from the
requirements of Chapter III subsidiaries of EU parents established in third countries
where there are no rules deemed equivalent to Articles 10 to 16 and 20 if that
competent authority is satisfied that:
(a)

there is a resolution strategy agreed upon between the group level resolution
authority in the Union and the third country host authority;

(b)

the resolution strategy for the subsidiary of an EU parent established in a third
country has no adverse effect on the financial stability of the Member State(s)
where the EU parent and other group entities are established.
Article 5
Definitions

For the purposes of this Regulation, the following definitions shall apply:
1.

"credit institution" means a credit institution as defined in point (1) of Article 4(1) of
Regulation (EU) No 575/2013 of the European Parliament and of the Council31;

2.

"group" means a parent undertaking and its subsidiaries;

3.

"resolution" means resolution as defined in Article 2(1) of Directive [BRRD];

31

EN

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013
on prudential requirements for credit institutions and investment firms and amending Regulation (EU)
No 648/2012 (OJ L176, 27.6.2013, p.1).

23

EN

4.

"proprietary trading" means using own capital or borrowed money to take positions
in any type of transaction to purchase, sell or otherwise acquire or dispose of any
financial instrument or commodities for the sole purpose of making a profit for own
account, and without any connection to actual or anticipated client activity or for the
purpose of hedging the entity’s risk as result of actual or anticipated client activity,
through the use of desks, units, divisions or individual traders specifically dedicated
to such position taking and profit making, including through dedicated web-based
proprietary trading platforms;

5.

"EU parent" means a parent undertaking in a Member State which is not a subsidiary
of another undertaking within any Member State;

6.

"subsidiary" means a subsidiary undertaking as defined in point (10) of Article 2 of
Directive 2013/34/EU of the European Parliament and of the Council32;

7.

"competent authority" means a competent authority as defined in point (40) of
Article 4(1) of Regulation (EU) No 575/2013, including the ECB in accordance with
Council Regulation (EU) No 1024/2013;

8.

"institution" means an institution as defined in point (3) of Article 4(1) of Regulation
(EU) No 575/2013;

9.

"parent undertaking" means a parent undertaking as defined in point (9) of Article 2
of Directive 2013/34/EU, including an institution, a financial holding company, a
mixed financial holding company and a mixed activity holding company;

10.

"financial instruments" means financial instruments as defined in section C of Annex
I of Directive 2004/39/EC;

11.

"management body" means a management body as defined in point (7) of Article
3(1) of Directive 2013/36/EU or the equivalent body when the entity concerned is
not an institution;

12.

"market making" means a financial institution's commitment to provide market
liquidity on a regular and on-going basis, by posting two-way quotes with regard to a
certain financial instrument, or as part of its usual business, by fulfilling orders
initiated by clients or in response to clients’ requests to trade, but in both cases
without being exposed to material market risk;

13.

"sponsor" means sponsor as defined in point (14) of Article 4(1) of Regulation (EU)
No 575/2013;

14.

"securitisation" means securitisation as defined in point (61) of Article 4(1) of
Regulation (EU) No 575/2013;

15.

"trading in derivatives" means to buy or sell derivatives;

16.

"core credit institution" means a credit institution that at the minimum takes deposits
eligible under the Deposit Guarantee Scheme in accordance with Directive
94/19/EC33;

32

Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual
financial statements, consolidated financial statements and related reports of certain types of
undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and
repealing Council Directives 78/660/EEC and 83/349/EEC, OJ L 182, 29.6.2013, p. 19.

33

EN

Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on depositguarantee schemes, OJ L 135, 31.05.1994 pages 0005 to 0014.

24

EN

17.

"commodity" means commodity as defined in point (1) of Article 2 of Commission
Regulation (EC) No 1287/200634;

18.

"group entity" means a legal entity that is part of a group;

19.

"financial entity" means an entity which falls within one of the following categories:
financial sector entity, as defined in point (27) of Article 4(1) of Regulation
(EU) No 575/2013;

–

closed-ended and unleveraged alternative investment funds ("AIF") as defined
in Directive 2011/61/EU, where those AIFs are established in the Union or, if
they are not established in the Union, they are marketed in the Union according
to Articles 35 or 40 of Directive 2011/61/EU of the European Parliament and
of the Council35, qualifying venture capital funds as defined in Article 3(b) of
Regulation (EU) No 345/2013 of the European Parliament and of the
Council36, qualifying social entrepreneurship funds as defined in Article 3(b) of
Regulation (EU) No 346/201337 and AIF authorized as European long term
investment funds (ELTIF) in accordance with Regulation (EU) No
[XXX/XXXX]38];

–

UCITS as defined by Article 1(2) of Directive 2009/65/EC39;

–

securitisation special purpose entity as defined in point (66) of Article 4(1) of
Regulation (EU) No 575/2013;

20.

"SME" means an undertaking which employ fewer than 250 persons and which have
an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet
total not exceeding EUR 43 million;

21.

"dealing in investments as a principal" means buying, selling, subscribing for or
underwriting securities or contractually based investments as a principal;

22.

"consolidating supervisor" means a competent authority responsible for the exercise
of supervision of an EU parent and its subsidiaries on a consolidated basis as defined
in point (48) of Article 4(1) of Regulation (EU) No 575/2013.

34

Commission Regulation (EC) No 1287/2006 of 10 August 2006 implementing Directive 2004/39/EC of
the European Parliament and of the Council as regards recordkeeping obligations for investment firms,
transaction reporting, market transparency, admission of financial instruments to trading, and defined
terms for the purposes of that Directive (OJ L241, 2.9.2006, p. 1).
Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative
Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations
(EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p.1).
Regulation (EU) No 345/2013 of the European Parliament and of the Council of 17 April 2013 on
European venture capital funds (OJ L 115, 25.4.2013, p.1).
Regulation (EU) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on
European social entrepreneurship funds (OJ L 115, 25.4.2013, p. 18).
Regulation (EU) No xx/xxxx of the European Parliament and of the Council on European Long-term
Investment funds, OJ L xx/xx.
Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the
coordination of laws, regulations and administrative provisions relating to undertakings for collective
investment in transferable securities (UCITS) (OJ L302, 17.11.2009, p.32).

35

36

37
38

39

EN

–

25

EN

Chapter II
Prohibited activities
Article 6
Prohibition of certain trading activities
1.

Entities referred to in Article 3 shall not:
(a)

engage in proprietary trading;

(b)

with its own capital or borrowed money and for the sole purpose of making a
profit for own account:
(i)

acquire or retain units or shares of AIFs as defined by Article 4(1)(a) of
Directive 2011/61/EU;

(ii)

invest in derivatives, certificates, indices or any other financial
instrument the performance of which is linked to shares or units of AIFs;

(iii) hold any units or shares in an entity that engages in proprietary trading or
acquires units or shares in AIFs.
2.

EN

The prohibition in point (a) of paragraph 1 shall not apply to:
(a)

financial instruments issued by Member States central governments or by
entities listed in point (2) of Article 117 and in Article 118 of Regulation (EU)
No 575/2013;

(b)

a situation where an entity referred to in Article 3 meets all of the following
conditions:
(i)

it uses its own capital as part of its cash management processes;

(ii)

it exclusively holds, purchases sells or otherwise acquires or disposes of
cash or cash equivalent assets. Cash equivalent assets must be highly
liquid investments held in the base currency of the own capital, be readily
convertible to a known amount of cash, be subject to an insignificant risk
of a change in value, have maturity which does not exceed 397 days and
provide a return no greater than the rate of return of a three-month high
quality government bond.

3.

The restrictions laid down in point (b) of paragraph 1 shall not apply with regard to
closed-ended and unleveraged AIFs as defined in Directive 2011/61/EU where those
AIFs are established in the Union or, if they are not established in the Union, they are
marketed in the Union according to Articles 35 or 40 of Directive 2011/61/EU , to
qualifying venture capital funds as defined in Article 3(b) of Regulation (EU) No
345/2013, to qualifying social entrepreneurship funds as defined in Article 3(b) of
Regulation (EU) No 346/2013, and to AIFs authorized as ELTIFs in accordance with
Regulation (EU) No [XXX/XXXX].

4.

The management body of each entity referred to in Article 3 shall ensure that the
requirements set out in paragraph 1 are complied with.

5.

The requirements in paragraphs 1 to 4 shall apply as of [OP please introduce exact
date, 18 months after publication of the Regulation].

26

EN

6.

The Commission shall be empowered to adopt delegated acts in accordance with
Article 36 to exempt from the prohibition referred to in point (a) of paragraph 1:
(a)

financial instruments other than those referred to in point (a) of paragraph 2
issued by governments of third countries that apply supervisory and regulatory
arrangements at least equivalent to those applied within the Union, exposures
to which are assigned a 0 per cent risk weight in accordance with Article 115
of Regulation (EU) No 575/2013;

(b)

financial instruments issued by Member States' regional governments,
exposures to which are assigned a 0 per cent risk weight in accordance with
Article 115 of Regulation (EU) No 575/2013.
Article 7
Rules on remuneration

Without prejudice to the remuneration rules laid down in Directive 2013/36/EU, the
remuneration policy of the entities referred to in Article 3 shall be designed and implemented
in such a way that it does not, directly or indirectly, encourage or reward the carrying out by
any staff member of activities prohibited in Article 6(1).

Chapter III
Separation of certain trading activities
Article 8
Scope of activities
1.

40

41

EN

For the purposes of this Chapter, trading activities shall include activities other than:
(a)

taking deposits that are eligible under the Deposit Guarantee Scheme in
accordance with Directive 94/19/EC of the European Parliament and of the
Council40;

(b)

lending including, consumer credit, credit agreements relating to immovable
property, factoring with or without recourse, financing of commercial
transactions (including forfeiting);

(c)

financial leasing;

(d)

payment services as defined in Article 4(3) of Directive 2007/64/EC of the
European Parliament and of the Council41;

(e)

issuing and administering other means of payment such as travellers' cheques
and bankers' drafts insofar as such activity is not covered by point (d);

(f)

money broking, safekeeping and administration of securities;

Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on depositguarantee schemes (OJ L 135, 31/05/1994, pages 0005 to 0014).
Directive of the European Parliament and of the Council of 13 November 2007 on payment services in
the internal market (OJ L 319 of 5.12.2007, pages 1 to 36).

27

EN

(g)

credit reference services;

(h)

safe custody services;

(i)

issuing electronic money.

2.

The requirements of this Chapter shall not apply to the buying or selling of financial
instruments issued by Member States’ central governments or by entities listed in
point (2) of Article 117 and in Article 118 of Regulation (EU) No 575/2013.

3.

The Commission shall be empowered to adopt delegated acts in accordance with
Article 35 to exempt financial instruments:
(a)

other than those referred to in paragraph 2 issued by governments of third
countries that apply supervisory and regulatory arrangements at least
equivalent to those applied within the Union, exposures to which are assigned a
0 per cent risk weight in accordance with Article 115 of Regulation (EU) No
575/2013;

(b)

issued by Member States' regional governments, exposures to which are
assigned a 0 per cent risk weight in accordance with Article 115 of Regulation
(EU) No 575/2013.
Article 9
Duty to review activities

1.

2.

EN

The competent authority shall assess trading activities including in particular: market
making, investments in and acting as a sponsor for securitisation, and trading in
derivatives other than those derivatives permitted under Articles 11 and 12 of the
following entities:
(a)

a core credit institution established in the Union, which is neither a parent
undertaking nor a subsidiary, including all its branches irrespective of where
they are located;

(b)

an EU parent, including all branches and subsidiaries irrespective of where
they are located, where one of the group entities is a core credit institution
established in the Union;

(c)

EU branches of credit institutions established in third countries.

When performing the assessment referred to in paragraph 1, the competent authority
shall use the following metrics:
(a)

the relative size of trading assets, as measured by trading assets divided by total
assets;

(b)

the leverage of trading assets as measured by trading assets divided by core
Tier 1 capital;

(c)

the relative importance of counterparty credit risk, as measured by the fair
value of derivatives divided by total trading assets;

(d)

the relative complexity of trading derivatives, as measured by level 2 and 3
trading derivatives assets divided by trading derivatives and by trading assets;

(e)

the relative profitability of trading income, as measured by trading income
divided by total net income;

28

EN

(f)

the relative importance of market risk, as measured by computing the
difference between trading assets and liabilities in absolute value and dividing
it by the simple average between trading assets and trading liabilities;

(g)

the interconnectedness, as measured by the methodology referred to in Article
131(18) of Directive 2013/36/EU;

(h)

credit and liquidity risk arising from commitments and guarantees provided by
the core credit institution.

3.

The competent authority shall have finalised its assessment by [OP – please
introduce 18 months from the day of publication of the Regulation], and shall carry
out assessments on a regular basis, at least yearly, thereafter.

4.

EBA shall develop draft regulatory technical standards to specify how the metrics
shall be measured and, where appropriate, specify the details of the metrics referred
to in paragraph 2 and their measurement using supervisory data. The draft regulatory
technical standards shall also provide the competent authority with a methodology
for the consistent measurement and application of the metrics.
EBA shall submit those draft regulatory technical standards to the Commission by
[OP – please introduce 1 month from the day of publication of the Regulation.]
Power is delegated to the Commission to adopt the draft regulatory technical
standards referred to in the first subparagraph in accordance with Articles 10 to 14 of
Regulation (EU) No 1093/2010.
Article 10
Power of competent authority to require that a core credit institution does not carry out
certain activities

EN

1.

Where the competent authority concludes that, following the assessment referred to
in Article 9(1), the limits and conditions linked to the metrics referred to in points (a)
to (h) of Article 9(2) and specified in the delegated act referred to in paragraph 5 are
met, and it therefore deems that there is a threat to the financial stability of the core
credit institution or to the Union financial system as a whole, taking into account the
objectives referred to in Article 1, it shall, no later than two months after the
finalisation of that assessment, start the procedure leading to a decision as referred to
in the second subparagraph of paragraph 3.

2.

Where the limits and conditions referred to in paragraph 1 are not met, the competent
authority may still start the procedure leading to a decision as referred to in the third
subparagraph of paragraph 3 where it concludes, following the assessment referred to
in Article 9(1), that any trading activity, with the exception of trading in derivatives
other than those permitted under Article 11 and 12, carried out by the core credit
institution, poses a threat to the financial stability of the core credit institution or to
the Union financial system as a whole taking into account the objectives referred to
in Article 1.

3.

The competent authority shall notify its conclusions referred to in paragraphs 1 or 2
to the core credit institution and provide the core credit institution with the
opportunity to submit written comments within two months from the date of the
notification.

29

EN

Unless the core credit institution demonstrates, within the time limit referred to in the
first subparagraph, to the satisfaction of the competent authority, that the reasons
leading to the conclusions are not justified, the competent authority shall adopt a
decision addressing the core credit institution and requiring it not to carry out the
trading activities specified in those conclusions. The competent authority shall state
the reasons for its decision and publicly disclose it.
For purpose of paragraph 1, where the competent authority decides to allow the core
credit institution to carry out those trading activities it shall also state the reasons for
that decision and publicly disclose it.
For purpose of paragraph 2, where the competent authority decides to allow the core
credit institution to carry out trading activities the competent authority shall adopt a
decision addressed to the core credit institution to that effect.
Prior to adopting any decision referred to in this paragraph the competent authority
shall consult the EBA on the reasons underlying its envisaged decision and on the
potential impact of such a decision on the financial stability of the Union and the
functioning of the internal market. The competent authority shall also notify the EBA
of its final decision.
The competent authority shall adopt its final decision within two months from having
received the written comments referred to in the first subparagraph.
4.

The decisions referred to in the second subparagraph of paragraph 3 will be subject
to review by the competent authority every 5 years.

5.

The Commission shall, [OP insert the correct date by 6 months of publication of this
Regulation] adopt delegated acts in accordance with Article 35 to:
(a)

specify, with regard to the metrics:
(a)

the relevant limit of each of the metrics provided in points (a) to (h) of
Article 9(1), above which the risk level of the trading activity concerned
is deemed individually significant;

(ii)

the conditions, including how many of the metrics need to exceed the
relevant limit, and in what combination, in order for the competent
authority to start the procedure referred to in Article 10(1).

(iii) The specification of the conditions in point (ii) shall include an indication
of the level of the aggregate significant risk of the trading activity
concerned that results from several metrics having exceeded the relevant
limits referred to in point (i);
(b)

specify which type of securitisation is not considered to pose a threat to the
financial stability of the core credit institution or to the Union financial system
as a whole with regard to each of the following aspects:
(i)

the structural features, such as the embedded maturity transformation and
simplicity of the structure;

(ii)

the quality of the underlying assets and related collateral characteristics;

(iii) the listing and transparency features of the securitisation and its
underlying assets;
(iv) the robustness and quality of the underwriting processes.

EN

30

EN

Article 11
Prudent management of own risk
1.

A core credit institution that has been subject to a decision referred to in Article
10(3) may carry out trading activities to the extent that the purpose is limited to only
prudently managing its capital, liquidity and funding.
As part of the prudent management of its capital, liquidity and funding, a core credit
institution may only use interest rate derivatives, foreign exchange derivatives and
credit derivatives eligible for central counterparty clearing to hedge its overall
balance sheet risk. The core credit institution shall demonstrate to the competent
supervisor that the hedging activity is designed to reduce, and demonstrably reduces
or significantly mitigates, specific, identifiable risks of individual or aggregated
positions of the core credit institution.

2.

Without prejudice to the remuneration rules laid down in Directive 2013/36/EU, the
remuneration policy applicable to staff of the core credit institution engaged in
hedging activities shall:
(a)

aim at preventing any residual or hidden proprietary trading activities, whether
disguised as risk management or otherwise;

(b)

reflect the legitimate hedging objectives of the core credit institution as a whole
and ensure that remuneration awarded is not directly determined by reference
to the profits generated by such activities but takes account of the overall
effectiveness of the activities in reducing or mitigating risk.

The management body shall ensure that the remuneration policy of the core credit
institution is in line with the provisions set out in the first subparagraph, acting on the
advice of the risk committee, where such a committee is established in accordance
with Article 76(3) of Directive 2013/36/EU.
3.

The Commission shall be empowered to adopt delegated acts in accordance with
Article 35 of this Regulation to supplement the financial instruments referred to in
paragraph 1 by adding other financial instruments including other types of
derivatives, in particular those subject to the obligations set out in Article 11 of
Regulation (EU) No 648/2012 of the European Parliament and of the Council42, in
order to take into account financial instruments, which have the same effect on
financial stability as those mentioned in paragraph 1 for the purpose of prudent
management of capital, liquidity and funding.
Article 12
Provision of risk management services to customers

1.

42

EN

A core credit institution that has been subject to a decision referred to in Article
10(3) may sell interest rate derivatives, foreign exchange derivatives, credit
derivatives, emission allowances derivatives and commodity derivatives eligible for
central counterparty clearing and emission allowances to its non-financial clients, to
financial entities referred to in the second and third indents of point (19) of Article 5,
Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012
on OTC derivatives, central counterparties and trade repositories.

31

EN

to insurance undertakings and to institutions providing for occupational retirement
benefits when the following conditions have been satisfied:
(a)

the sole purpose of the sale is to hedge interest rate risk, foreign exchange risk,
credit risk, commodity risk or emissions allowance risk;

(b)

the core credit institution's own funds requirements for position risk arising
from the derivatives and emission allowances does not exceed a proportion of
its total risk capital requirement to be specified in a Commission delegated act
in accordance with paragraph 2.

When the requirement in point (b) is not fulfilled, the derivatives and emission
allowances may neither be sold by the core credit institution nor be recorded on its
balance sheet.
2.

The Commission shall be empowered to adopt delegated acts in accordance with
Article 35 to:
(a)

permit other financial instruments than those mentioned in paragraph 1, in
particular those subject to the obligations set out in Article 11 of Regulation
(EU) No 648/2012, for purpose of hedging risk to be sold to the type of clients
listed in paragraph 1 of this Article;

(b)

specify the proportion of the core credit institution's own funds requirements
above which derivatives and emission allowances referred to in paragraph 1 of
this Article may not be sold nor recorded on the balance sheet of the core credit
institution.
Article 13
Rules on separate group entities

1.

When a competent authority has made a decision in accordance with Article 10(3)
that a core credit institution cannot carry out certain trading activities and if the core
credit institution belongs to a group, then the trading activities to be separated may
be carried out only by a group entity that is legally, economically and operationally
separate ("trading entity") from the core credit institution.

2.

When an entity referred to in Article 9(1) has decided on its own initiative to separate
trading activities covered by Article 9 from the core credit institution and received
the approval of its separation plan in accordance with the procedure set out in Article
18, then the requirements set out in paragraphs 3 to 13 of this Article and Articles 14
to 17 and 20 shall apply to the separated entities.

3.

The EU parent shall ensure that a group containing core credit institutions and
trading entities shall be structured so that on a sub-consolidated basis two distinct
sub-groups are created, only one of which contains core credit institutions.

4.

The EU parent of the core credit institution shall ensure to the extent necessary that
the core credit institution can carry on its activities in the event of the insolvency of
the trading entity.

5.

The core credit institution shall not hold capital instruments or voting rights in a
trading entity.
Notwithstanding the first subparagraph, the competent authority may decide to allow
core credit institutions that meet the requirements set out in Article 49(3)(a) or (b) of

EN

32

EN

Regulation (EU) No 575/2013 to hold capital instruments or voting rights in a trading
entity where the competent authority considers that holding such capital instruments
or voting rights is indispensable for the functioning of the group and that the core
credit institution has taken sufficient measures in order to appropriately mitigate the
relevant risks.
A core credit institution, which is neither a central nor a regional credit institution,
shall not, in any case, be allowed to directly hold capital instruments or voting rights
in any trading entity.
Prior to adopting a decision in accordance with this paragraph, the competent
authority shall consult EBA.
The competent authority shall notify its decision to EBA.EBA shall publish a list of
those institutions to which this paragraph has been applied.

EN

6.

The core credit institution and the trading entity shall issue their own debt on an
individual or sub-consolidated basis provided that this is not inconsistent with the
resolution plan agreed by the relevant resolution authorities in accordance with
Directive [BRRD].

7.

All contracts and other transactions entered into between the core credit institution
and the trading entity shall be as favourable to the core credit institution as are
comparable contracts and transactions with or involving entities not belonging to the
same sub-group.

8.

A majority of the members of the management body of the core credit institution and
of the trading entity respectively shall consist of persons who are not members of the
management body of the other entity. No member of the management body of either
entity shall perform an executive function in both entities with the exception for the
risk management officer of the parent undertaking.

9.

The management body of the core credit institution, of the trading entity and of their
parents shall have a duty to uphold the objectives of the separation.

10.

In accordance with the applicable national law, the name or the designation of the
trading entity and of the core credit institution shall be such that the public can easily
identify which entity is a trading entity and which entity is a core credit institution.

11.

The structurally separated institutions shall comply with the obligations laid down in
Parts Two, Three and Four and Parts Six, Seven and Eight of Regulation (EU) No
575/2013 and in Title VII of Directive 2013/36/EU on a sub-consolidated basis in
conformity with paragraph 3 of this Article.

12.

By way of derogation from Article 6(1) and Article 7 of Regulation (EU) No
575/2013, the obligations laid down in Parts Two to Four and Eight of that
Regulation shall apply on sub-consolidated basis in conformity with paragraph 3 of
this Article.

13.

By way of derogation from Article 6(4) and Article 8 of Regulation (EU) No
575/2013, the requirements of Part Six of that Regulation shall apply on subconsolidated basis in conformity with paragraph 3 of this Article.

33

EN

Article 14
Intra-group large exposure limits
1.

For the purpose of the calculation of the intragroup large exposure limit under
paragraph 2, all entities belonging to the same subgroup pursuant to Article 13(3) are
considered as one client or one group of connected clients within the meaning of
point (39) of Article 4(1) of Regulation (EU) No 575/2013.

2.

When measures have been imposed in accordance with this Chapter the core credit
institution shall not incur an intra-group exposure that exceeds 25 per cent of the core
credit institution's eligible capital to an entity that does not belong to the same subgroup as the core credit institution. The intra-group exposure limit shall apply on a
sub-consolidated basis, and after taking into account the effect of the credit risk
mitigation and exemptions in accordance with Articles 399 to 403 of Regulation
(EU) No 575/2013 and Article 16 of this Regulation.
Article 15
Extra-group large exposure limits

1.

2.

In addition to the provisions of paragraph 1 of Article 395 of Regulation (EU) No
575/2013 when measures have been imposed in accordance with this Chapter of this
Regulation the core credit institution shall not incur the following exposures:
(a)

a large exposure that exceeds 25 per cent of the core credit institution's eligible
capital to a financial entity. That exposure limit shall apply on an individual
and on a sub-consolidated basis, and after taking into account the effect of the
credit risk mitigation and exemptions in accordance with Articles 399 to 403 of
Regulation (EU) No 575/2013 and Article 16 of this Regulation;

(b)

large exposures that in total exceed 200 per cent of the core credit institution's
eligible capital to financial entities. That exposure limit shall apply on an
individual and on a sub-consolidated basis, and after taking into account the
effect of the credit risk mitigation and exemptions in accordance with Articles
399 to 403 of Regulation (EU) No 575/2013 and Article 16 of this Regulation.

The Commission shall be empowered to adopt delegated acts in accordance with
Article 35 to adjust the level of the extra-group aggregate large exposure limit as set
out in point (b) of paragraph 1, in line with the extent to which the credit risk
mitigation has been recognised.
Article 16
Credit risk mitigation techniques

In addition to the provisions of Articles 399 to 403 of Regulation (EU) No 575/2013, when
measures have been imposed in accordance with this Chapter of this Regulation, restrictions
with respect to the recognition of credit mitigation techniques shall apply to the computation
of exposure values for the purposes of compliance with the large exposure limits as referred to
in Articles 14 and 15 of this Regulation.

EN

34

EN

The Commission shall be empowered to adopt delegated acts in accordance with Article 35 to
specify the extent to which credit risk mitigation techniques including types of and limits to
eligible credit protection shall be recognised for the purposes of the first sub-paragraph with
the purpose of ensuring that credit risk mitigation techniques do not fail when risks
materialise so that there can be effective recovery of credit protection.
Article 17
Derogation from transitional provisions for large exposures
As an exception to paragraph 3 of Article 493 of Regulation (EU) No 575/2013, the
derogations provided for in that paragraph shall not apply to exposures incurred by core credit
institutions that have been subject to structural measures in accordance with this Regulation.
Article 18
Separation plan
1.

When a competent authority has made a decision in accordance with Article 10(3)
that a core credit institution cannot carry out certain trading activities, the core credit
institution or, where appropriate, its EU parent shall submit a separation plan to the
competent authority within 6 months from the date of the decision referred to in the
second sub-paragraph of Article 10(3).
Similarly, when an entity referred to in Article 9(1) has decided to separate trading
activities covered by the duty to review in Article 9 from the core credit institution, it
shall submit a plan detailing its separation at the start of the assessment period
referred to Article 9. The plan shall contain at least the information required in points
(a) and (b) of paragraph 2 of this Article.

2.

The separation plan shall explain in detail how the separation will be carried out.
That plan shall contain at least the following:

EN

(a)

specification of assets and activities that will be separated from the core credit
institution;

(b)

details on how the rules referred to in Article 13 are applied;

(c)

a timeline for the separation.

3.

The competent authority shall assess the plans referred to in paragraph 1 and 2 and,
within six months of its submission, adopt a decision approving the plan or require
changes to the separation plan.

4.

Where the competent authority requires changes to the separation plan the core credit
institution or, where appropriate its EU parent, shall resubmit the separation plan
with the required changes within three months from the request of the competent
authority.

5.

The competent authority shall adopt a decision approving or rejecting the plan within
one month of resubmission. Where the competent authority rejects the plan it shall,
within one month of the rejection, adopt a decision setting out a plan for separation
introducing any necessary adjustments.

35

EN

6.

Where the core credit institution or, where appropriate, its EU parent does not submit
a separation plan as required in paragraph 1, the competent authority shall, no later
than 3 months after the deadline referred to in paragraph 1 has lapsed, adopt a
decision setting out a plan for separation.

7.

Where the core credit institution or, where appropriate, its EU parents does not
resubmit the separation plan with the changes required by the competent authority,
the competent authority shall adopt a decision setting out a plan for separation no
later than one month after the deadline in the first subparagraph of paragraph 4 has
lapsed.

8.

The core credit institution or, where appropriate, its EU parent shall demonstrate to
the competent authority that it has implemented the approved plan.

9.

The management body of a credit institution or an EU parent shall ensure that the
separation plan has been implemented in accordance with the approval of the
competent authority.
Article 19
Cooperation between competent authorities and relevant resolution authorities

1.

Before taking the decision referred to in Article 10(3), the competent authority shall
notify the relevant resolution authority designated in accordance with Article 3 of
Directive [BRRD] thereof.

2.

When carrying out the assessment in accordance with Article 9 and when requiring
the core credit institution not to carry out certain activities in accordance with Article
10, the competent authority shall take into account any ongoing or pre-existing
resolvability assessments carried out by any relevant resolution authority pursuant to
Article 13 and 13(a) of Directive [BRRD].

3.

The competent authority shall cooperate with the relevant resolution authority and
exchange relevant information that is deemed necessary in carrying out its duties.

4.

The competent authority shall ensure that measures imposed pursuant to this
Chapter, are consistent with the measures imposed pursuant to Article 13(b) of
Regulation (EU) No 1024/2013, Article 8(9) of Regulation (EU) No [SRM], Article
13 and 13(a), Articles 14 and 15 of Directive [BRRD] and Article 104 of Directive
2013/36/EU.
Article 20
Prohibited activities for the trading entity

The trading entity shall not:

EN

(a)

take deposits that are eligible under the Deposit Guarantee Scheme in accordance
with Directive 94/19/EC except where the said deposit relates to the exchange of
collateral relating to trading activities;

(b)

provide payment services as defined in Article 4(3) of Directive 2007/64/EC
associated with the activities referred to in point (a) except where the said payment
services are ancillary and strictly necessary for the exchange of collateral relating to
trading activities.

36

EN

Article 21
Derogation from the requirements of Chapter III
1.

At the request of a Member State, the Commission may grant a derogation from the
requirements of this Chapter to a credit institution taking deposits from individuals
and SMEs that are subject to national primary legislation adopted before 29 January
2014 when the national legislation complies with the following requirements:
(a)

it aims at preventing financial stress or failure and systemic risk referred to in
Article 1;

(b)

it prevents credit institutions taking eligible deposits from individuals and
SMEs from engaging in the regulated activity of dealing in investments as
principal and holding trading assets; however, the national legislation may
provide for limited exceptions to allow the credit institution taking deposits
from individuals and SMEs to undertake risk-mitigating activities for the
purpose of prudently managing its capital, liquidity and funding and to provide
limited risk management services to customers;

(c)

if the credit institution taking eligible deposits from individuals and SMEs
belongs to a group, it ensures that the credit institution is legally separated from
group entities that engage in the regulated activity of dealing in investments as
a principal or hold trading assets, and the national legislation specifies the
following:
(i)

the credit institution taking eligible deposits from individuals and SMEs
is able to make decisions independently of other group entities;

(ii)

the credit institution taking eligible deposits from individuals and SMEs
has a management body that is independent of other group entities and
independent of the credit institution itself;

(iii) the credit institution taking eligible deposits from individuals and SMEs
is subject to capital and liquidity requirements in its own right;
(iv) the credit institution taking eligible deposits from individuals and SMEs
may not enter into contracts or transactions with other group entities
other than on terms similar to those referred to in Article 13(7).
2.

A Member State wishing to obtain a derogation for a credit institution subject to the
national legislation in question, shall send a request for derogation, accompanied by
a positive opinion issued by the competent authority supervising the credit institution
that is subject to the request for derogation, to the Commission. That request shall
provide all the necessary information for the appraisal of the national legislation and
specify the credit institutions the derogation is applied for. Where the Commission
considers that it does not have all the necessary information, it shall contact the
Member State concerned within two months of receipt of the request and specify
what additional information is required.
Once the Commission has all the information it considers necessary for appraisal of
the request for derogation, it shall within one month notify the requesting Member
State that it is satisfied with the information.
Within five months of issuing the notification referred to in the second subparagraph,
the Commission shall, after having consulted the EBA on the reasons underlying its

EN

37

EN

envisaged decision and on the potential impact of such a decision on the financial
stability of the Union and the functioning of the internal market, adopt an
implementing decision declaring the national legislation not incompatible with this
Chapter and granting the derogation to the credit institutions specified in the request
referred to in paragraph 1. Where the Commission intends to declare the national
legislation incompatible and to not grant the derogation it shall set out its objections
in detail and provide the requesting Member State with the opportunity to submit
written comments within one month from the date of notification of the Commission
objections. The Commission shall within three months from the end of the time limit
for submission adopt an implementing decision granting or rejecting the derogation.
Where the national legislation is amended, the Member State shall notify the
amendments to the Commission. The Commission may review the implementing
decision referred to in the third subparagraph.
Where the national legislation not declared incompatible with this Chapter no longer
applies to a credit institution that has been granted derogation from the requirements
of this Chapter, that derogation shall be withdrawn with regard to that credit
institution.
The Commission shall notify its decisions to the EBA. The EBA shall publish a list
of the credit institutions that have been granted a derogation in accordance with this
Article. The list shall be continuously kept up-to-date.

Chapter IV
Entities subject to the requirements of Chapters II and III
Article 22
Rules governing the calculation of thresholds
1.

For the purpose of Article 3(b)(ii), the calculation of the thresholds shall be based on
the consolidated accounts of the EU parent.

2.

For the purpose of Article 3(b)(iii), the calculation of the thresholds shall be based on
the activities carried out in the Union.

3.

Assets and liabilities of insurance and reinsurance undertakings and other nonfinancial undertakings shall not be included in the calculation.

4.

By [OP insert the correct date by 12 months of publication of this Regulation], the
competent authority shall identify credit institutions and groups that are subject to
this Regulation in accordance with Article 3 and notify them immediately to the
EBA.
After having been notified by the competent authority, the EBA shall immediately
publish the list referred to in the first subparagraph. The list shall be continuously
kept up-to-date.

EN

38

EN

Article 23
Calculation of trading activities
1.

For the purposes of Article 3, trading activities shall be calculated as follows in
accordance with the applicable accounting regime.
Trading Activities = (TSA + TSL + DA + DL)/2, where:
(a)

Trading Securities Assets (TSA) are assets that are part of a portfolio managed
as a whole and for which there is evidence of a recent actual pattern of shortterm profit taking, excluding derivative assets;

(b)

Trading Securities Liabilities (TSL) are liabilities taken with the intent of
repurchasing in the near term, part of a portfolio managed as a whole, and for
which there is evidence of a recent actual pattern of short-term profit-taking,
excluding derivative liabilities;

(c)

Derivative Assets (DA) are derivatives with positive replacement values not
identified as hedging or embedded derivatives;

(d)

Derivative Liabilities (DL) are derivatives with negative replacement values
not identified as hedging instruments.

2.

Assets and liabilities of insurance and reinsurance undertakings and other nonfinancial undertakings shall not be included in the calculation of trading activities.

3.

EBA shall draft implementing technical standards to lay down the methodology for
calculating the trading activities referred to in paragraph 1 taking into account the
differences in the applicable accounting regimes.
EBA shall submit those draft implementing technical standards to the Commission
by [OP please introduce exact date 1 month from the day of publication of the
Regulation.]
Power is conferred on the Commission to adopt the implementing technical standards
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU)
No 1093/2010.

4.

The Commission shall be empowered to amend, by means of delegated acts in
accordance with Article 35, the components of trading activities referred to in points
(a) to (d) of paragraph 1 of this Article to take into account changes in the applicable
accounting regimes.
Article 24
Submission of information on the trading activities to the competent authority

1.

EN

Entities referred to in Article 3 shall submit, for the first time [PO to insert a date 9
months after the date of publication of this Regulation] and on a yearly basis
thereafter, the relevant information concerning the total amount of their trading
activities and the components thereof, as provided for in Article 23(1), to the
competent authority.

39

EN

2.

EBA shall develop draft implementing technical standards to determine the uniform
template for the reporting referred to in paragraph 1 and the instructions on how to
use that template.
EBA shall submit those draft implementing technical standards to the Commission
by [OP please introduce exact date, 1 month from the day of publication of the
Regulation].
Power is conferred on the Commission to adopt the implementing technical standards
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU)
No 1093/2010.

Chapter V
Compliance
SECTION ONE

Entities
Article 25
Duties of entities subject to this Regulation

EN

1.

The entities subject to this Regulation shall have appropriate measures in place to
enable the competent authorities to obtain information needed to assess the
compliance with this Regulation.

2.

The entities subject to this Regulation shall provide the competent authority with all
the information necessary, including the information necessary for the metrics-based
assessment referred to in Article 9(2), for the assessment of their compliance with
this Regulation. Those entities shall also ensure that their internal control
mechanisms and administrative and accounting procedures permit the monitoring of
their compliance with this Regulation at all times.

3.

The entities subject to this Regulation shall register all their transactions and
document systems and processes used for purposes of this Regulation in such a
manner that the competent authority is able to monitor compliance with this
Regulation at all times.

40

EN

SECTION TWO

Competent authorities
Article 26
Powers and duties of competent authorities
1.

In carrying out the duties assigned to them according to this Regulation, the
competent authorities shall exercise the powers assigned to them in accordance with
relevant Union law.

2.

The competent authority shall monitor the activities of the entities subject to this
Regulation, and assess and ensure compliance with this Regulation on a continuous
basis.

3.

Competent authorities shall have the power to request an EU parent, that is not a
regulated entity but that has at least one subsidiary which is a regulated entity, to
ensure that its regulated subsidiaries comply with this Regulation.

4.

For the purposes of this Regulation, the consolidating supervisor shall be deemed to
be the competent authority with regard to all group entities that belong to the same
group as the EU parent and that are subject to this Regulation.
When the subsidiary of an EU parent is established in another Member State and
supervised by a different supervisor than the EU parent and when the subsidiary is
significant in accordance with Article 6(4) of Regulation (EU) No 1024/2013, the
consolidating supervisor shall consult with the competent authority of the home
Member State of the significant subsidiary with regard to any decision to be made by
the consolidating supervisor pursuant to this Regulation.

Chapter VI
Relationships with third countries
Article 27
Equivalence of the legal framework of a third country
1.

At the request of a competent authority of a Member State or a third country, or on
its own initiative, the Commission may adopt implementing acts determining that:
(a)

EN

the legal, supervisory and enforcement arrangements of a third country ensures
that credit institutions and parent companies in that third country comply with
binding requirements which are equivalent to the requirements laid down in
Articles 6, 10 to 16 and 20;

41

EN

(b)

the legal framework of that third country provides for an effective equivalent
system for the recognition of structural measures provided under third-country
national law regimes.

2.

The Commission may amend or withdraw its decision if the conditions on the basis
of which the decision has been taken are no longer fulfilled.

3.

The Commission shall be empowered to adopt delegated acts in accordance with
Article 35 of this Regulation to set the criteria for assessing whether or not a third
country legal and supervisory framework is equivalent to this Regulation.
The Commission shall adopt the delegated act [OP please introduce the exact date
within 24 months from the entry into force of this Regulation].

4.

The EBA shall establish cooperation arrangements with the relevant competent
authorities of third countries whose legal and supervisory frameworks have been
considered equivalent to this Regulation in accordance with paragraphs 1 to 3. Such
arrangements shall specify at least a minimum information sharing regime between
relevant competent authorities of both jurisdictions.

Chapter VII
Administrative sanctions and measures
Article 28
Administrative sanctions and measures
1.

Without prejudice to the supervisory powers of competent authorities under Article
26 and the right of Member States to provide for and impose criminal sanctions,
Member States shall, in conformity with national law, provide for competent
authorities to have the power to impose administrative sanctions and other
administrative measures in relation to at least the following breaches:
(a)

breach of the prohibition laid down in Article 6;

(b)

any manipulation of information to be submitted in accordance with Article
24(1).

Member States shall provide for competent authorities the power to impose
administrative sanctions and measures on a credit institution and on any group entity,
including a mixed activity holding company, an insurance undertaking or reinsurance
undertaking.
Where the provisions referred to in the first subparagraph apply to legal persons, in
case of a breach Member States shall provide for competent authorities the power to
apply sanctions, subject to the conditions laid down in national law, to members of
the management body and to other individuals who under national law are
responsible for the breach.
2.

EN

The administrative sanctions and measures taken for the purpose of paragraph 1 shall
be effective, proportionate and dissuasive.

42

EN

3.

Where Member States have chosen to lay down criminal sanctions for the breaches
of the provisions referred to in paragraph 1, they shall ensure that appropriate
measures are in place so that a competent authority has all the necessary powers to
liaise with judicial authorities within their jurisdiction to receive specific information
related to criminal investigations or proceedings commenced for possible violations
of Article 6 and for manipulating information to be submitted in accordance with
24(1), and to provide the same to other competent authorities and EBA to fulfil their
obligation to cooperate with each other and, where relevant with EBA for the
purposes of paragraph 1.
Competent authorities may also cooperate with competent authorities of other
Member States with respect to facilitating the exercise of their sanctioning powers.

4.

Member States shall, in conformity with national law, confer on competent
authorities the power to apply at least the following administrative sanctions and
other measures in the event of the breaches referred to in paragraph 1:
(a)

an order requiring the person responsible for the breach to cease the unlawful
conduct and to desist from a repetition of that conduct;

(b)

the disgorgement of the profits gained or losses avoided due to the breach in so
far as they can be determined;

(c)

a public warning which indicates the person responsible and the nature of the
breach;

(d)

withdrawal or suspension of the authorisation;

(e)

a temporary ban of any natural person, who is deemed responsible, from
exercising management functions of an entity referred to in Article 3;

(f)

in the event of repeated breaches, permanent ban of any natural person who is
deemed responsible, from exercising management functions in an entity
referred to in Article 3;

(g)

maximum administrative pecuniary sanctions of at least three times the amount
of the profits gained or losses avoided because of the breach where those can
be determined;

(h)

in respect of a natural person, a maximum administrative pecuniary sanction of
at least EUR 5 000 000 or in the Member States whose currency is not the
euro, the corresponding value in the national currency on the date of entry to
force of this Regulation;

(i)

in respect of legal persons, maximum administrative pecuniary sanctions of at
least 10 per cent of the total annual turnover of the legal person according to
the last available accounts approved by the management body; where the legal
person is a parent undertaking or a subsidiary of the parent undertaking which
has to prepare consolidated financial accounts according to Directive
2013/34/EU, the relevant total annual turnover shall be the total annual
turnover or the corresponding type of income according to the relevant
accounting regime according to the last available consolidated accounts
approved by the management body of the ultimate parent undertaking.

Member States may provide that competent authorities may have powers in addition
to those referred to in this paragraph and may provide for a wider scope of sanctions
and higher levels of sanctions than those established in this paragraph.

EN

43

EN

5.

By [OP please introduce the exact date 12 months after entry into force of this
Regulation] Member States shall notify the rules regarding paragraph 1 to the
Commission and the EBA. They shall notify the Commission and the EBA without
delay of any subsequent amendment thereto.
Article 29
Exercise of supervisory powers and sanctions

1.

Member States shall ensure that when determining the type and level of
administrative sanctions and other measures, competent authorities shall take into
account all relevant circumstances, including, where appropriate:
(a)

the gravity and duration of the breach;

(b)

the degree of responsibility of the person responsible for the breach;

(c)

the financial strength of the person responsible for the breach, by considering
factors such as the total turnover in the case of a legal person, or the annual
income in the case of a natural person;

(d)

the importance of the profits gained or losses avoided by the person responsible
for the breach, insofar as they can be determined;

(e)

the level of cooperation of the person responsible for the breach with the
competent authority, without prejudice to the need to ensure disgorgement of
profits gained or losses avoided by that person;

(f)

previous breaches by the person responsible for the breach;

(g)

measures taken by the person responsible for the breach to prevent its
repetition;

(h)

any potential systemic consequences of the breach.
Article 30
Reporting of breaches

EN

1.

A competent authority shall establish effective mechanisms to enable reporting of
actual or potential breaches referred to in Article 28(1).

2.

The mechanisms referred to in paragraph 1 shall include at least:
(a)

specific procedures for the receipt of reports of breaches and their follow-up,
including the establishment of secure communication channels for such
reports;

(b)

appropriate protection for persons working under a contract of employment,
who report breaches or who are accused of breaches, against retaliation,
discrimination or other types of unfair treatment;

(c)

protection of personal data both of the person who reports the breach and the
natural person who allegedly committed the breach, including protection in
relation to preserving the confidentiality of their identity, at all stages of the
procedure without prejudice to disclosure of information being required by
national law in the context of investigations or subsequent judicial proceedings.

44

EN

3.

Member States shall require employers to have in place appropriate internal
procedures for their employees to report breaches referred to in Article 28(1).

4.

Member States may provide for financial incentives to persons who offer relevant
information about potential breaches of this Regulation to be granted in accordance
with national law where such persons do not have other pre-existing legal or
contractual duties to report such information, and provided that the information is
new, and it results in the imposition of an administrative sanction or other measure
taken for a breach of this Regulation or a criminal sanction.
Article 31
Exchange of information with EBA

1.

Competent authorities shall provide the EBA annually with aggregated information
regarding all administrative measures and sanctions imposed by them in accordance
with Article 28. EBA shall publish that information in an annual report.

2.

Where Member States have chosen to lay down criminal sanctions for the breaches
of the provisions referred to in Article 28(1), their competent authorities shall
provide EBA annually with anonymised and aggregated data regarding all criminal
investigations undertaken and criminal sanctions imposed. EBA shall publish that
information in an annual report.

3.

Where the competent authority has disclosed administrative sanctions, fines and
other measures, as well as criminal sanctions to the public, it shall simultaneously
notify EBA thereof.

4.

EBA shall develop draft implementing technical standards to determine the
procedures and forms for exchange of information as referred to in paragraphs 1 and
2.
EBA shall submit those draft implementing technical standards to the Commission
[OP please introduce exact date by 12 months after the publication of the
Regulation].
Power is conferred to the Commission to adopt the implementing technical standards
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU)
No 1095/2010.
Article 32
Publication of decisions

1.

Subject to the third subparagraph, a competent authority shall publish any decision
imposing an administrative sanction or other measure in relation to a breach of
Article 6 and for manipulating financial reporting referred to in Article 28(1) on its
website immediately after the person subject to that decision has been informed of
that decision.
The information published pursuant to the first subparagraphs shall specify at least
the type and nature of the breach and the identity of the person subject to the
decision.

EN

45

EN

The first and second subparagraphs do not apply to decisions imposing measures that
are of an investigatory nature.
Where a competent authority considers, following a case-by-case assessment, that
the publication of the identity of the legal person subject to the decision, or the
personal data of a natural person, would be disproportionate, or where such
publication would jeopardise an ongoing investigation or the stability of the financial
markets or an on-going investigation, it shall do one of the following:
(a)

defer publication of the decision until the reasons for that deferral cease to
exist;

(b)

publish the decision on an anonymous basis in a manner which is in
accordance with national law where such publication ensures the effective
protection of the personal data concerned and, where appropriate, postpone
publication of the relevant data for a reasonable period of time where it is
foreseeable that the reasons for anonymous publication will cease to exist
during that period;

(c)

not publish the decision in the event that the competent authority is of the
opinion that publication in accordance with point (a) or (b) will be insufficient
to ensure:
(i)

that the stability of financial markets is not jeopardised;

(ii)

the proportionality of the publication of such decisions with regard to
measures which are deemed to be of a minor nature.

2.

Where the decision is subject to an appeal before a national judicial, administrative
or other authority, a competent authority shall also publish immediately on their
website such information and any subsequent information on the outcome of such an
appeal. Moreover, any decision annulling a decision subject to appeal shall also be
published.

3.

A competent authority shall ensure that any decision that is published in accordance
with this Article shall remain accessible on their website for a period of at least five
years after its publication. Personal data contained in those decisions shall be kept on
the website of the competent authority for the period which is necessary in
accordance with the applicable data protection rules.

Chapter VIII
Reports and review
Article 33
Reports by EBA
EBA shall, in cooperation with ESMA, prepare the following reports and submit them to the
Commission within [OP please introduce exact date, 12 months from the publication of the
Regulation.]:

EN

46

EN

(a)

a report on the possible limit of the metrics in points (a) to (h) in Article 9(2) and the
types of securitisation that in the view of EBA do not pose a threat to the financial
stability of the core credit institution or to the Union financial system;

(b)

a report on whether other types of derivatives and other types of financial
instruments than those listed in Article 11(1) should be included for the purpose of
the prudent management of a core credit institution’s own risk;

(c)

a report on whether other financial instruments for hedging purposes than those listed
in Article 12(1) could be permitted to be sold to clients and the proportion of own
funds requirements above which derivatives may not be sold as referred to in point
(b) of Article 12(2).

Article 34
Review
The Commission shall, on a regular basis, monitor the effect of rules laid down in this
Regulation in respect of the achievement of the objectives referred to in Article 1 and on the
stability of the Union financial system as a whole, taking into account market structure
developments as well as the development and activities of the entities regulated by this
Regulation, and make any appropriate proposals. The review shall in particular focus on the
application of the thresholds referred to in Article 3, the application and effectiveness of the
prohibition foreseen in Article 6, the scope of activities referred to in Article 8 and the
suitability of the metrics set out in Article 9. By 1 January 2020 and on a regular basis
thereafter, the Commission shall, after taking into account the views of the competent
authorities, submit to the European Parliament and to the Council a report, including the
issues mentioned above, if appropriate accompanied by a legislative proposal.

Chapter IX
Final provisions
Article 35
Exercise of delegated powers

EN

1.

The power to adopt delegated acts is conferred on the Commission subject to the
conditions laid down in this Article.

2.

The delegation of power referred to in Articles 6(6), 8(3), 10(5), 11(3), 12(2), 15(2),
second sub-paragraph of Article 16, Articles 23(4) and 27(3) shall be conferred on
the Commission for an indeterminate period of time from the date referred to in
Article 38.

3.

The delegation of power referred to in Articles 6(6), 8(3), 10(5), 11(3), 12(2), 15(2),
second sub-paragraph of Article 16, Article 23(4) and 27(3) may be revoked at any
time by the European Parliament or by the Council. A decision of revocation shall
put an end to the delegation of the power specified in that decision. It shall take
effect the day following the publication of the decision in the Official Journal of the

47

EN

European Union or at a later date specified therein. It shall not affect the validity of
any delegated acts already in force.
4.

As soon as it adopts a delegated act, the Commission shall notify it simultaneously to
the European Parliament and to the Council.

5.

A delegated act adopted pursuant to Articles 6(6), 8(3), 10(5), 11(3), 12(2), 15(2),
second sub-paragraph of Article 16, Article 23(4) and 27(3) shall enter into force
only if no objection has been expressed either by the European Parliament or the
Council within a period of 2 months of notification of that act to the European
Parliament and the Council or if, before the expiry of that period, the European
Parliament and the Council have both informed the Commission that they will not
object. That period shall be extended by 2 months at the initiative of the European
Parliament or the Council.

Article 36
Entry into force and date of application
This Regulation shall enter into force on the twentieth day following that of its publication in
the Official Journal of the European Union.
It shall apply from the date of entry into force, with the exception of Article 6 that shall apply
[OP please introduce exact date, 18 months after publication of this Regulation] and Articles
13 to 18 and 20 that shall apply [OP please introduce exact date, 36 months after publication
of this Regulation].
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels,

For the European Parliament
The President

EN

For the Council
The President

48

EN

LEGISLATIVE FINANCIAL STATEMENT
1.

FRAMEWORK OF THE PROPOSAL/INITIATIVE
1.1. Title of the proposal/initiative
1.2. Policy area(s) concerned in the ABM/ABB structure
1.3. Nature of the proposal/initiative
1.4. Objective(s)
1.5. Grounds for the proposal/initiative
1.6. Duration and financial impact
1.7. Management mode(s) envisaged

2.

MANAGEMENT MEASURES
2.1. Monitoring and reporting rules
2.2. Management and control system
2.3. Measures to prevent fraud and irregularities

3.

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE
3.1. Heading(s) of the multiannual financial framework and expenditure budget
line(s) affected
3.2. Estimated impact on expenditure
3.2.1. Summary of estimated impact on expenditure
3.2.2. Estimated impact on operational appropriations
3.2.3. Estimated impact on appropriations of an administrative nature
3.2.4. Compatibility with the current multiannual financial framework
3.2.5. Third-party contributions
3.3. Estimated impact on revenue

EN

49

EN

LEGISLATIVE FINANCIAL STATEMENT
1.

FRAMEWORK OF THE PROPOSAL/INITIATIVE

1.1.

Title of the proposal/initiative

Regulation of the European Parliament and of the Council on structural measures improving
the resilience of EU banks
1.2.

Policy area(s) concerned in the ABM/ABB structure43

Internal Market – Financial markets
1.3.

Nature of the proposal/initiative

: The proposal/initiative relates to a new action
1.4.

Objective(s)

1.4.1.

The Commission's
proposal/initiative

multiannual

strategic

objective(s)

targeted

by

the

Contribute to reducing the risks to financial stability and restoring investor and other market
participants' confidence in financial markets
1.4.2.

Specific objective(s) and ABM/ABB activity(ies) concerned

In the light of the general objectives above, the regulation aims at preventing systemic risk,
financial stress or failure large, complex and interconnected banks and to meet a number of
objectives:
•

To reduce excessive risk taking within the credit institution;

•

To remove material conflicts of interest between the different parts of the credit
institution;

•

To avoid misallocation of resources and to encourage lending to the real economy;

•

To ensure undistorted conditions of competition for all institutions within the internal
market;

•

To reduce interconnectedness within the financial sector leading to systemic risk;

•

To facilitate efficient management, monitoring and supervision of a credit institution;
and

•

To facilitate the orderly resolution and recovery of the group.

43

EN

ABM: activity-based management – ABB: activity-based budgeting.

50

EN

1.4.3.

Expected result(s) and impact
Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted.

Reduction of risk taking within the credit institution;
Reduction of conflicts of interest between the different parts of the credit institution;
Reduced misallocation of resources and more lending to the real economy;
Less distortion of competition within the internal market;
Reduced interconnectedness within the financial sector;
More efficient management, monitoring and supervision of a credit institution;
More orderly resolution and recovery of the largest and most complex banking groups.
1.4.4.

Indicators of results and impact
Specify the indicators for monitoring implementation of the proposal/initiative.

Relevant indicators to evaluate the proposal could include:
•

Number and size of banks subjected to structural separation requirements;

•

Allocation of activities to deposit-taking or trading entity;

•

Transaction volumes, spreads or liquidity in relevant markets;

•

Trends in market shares of banks subject to structural separation;

•

Market concentration in activities subject to structural separation;

•

New entrants in activities subject to structural separation;

•

Trends in profitability of banks subject to structural separation;

•

Measures of the size of implicit public subsidies;

•

Measures of TBTF banks’ funding cost advantage;

•

Measures of trading and loan activity by TBTF banks.

1.5.

Grounds for the proposal/initiative

1.5.1.

Requirement(s) to be met in the short or long term

Since the start of the financial crisis, the European Union (the "EU") and its Member States
have engaged in a fundamental overhaul of bank regulation and supervision.
In the area of banking, the EU has initiated a number of reforms to increase the resilience of
banks and to reduce the impact of potential bank failures, the objectives being to create a
safer, sounder, more transparent and responsible financial system that works for the economy
and society as a whole (see in particular the new Capital Requirement Regulation and
Directive (the "CRR"/"CRDIV") as well as the proposed Bank Recovery and Resolution
Directive (the "BRRD").
However, the EU banking sector and individual banks remain large in absolute and relative
terms. The largest banks are also more active in complex trading activities and more active
cross-border through a very high number of legal entities.
Several EU Member States as well as third countries have therefore taken a step further and
have enacted, or are in the process of enacting, structural reforms of their respective banking
sectors to address concerns related to the largest and most complex financial institutions. Also
international institutions such as the G20, the Financial Stability Board, the Bank for

EN

51

EN

International Settlements, the International Monetary Fund, and the Organisation for
Economic Cooperation and Development have highlighted the role of such reforms as regards
e.g. resolvability and have called for a broad and global debate on bank business models.
1.5.2.

Added value of EU involvement

In light of these developments, there is a strong justification to act at EU level. While the
national reforms broadly share the same objective, they differ in detail. This will distort
establishment decisions, as TBTF banks may transfer activities to, or locate, in another
Member State. A common EU response would therefore be a more effective response. The
need for uniform rules is particularly important for the banking union in order to facilitate the
supervisory tasks of the SSM and the resolution actions of the SRM.
1.5.3.

Lessons learned from similar experiences in the past

n/a
1.5.4.

Compatibility and possible synergy with other appropriate instruments

The EU has already initiated a number of reforms to increase the resilience of banks and to
reduce the probability and impact of bank failure. These reforms include measures to
strengthen banks' solvency (the capital and liquidity requirements part of the CRR/CRDIV
package); measures to strengthen bank resolvability (the proposed BRRD); measures to better
guarantee deposits (the revision of the Deposit Guarantee Schemes directive (the "DGS");
measures to improve transparency and address the risks of derivatives and to improve market
infrastructures (European Market Infrastructure Regulation (the "EMIR") and related
revisions to the Markets in Financial Instruments Directive ("MiFID")). Additionally, in order
to break the negative feedback cycle between the sovereign and banking risks and to restore
confidence in the euro and the banking system, the European Commission has called for
further development of a Banking Union, building on the single rule book that will be
applicable to all banks in the entire EU. This include a Single Supervisory Mechanism
(“SSM”) and a Single Resolution Mechanism ("SRM), which will be mandatory for members
of the euro area but open to voluntary participation for all other Member States.
Despite this broad-ranging reform agenda further measures are needed to reduce the
probability and impact of failure of TBTF banks. Such measures have global support, as
evidenced by recent statements by G20 leaders and ministers.
As regards impact of failure, implementation of the BRRD will pave the way for the orderly
resolution of normal EU banks and thus significantly reduce the impact of failure of such
banks on public finances. The resolution powers will be challenging to exercise for TBTF
banks, given their particularly large, complex and integrated balance sheets and corporate
structures. As a result, while the potential for eventual public support is certainly reduced, it
may still not be eradicated if the powers are not in all instances fully applied. The impact of a
failure of a large and complex bank may therefore still be significant. All this may explain
market perceptions of remaining implicit subsidies and call for further clarity as regards
potential additional structural measures. Structural reform will increase the options available
to authorities when dealing with failing banking groups. By increasing orderly resolution
credibility, it will also improve market discipline and bank balance sheet dynamics ex ante.
Structural reforms could make the newly granted powers in BRRD more effective for TBTF
banks, as resolution authorities would deal with separate, segregated and simpler balance
sheets. This would make it easier to monitor and assess the different entities of a banking
group and it expands the range of options at the disposal of resolution authorities. Additional
measures for TBTF banks would be in line with the BRRD’s proportionality principle.

EN

52

EN

1.6.

Duration and financial impact

: Proposal/initiative of unlimited duration
Entry into force and start of application foreseen for 2015/2017 with compliance with
proprietary trading ban as of January 2017 and potential separation requirements as of July
2018.
1.7.

Management mode(s) planned44
From the 2014 budget
Direct management by the Commission
–

by its departments, including by its staff in the Union delegations;

–

by the executive agencies;
Shared management with the Member States

: Indirect management by delegating implementation tasks to:
–

third countries or the bodies they have designated;

–

international organisations and their agencies (to be specified);

–

the EIB and the European Investment Fund;

–

bodies referred to in Articles 208 and 209 of the Financial Regulation;

–

public law bodies;

–

bodies governed by private law with a public service mission to the extent that
they provide adequate financial guarantees;

–

bodies governed by the private law of a Member State that are entrusted with
the implementation of a public-private partnership and that provide adequate
financial guarantees;

–

persons entrusted with the implementation of specific actions in the CFSP
pursuant to Title V of the TEU, and identified in the relevant basic act.

–

If more than one management mode is indicated, please provide details in the "Comments" section.

Comments
EBA is a regulatory agency acting under the oversight of the Commission.

44

EN

Details of management modes and references to the Financial Regulation may be found on the
BudgWeb site: http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html

53

EN

2.

MANAGEMENT MEASURES

2.1.

Monitoring and reporting rules

The proposal foresees that the Commission should review the effectiveness of the proposed
measures on a periodic basis.
2.2.

Management and control system

2.2.1.

Risk(s) identified

In relation to the legal, economical, efficient and effective use of appropriations resulting
from the proposal, it is expected that the proposal would not bring about new risks that would
not be currently covered by EBA's existing internal control framework.
2.2.2.

Information concerning the internal control system set up

n.a.
2.2.3.

Estimate of the costs and benefits of the controls and assessment of the expected level
of risk of error

n.a.
2.3.

Measures to prevent fraud and irregularities

For the purposes of combating fraud, corruption and any other illegal activity, the provisions
of Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May
1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) shall
apply to the EBA without any restriction.
EBA shall accede to the Interinstitutional Agreement of 25 May 1999 between the European
Parliament, the Council of the European Union and the Commission of the European
Communities concerning internal investigations by the European Anti-Fraud Office (OLAF)
and shall immediately adopt appropriate provisions for all EBA staff.
The funding decisions and the agreements and the implementing instruments resulting from
them shall explicitly stipulate that the Court of Auditors and OLAF may, if need be, carry out
on-the-spot checks on the beneficiaries of monies disbursed by EBA as well as on the staff
responsible for allocating these monies.
Articles 64 and 65 of the Regulation establishing EBA set out the provisions on
implementation and control of the EBA budget and applicable financial rules.

EN

54

EN

3.

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE

3.1.

Heading(s) of the multiannual financial framework and expenditure budget
line(s) affected
• Existing budget lines
In order of multiannual financial framework headings and budget lines.
Type of
expenditure

Budget line
Heading of
multiannual
financial
framework

Diff./nondiff.
(45)

Contribution
from
EFTA
countries
46

from
candidate
countries47

from third
countries

within the
meaning of Article
21(2)(b) of the
Financial
Regulation

YES

YES

NO

NO

12.0302
1.a

European Banking Authority (EBA)

DIFF

• New budget lines requested

45
46
47

EN

Diff. = Differentiated appropriations / Non-Diff. = Non-differentiated appropriations.
EFTA: European Free Trade Association.
Candidate countries and, where applicable, potential candidate countries from the Western Balkans.

55

EN

3.2.

Estimated impact on expenditure

This legislative initiative will have the following impacts on expenditures:
•

The hiring of two new temporary agents (TA) at EBA (2 TA as from January 2016) - See in Annex for more information on their roles
and the way their costs were calculated (of which 40% will be funded by the EU and 60% by the Member States).

•

The new tasks will be carried out with the human resources available within the annual budgetary allocation procedure, in the light of
budgetary constraints which are applicable to all EU bodies and in line with the financial programming for agencies. Notably, the
resources needed by the agency for the new tasks will be consistent and compatible with the human and financing programming for
EBA set by the recent Communication to the European Parliament and the Council – Programming of human and financial resources for
decentralised agencies 2014-2020' (COM(2013)519).

3.2.1.

Summary of estimated impact on expenditure
EUR million (to three decimal places)

Heading of multiannual financial
framework

Number

DG: MARKT

1a Smart and Inclusive Growth – Economic, Social and Territorial Cohesion

2014

2015

2016

2017

2018

2019

2020

TOTAL

0,00
0,00

0,00
0,00

0,16
0,16

0,15
0,15

0,15
0,15

0,15
0,15

0,15
0,15

0,76
0,76

y Operational appropriations

12.0302

Commitments

(1)

European Banking Authority (EBA)

Payments

(2)

Appropriations of an administrative nature financed from the
envelope of specific programmes48

48

EN

Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former "BA" lines), indirect research,
direct research.

56

EN

Number of budget line

(3)

Commitments

TOTAL appropriations

for DG MARKT

y TOTAL operational appropriations

=2+2a

Payments

EN

0,00
0,00

0,00
0,00

0,16
0,16

0,15
0,15

0,15
0,15

0,15
0,15

0,15
0,15

0,76
0,76

0,00
0,00

0,00
0,00

0,16
0,16

0,15
0,15

0,15
0,15

0,15
0,15

0,15
0,15

0,76
0,76

+3

Commitments

(4)

Payments

(5)

y TOTAL appropriations of an administrative nature
financed from the envelope for specific programmes

TOTAL appropriations
for HEADING 1.a
of the multiannual financial framework

=1+1a
+3

(6)

Commitments

=4+ 6

Payments

=5+ 6

Payments

=5+ 6

57

EN

Heading of multiannual financial
framework

5

" Administrative expenditure "
EUR million (to three decimal places)
Year
N

Year
N+1

Year
N+2

Year
N+3

Enter as many years as
necessary to show the duration
of the impact (see point 1.6)

TOTAL

DG:
y Human resources
y Other administrative expenditure

TOTAL DG <…….>

TOTAL appropriations
for HEADING 5
of the multiannual financial framework

Appropriations

(Total commitments =
Total payments)

EUR million (to three decimal places)
Year
N49

TOTAL appropriations
under HEADINGS 1 to 5
of the multiannual financial framework

49

EN

Year
N+1

Year
N+2

Year
N+3

Enter as many years as
necessary to show the duration
of the impact (see point 1.6)

TOTAL

Commitments
Payments

Year N is the year in which implementation of the proposal/initiative starts.

58

EN

3.2.2.

Estimated impact on operational appropriations
–

The proposal/initiative does not require the use of operational appropriations

– : The proposal/initiative requires the use of operational appropriations, as explained below:
Commitment appropriations in EUR million (to three decimal places)
Year
N+2

Year
N+3

Enter as many years as necessary to show the
duration of the impact (see point 1.6)

TOTAL

Cost

No

Cost

No

Cost

No

Cost

No

Cost

No

Cost

No

Avera
ge
cost

No

OUTPUTS
Type50

Ø

Year
N+1

Year
N

Indicate
objectives and
outputs

Cost

No
total

Total
cost

SPECIFIC OBJECTIVE No 151 ...

- Output
- Output
- Output
Subtotal for specific objective No 1
SPECIFIC OBJECTIVE NO 2 ...
- Output
Subtotal for specific objective No 2
TOTAL COST

50
51

EN

Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.).
As described in point 1.4.2. ‘Specific objective(s)…’

59

EN

3.2.3.

Estimated impact on appropriations of an administrative nature

3.2.3.1. Summary
– : The proposal/initiative does not require the use of appropriations of an
administrative nature
–

The proposal/initiative requires the use of appropriations of an administrative
nature, as explained below:

EUR million (to three decimal places)
Year

N52

Year
N+1

Year
N+2

Year
N+3

Enter as many years as necessary to show the
duration of the impact (see point 1.6)

TOTAL

HEADING 5
of the multiannual
financial framework
Human resources
Other
administrative
expenditure
Subtotal HEADING 5
of the multiannual
financial framework

Outside HEADING 553 of
the multiannual financial
framework

Human resources
Other
of
an
nature

expenditure
administrative

Subtotal
outside HEADING 5
of the multiannual
financial framework

TOTAL

The human resources appropriations required will be met by appropriations from the DG that are already assigned to
management of the action and/or have been redeployed within the DG, together if necessary with any additional allocation
which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.

52
53

EN

Year N is the year in which implementation of the proposal/initiative starts.
Technical and/or administrative assistance and expenditure in support of the implementation of EU
programmes and/or actions (former "BA" lines), indirect research, direct research.

60

EN

3.2.3.2. Estimated requirements of human resources
– : The proposal/initiative does not require the use of human resources.
–

The proposal/initiative requires the use of human resources, as explained
below:
Estimate to be expressed in full time equivalent units

Year
N

Year
N+1

Year N+2

Ye
ar
N+
3

Enter
as
many
years
as
necessa
ry to
show
the
duratio
n of the
impact
(see
point
1.6)

y Establishment plan posts (officials and temporary staff)
XX 01 01 01 (Headquarters and Commission’s
Representation Offices)
XX 01 01 02 (Delegations)
XX 01 05 01 (Indirect research)
10 01 05 01 (Direct research)
y External staff (in Full Time Equivalent unit: FTE)54
XX 01 02 01 (CA, SNE, INT from the "global
envelope")
XX 01 02 02 (CA, LA, SNE, INT and JED in the
delegations)
- at Headquarters

XX 01 04 yy55

- Delegations
XX 01 05 02 (CA, SNE, INT - Indirect research)
10 01 05 02 (CA, INT, SNE - Direct research)
Other budget lines (specify)
TOTAL

XX is the policy area or budget title concerned.
The human resources required will be met by staff from the DG who are already assigned to management of the
action and/or have been redeployed within the DG, together if necessary with any additional allocation which
may be granted to the managing DG under the annual allocation procedure and in the light of budgetary
constraints.

Description of tasks to be carried out:
Officials and temporary staff
External staff

54

55

EN

CA= Contract Staff; LA = Local Staff; SNE= Seconded National Expert; INT = agency staff; JED=
Junior Experts in Delegations).
Sub-ceiling for external staff covered by operational appropriations (former "BA" lines).

61

EN

3.2.4.

Compatibility with the current multiannual financial framework
– : Proposal/initiative is compatible the current multiannual financial framework.
– The resources needed by EBA for the new tasks will be consistent and compatible
with the MFF 2014-2020 and the human and financing programming for EBA set
by the recent Communication to the European Parliament and the Council –
Programming of human and financial resources for decentralised agencies 20142020 (COM(2013)519)."
–

Proposal/initiative will entail reprogramming of the relevant heading in the
multiannual financial framework.

Explain what reprogramming is required, specifying the budget lines concerned and the corresponding
amounts.

[…]
–

Proposal/initiative requires application of the flexibility instrument or revision
of the multiannual financial framework56.

Explain what is required, specifying the headings and budget lines concerned and the corresponding
amounts.

[…]
3.2.5.

Third-party contributions
– The proposal/initiative provides for the co-financing estimated below:
Appropriations in EUR million (to 3 decimal places)

2014

2015

2016

2017

2018

2019

2020

Total

Member States

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

TOTAL
appropriations
cofinanced

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

56

EN

See points 19 and 24 of the Interinstitutional Agreement (for the period 2007-2013).

62

EN

3.3.

Estimated impact on revenue
–

Proposal/initiative has no financial impact on revenue.

–

Proposal/initiative has the following financial impact:
on own resources
on miscellaneous revenue
EUR million (to three decimal places)

Budget revenue line:

Article ………….

Appropriation
s available for
the current
financial year

Impact of the proposal/initiative57

2014

2015

2016

2017

2018

2019

2020

0.00

0.00

0.00

0.00

0.00

0.00

0.00

For miscellaneous ‘assigned’ revenue, specify the budget expenditure line(s) affected.

[…]
Specify the method for calculating the impact on revenue.

57

EN

As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net
amounts, i.e. gross amounts after deduction of 25% for collection costs.

63

EN

Annex on structural measures improving the resilience of EU credit institutions
Estimation for EBA
The proposal of the Commission includes provisions for EBA to develop four delegated acts
and six technical standards that should ensure that provisions of a highly technical nature are
consistently implemented across the EU.
The Commission should adopt regulatory technical standards developed by the EBA with
regard to the methodology for the consistent measurement and application of the metrics
relative to the calculation of the threshold above which separation of trading activities should
take place. The Commission and the EBA should ensure that those standards can be applied
by all institutions concerned in a manner that is proportionate to the nature, scale and
complexity of those institutions and their activities. Additionally, the Commission should
adopt implementing technical standards developed by the EBA with regard to the
methodology for calculating the amount of trading activities engaged in by credit institutions
and parent companies and the uniform template for disclosure of total amount and the
components of credits institutions and parent companies' trading activities by means of
implementing acts. The work foreseen requires bilateral and multilateral meetings with
stakeholders, analysis and assessment of options and drafting of consultation documents,
public consultation of stakeholders, setting up and management of standing expert groups
composed of supervisors from Member States, setting up and management of ad hoc expert
groups, analysis of the responses to consultations, drafting of cost/benefit analysis and
drafting of the legal text.
It has been assumed that the Regulation will enter into force in the end of 2015. The
additional EBA resources are therefore only required from 2016. Two temporary agents' posts
will be needed to carry out the required tasks in the long term:
Commission delegated acts:
•

Metrics: rebuttable presumption level, number;

•

Provision of risk management products : cap above which RM products have to
be provided by trading entity;

•

Rules of separation – large exposures:
techniques.

•

Territorial scope: criteria for equivalence

eligible credit risk mitigation

Commission Technical Standards:
•

Propriety trading ban – methodology for calculating trading activities for
purposes of general threshold;

•

Proprietary trading ban – uniform template for disclosure of trading activities;

•

Separation - metrics: consistent measurement and application.

•

Reporting obligation details and entry into force)

•

Registration of trade repositories

•

Authorities having access to trade repositories' data.

Additional resources assumption:

EN

64

EN

•

The two additional posts are assumed to be a temporary agents of functional
group and grade AD7.

•

Average salary costs for different categories of personnel are based on DG
BUDG guidance;

•

Salary correction coefficient for London is 1.344.

•

Mission costs estimated at €10,000.

•

Recruiting-related costs (travel, hotel, medical examinations, installation and
other allowances, removal costs, etc) estimated at €12,700.

The method of calculating the increase in the required budget for the next three years is
presented in more detail in table below. The calculation reflects the fact that that the Union
budget funds 40% of the costs.

Cost type

Amount (in thousands)

Calculation
2016

2017

2018

Total

355

355

1.064

Staff expenditure
11 Salaries and allowances

=2 x 132 x1.344

355

12 Expenditure related to
recruitment

=2 x 13

25

13 Mission expenses

=2 x 10

20

20

20

60

Total : Staff expenditure

400

375

375

1.150

Of which Community
contribution (40%)

160

150

150

240

225

225

460

Of which Member State
contribution (60%)

EN

25

65

690

EN