What changed between the plenary report and the adopted text

Removed:The targets and measures to address the ESG risks included in the plans referred to in the first subparagraph shall take into account the latest reports and measures prescribed by the European Scientific Advisory Board on Climate Change, in particular in relation to the achievement of the climate targets of the Union. The plans shall adopt an holistic approach and cover all banks activities and clients. Where the institution discloses information on sustainability matters in accordance with Directive 2013/34/EU, the plans referred to in the first subparagraph shall be consistent with the plans referred to in Article 19a or Article 29a of that Directive. In particular, the plans referred to in the first subparagraph shall include actions with regards to the business model and strategy of the institution that are consistent across both plans.

Removed:Member States shall ensure a proportionate application of the first and second subparagraphs for the management body of small and non-complex institutions, indicating in what areas a waiver or a simplified procedure may be applied.’;

Removed:(ba) in paragraph 4, the second subparagraph is replaced by the following:

Removed:‘The management body in its supervisory function and, where one has been established, the risk committee shall determine the nature, the amount, the format, and the frequency of the information on risk which it is to receive. In order to assist in the establishment of sound remuneration policies and practices, the risk committee shall, without prejudice to the tasks of the remuneration committee, examine whether incentives provided by the remuneration system take into consideration risk, including those resulting from impacts of environmental, social and governance factors, capital, liquidity and the likelihood and timing of earnings.’;

Removed:(c) paragraph 5 is replaced by the following:

Removed:‘5. Member States shall, in accordance with the proportionality requirement laid down in Article 7(2) of Commission Directive 2006/73/EC*11, ensure that institutions have internal control functions independent from the operational functions and which shall have sufficient authority, stature, resources and access to the management body.

Removed:Member States shall ensure that the internal control functions ensure that all material risks are identified, measured and properly reported. They shall ensure that the internal control functions are actively involved in elaborating the institution's risk strategy and in all material risk management decisions and that the internal control functions can deliver a complete view of the whole range of risks of the institution.

Removed:Member States shall ensure that the internal control function can report directly to the management body in its supervisory function, independent from members of the management body in its management function or senior management, and can raise concerns and warn that body, where appropriate, where specific risk developments affect or may affect the institution, without prejudice to the responsibilities of the management body pursuant to this Directive and Regulation (EU) No 575/2013.

Removed:The heads of internal control functions shall be independent senior managers with distinct responsibility for the risk management, compliance and internal audit functions. Where the nature, scale and complexity of the activities of the institution do not justify to appoint a specific person for each internal control functions, another senior person within the institution may combine the responsibilities for those functions, provided there is no conflict of interest.

Removed:The heads of the internal control functions shall not be removed without prior approval of the management body in its supervisory function▌.

Removed:________

Removed:*11 Commission Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (OJ L 241, 2.9.2006, p. 26).’;

Removed:(14a) in Article 77(4), the first subparagraph is replaced by the following:

Removed:‘EBA shall develop draft regulatory technical standards to define the notion 'exposures to specific market risk which are material in absolute terms' referred to in the first subparagraph of paragraph 3 and the thresholds for large numbers of material counterparties and positions in debt instruments of different issuers.’;

Removed:(15) Article 78 is amended as follows:

Removed:(a) the title is replaced by the following:

Removed:‘Supervisory benchmarking of approaches for calculating own funds requirements’;

Removed:(b) paragraph 1 is replaced by the following:

Removed:‘1. Competent authorities shall ensure all of the following:

Removed:(a) that institutions permitted to use internal approaches for the calculation of risk weighted exposure amounts or own funds requirements report the results of their calculations for their exposures or positions that are included in the benchmark portfolios;

Removed:(b) that institutions using the alternative standardised approach set out in Part Three, Title IV, Chapter 1a of Regulation (EU) No 575/2013 report the results of their calculations for their exposures or positions that are included in the benchmark portfolios;

Removed:(c) that institutions permitted to use internal approaches under Part Three, Title II, Chapter 3 of Regulation (EU) No 575/2013, as well as relevant institutions that apply the standardised approach under Part Three, Title II, Chapter 2 of that Regulation, report the results of the calculations of the approaches used for the purpose of determining the amount of expected credit losses for their exposures or positions that are included in the benchmark portfolios, where any of the following conditions is met:

Removed:(i) institutions prepare their accounts in conformity with the international accounting standards adopted in accordance with Article 6(2) of Regulation (EC) No 1606/2002;

Removed:(ii) institutions perform the valuation of assets and off-balance sheet items and the determination of their own funds in conformity with the international accounting standards pursuant to Article 24(2) of Regulation (EU) No 575/2013;

Removed:(iii) institutions perform the valuation of assets and off-balance sheet items in conformity with accounting standards under Directive 86/635/EEC*12 and they use an expected credit loss model that is the same as the one used in international accounting standards adopted in accordance with Article 6(2) of Regulation (EC) No 1606/2002.

Removed:Institutions shall submit the results of their calculations referred to in the first subparagraph together with an explanation of the methodologies used to produce them and any qualitative information, as requested by EBA, that can explain the impact of these calculations on own funds requirements, to the competent authorities at least annually, unless the EBA conducts the exercise biennially, while the frequency of the submission may differ in relation to the different approaches referred to in points (a), (b) and (c) of the first subparagraph.’; .

Removed:(c) paragraph 3 is amended as follows:

Removed:(i) the introductory wording is replaced by the following:

Removed:‘Competent authorities shall, on the basis of the information submitted by institutions in accordance with paragraph 1, monitor the range of risk weighted exposure amounts or own funds requirements, as applicable, for the exposures or transactions in the benchmark portfolio resulting from the approaches of those institutions. Competent authorities shall make an assessment of the quality of those approaches with the frequency referred to in paragraph 1, second subparagraph, paying particular attention to:’;

Removed:(ii) the second subparagraph is replaced by the following:

Removed:‘EBA shall produce a report to assist the competent authorities in the assessment of the quality of the approaches based on the information referred to in paragraph 2.’;

Removed:(d) in paragraph 5, the introductory sentence is replaced by the following:

Removed:‘The competent authorities shall ensure that their decisions on the appropriateness of corrective actions as referred to in paragraph 4, comply with the principle that such actions must maintain the objectives of the approaches within the scope of this Article and therefore do not:’;

Removed:(e) paragraph 6 is replaced by the following:

Removed:‘6. EBA may issue guidelines and recommendations in accordance with Article 16 of Regulation (EU) No 1093/2010 where it considers them necessary on the basis of the information and assessments referred to in paragraphs 2 and 3 of this Article in order to improve supervisory practices or practices of institutions with regard to the approaches within the scope of the supervisory benchmarking.’;

Removed:(f) paragraph 8 is amended as follows:

Removed:(i) in the first subparagraph, the following point (c) is added:

Removed:‘(c) the list of relevant institutions referred to in paragraph 1, point (c).’;

Removed:(ii) the following second subparagraph is inserted:

Removed:‘For the purposes of point (c), when determining the list of relevant institutions EBA shall take into account proportionality considerations.’;

Removed:_______

Removed:*12 Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions (OJ L 372, 31.12.1986, p. 1).

Removed:(16) paragraph 1 of Article 85 is amended as follows:

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

Removed:(17) a new Article 87a is inserted:

Removed:‘Article 87a Environmental, social and governance risks

Removed:1. Competent authorities shall ensure that institutions have, as part of their robust governance arrangements including risk management framework required under Article 74(1), robust strategies, policies, processes and systems for the identification, measurement, management and monitoring of environmental, social and governance risks over an appropriate set of time horizons.

Removed:2. The strategies, policies, processes and systems referred to in paragraph 1 shall be proportionate to the scale, nature and complexity of the environmental, social and governance risks of the business model and scope of the institution’s activities, and consider short, medium and a long-term horizon of at least 10 years.

Removed:3. Competent authorities shall ensure that institutions test their resilience to long-term negative impacts of environmental, social and governance factors, both under baseline and adverse scenarios within a given timeframe, starting with climate-related factors. For the testing, competent authorities shall ensure that institutions include a number of environmental, and social and governance scenarios reflecting potential impacts of environmental and social changes and associated public policies on the long-term business environment. Competent authorities shall ensure that for the testing, institutions use credible scenarios, based on the scenarios elaborated by international organisations.

Removed:4. Competent authorities shall assess and monitor developments of institutions’ practices concerning their environmental, social and governance strategy and risk management, including the plans to be prepared in accordance with Article 76, as well as the progress made and the risks to adapt their business models to the relevant applicable regulatory objectives towards a sustainable economy, taking into account ▌related loan origination policies, and environmental, social and governance related targets and limits. Competent authorities shall verify the robustness of those plans as part of the supervisory review and evaluation process.

Removed:Where relevant, for the assessment referred to in the first subparagraph, Competent authorities may cooperate with authorities or public bodies in charge of climate change and environmental supervision.

Removed:5. EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, to specify:

Removed:(a) minimum standards and reference methodologies for the identification, measurement, management and monitoring of environmental, social and governance risks;

Removed:(b) the content of plans to be prepared in accordance with Article 76(2), which shall include specific timelines and intermediate quantifiable targets and milestones, in order to monitor and address the financial risks stemming from ESG factors, including those arising from the transition and the process of adjustment to the applicable regulatory objectives towards a sustainable economy, in particular the objective to achieve climate neutrality by 2050 as set out in Regulation (EU) 2021/1119;

Removed:(c) qualitative and quantitative criteria for the assessment of the impact of environmental, social and governance risks on the financial stability of institutions in the short, medium and long term;

Removed:(d) criteria for setting the scenarios and methods referred to in paragraph 3, including the parameters and assumptions to be used in each of the scenarios and specific risks.

Removed:Where relevant, the targets, methodologies and the content of the plans, including targets criteria and commitments included in the plans, refered to in Directive 2013/34/EU shall be consistent with the criteria, methodologies and the targets as mentioned in (a), (b), (c) and (d) of this paragraph and shall be consistent with assumptions and commitments included in the plans.

Removed:EBA shall publish the guidelines referred to in point (b) of the first subparagraph by [OP please insert the date = 12 months from the date of entry into force of this amending Directive], the guidelines referred to in point (d) of the first subparagraph by [OP please insert the date = 18 months from the date of entry into force of this amending Directive] and the the guidelines referred to in points (a) and (c) of the first subparagraph by [OP please insert the date = 24 months from the date of entry into force of this amending Directive]. EBA shall update those guidelines on a regular basis, to reflect the progress made in measuring and managing environmental, social and governance factors as well as the developments of policy objectives of the Union on sustainability.’;

Removed:(18) Article 88 is amended as follows:

Removed:(a) in paragraph 1, point (e) is replaced by the following: