What changed between the plenary report and the adopted text

Removed:‘Where a public development credit institution as defined in Article 429a(2) issues a promotional loan as defined in Article 429a(3) to another institution, or to a financial institution that is authorised to perform activities as referred to in points 2 or 3 of Annex I to Directive 2013/36/EU and that meets the conditions pursuant to Article 119(5) of this Regulation, and where that other institution or financial institution passes through directly or indirectly that promotional loan to an ultimate obligor and cedes the receivable from the promotional loan as collateral to the public development credit institution, the public development credit institution may use the ceded receivable as eligible collateral, regardless of the original maturity of the ceded receivable.’;

Removed:(e) in paragraph 6, in the first subparagraph, point (d) is replaced by the following:

Removed:‘(d) the institution demonstrates that in at least 90 % of all liquidations for a given type of collateral the realised proceeds from the collateral are not below 70 % of the collateral value. Where there is material volatility in the market prices, the institution demonstrates to the satisfaction of the competent authorities that its valuation of the collateral is sufficiently conservative.’;

Removed:(100) Article 201 is amended as follows:

Removed:(a) paragraph 1 is amended as follows:

Removed:(i) point (d) is replaced by the following:

Removed:‘ (d) international organisations to which a 0 % risk weight is assigned in accordance with in Article 118;’;

Removed:(ii) the following point (fa) is inserted:

Removed:‘(fa) regulated financial sector entities;’;

Removed:(iii) point (g) is replaced by the following:

Removed:‘(g) where the credit protection is not provided to a securitisation exposure, other undertakings, that have a credit assessment by a nominated ECAI, including parent undertakings, subsidiaries or affiliated entities of the obligor where a direct exposure to those parent undertakings, subsidiaries or affiliated entities has a lower risk weight than the exposure to the obligor;’;

Removed:(iv) the following point (ga) is inserted:

Removed:‘(ga) where the credit protection is provided to a securitisation exposure, other undertakings, that have a credit assessment by a nominated ECAI of credit quality step 1, 2 or 3 and that had a credit assessment of credit quality step 1 or 2 at the time the credit protection was provided, including parent undertakings, subsidiaries and affiliated entities of the obligor where a direct exposure to those parent undertakings, subsidiaries or affiliated entities has a lower risk weight than that of the securitisation exposure;’;

Removed:(v) the following subparagraph is added:

Removed:‘For the purposes of point (fa), ‘regulated financial sector entity’ means a financial sector entity meeting the condition laid down in Article 142(1), point (4)(b).’;

Removed:(b) paragraph 2 is replaced by the following:

Removed:‘2. In addition to the protection providers listed in paragraph 1, corporate entities that are internally rated by the institution in accordance with Chapter 3, Section 6, shall be eligible protection providers of unfunded credit protection where the institution uses the IRB approach for exposures to those corporate entities.’;

Removed:(101) Article 202 is deleted;

Removed:(102) in Article 204, the following paragraph 3 is added:

Removed:‘3. First-to-default and all other nth-to-default credit derivatives shall not be eligible forms of unfunded credit protection under this Chapter.

Removed:▌’;

Removed:(103) Article 208 is amended as follows:

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

Removed:(i) in point (b), the following sentences are added:

Removed:‘In the case of a revaluation beyond the value at the time the loan was granted the value of the property shall not exceed the average value measured for that property or for a comparable property over the last four years in case of commercial immovable property, and over the last eight years in case of residential property. The value of the property can exceed this value in case modifications are made to the property that unequivocally increase its value, such as improvements of the energy performance or improvements to the resilience, protection and adaptation to physical risks of the building or housing unit▌.’;

Removed:(ii) the second subparagraph is deleted;

Removed:(b) the following paragraph 3a is inserted:

Removed:‘3a. In accordance with paragraph 3▌, institutions may carry out the monitoring of the property value and the identification of immovable property in need of revaluation by means of advanced statistical or other mathematical methods (‘models’), developed independently from the credit decision process and subject to the fulfilment of the following conditions:

Removed:(a) the institutions set out, in their policies and procedures, the criteria for using models to▌ monitor the values of collateral and to identify the properties that should be revaluated. Those policies and procedures shall account for such models’ proven track record, property-specific variables considered, the use of minimum available and accurate information, and the models’ uncertainty;

Removed:(b) the institutions ensure that the models used are:

Removed:(i) property and location specific at a sufficient level of granularity;

Removed:(ii) valid and accurate, and subject to robust and regular back-testing against the actual observed transaction prices;

Removed:(iii) based on a sufficiently large and representative sample, based on observed transaction prices;

Removed:(iv) based on up-to-date data of high quality;

Removed:(c) the institutions are ultimately responsible for the appropriateness and performance of the models, the valuer referred to in paragraph 3, point (b), is responsible for the valuation of immovable property for which the need for revaluation has been identified that is made using the models and the institutions understand the methodology, input data and assumptions of the models used;

Removed:(d) the institutions ensure that the documentation of the models is up to date;

Removed:(e) the institutions have in place adequate IT processes, systems and capabilities and have sufficient and accurate data for any model-based monitoring of the value of immovable property collateral and identification of properties in need of revaluation▌;

Removed:(f) the estimates of models are independently validated and the validation process is generally consistent with the principles set out in Article 185, where applicable and the independent valuer referred to in paragraph 3, point (b) is responsible for the final values used by the institution for the purposes of this Chapter.’;

Removed:(ba) the following paragraph 3b is inserted:

Removed:‘3b. The valuation criteria set out in Article 229(1) shall be taken into account for the purpose of monitoring and revaluation of the property value as set out in this Article.’;

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

Removed:‘5. The immovable property taken as credit protection shall be adequately insured against the risk of damage and institutions shall have in place procedures to monitor the adequacy of the insurance.’;

Removed:(104) ▌Article 210 is amended as follows:

Removed:(a) in paragraph 1, the following subparagraph is added:

Removed:‘Where general security agreements, or other forms of floating charge, provide the lending institution with a registered claim over a company’s assets and where that claim contains both assets that are not eligible as collateral under the IRB Approach and assets that are eligible as collateral under the IRB Approach, the institution may recognise those latter assets as eligible funded credit protection. In that case, that recognition shall be conditional on those assets meeting the requirements for eligibility of collateral under the IRB Approach as set out in this Chapter.’;

Removed:(b) the following paragraph is added:

Removed:‘2. For physical collateral, obsolescence of collateral shall also include ESG-related valuation considerations related to prohibitions or limitations imposed by the relevant Member States and Union legal and regulatory objectives and legislation, as well as, where relevant for internationally active institutions, third country objectives and regulations.’;

Removed:(105) in Article 213, paragraph 1 is replaced by the following:

Removed:‘1. Subject to Article 214(1), credit protection deriving from a guarantee or credit derivative shall qualify as eligible unfunded credit protection where all of the following conditions are met:

Removed:(a) the credit protection is direct;

Removed:(b) the extent of the credit protection is clearly set out and incontrovertible;

Removed:(c) the credit protection contract does not contain any clause, the fulfilment of which is outside the direct control of the lending institution, that:

Removed:(i) would allow the protection provider to cancel or change the credit protection unilaterally;

Removed:(ii) would increase the effective cost of the credit protection as a result of a deterioration in the credit quality of the protected exposure;

Removed:(iii) could prevent the protection provider from being obliged to pay out in a timely manner in the event that the original obligor fails to make any payments due, or where the leasing contract has expired for the purposes of recognising guaranteed residual value under Articles 134(7) and 166(4);

Removed:(iv) could allow the maturity of the credit protection to be reduced by the protection provider;

Removed:(d) the credit protection contract is legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement.

Removed:For the purposes of point (c), a clause in the credit protection contract providing that faulty due diligence or fraud by the lending institution or by the debtor cancels or diminishes the extent of the credit protection offered by the guarantor, shall not disqualify that credit protection from being eligible.

Removed:▌

Removed:For the purposes of point (c), the protection provider may make one lump sum payment of all monies due under the claim, or may assume the future payment obligations of the obligor covered by the credit protection contract.’;