What changed between the plenary report and the adopted text

Removed:‘4. Where multiple margin agreements apply to the same netting set, or the same netting set includes both transactions subject to a margin agreement and transactions not subject to a margin agreement, an institution shall calculate its exposure value as follows:

Removed:(a) the institution shall establish the hypothetical sub-netting sets concerned, composed of transactions included in the netting set, as follows:

Removed:(i) all transactions subject to a margin agreement and to the same margin period of risk as determined in accordance with Article 285, paragraphs 2 to 5, shall be allocated to the same sub-netting set;

Removed:(ii) all transactions not subject to a margin agreement shall be allocated to the same sub-netting set, distinct from the sub-netting sets established in accordance with point (i).

Removed:(b) the institution shall calculate the replacement cost of the netting set referred to in the introductory sentence of this paragraph in accordance with Article 275(2) by taking into account all the transactions within the netting set, subject to a margin agreement or not, and apply all of the following:

Removed:(i) CMV shall be calculated for all the transactions within a netting set gross of any collateral held or posted where positive and negative market values are netted in computing the CMV;

Removed:(ii) NICA, VM, TH, and MTA, where applicable, shall be calculated separately as the sum across the same inputs applicable to each individual margin agreement of the netting set.

Removed:(c) the institution shall calculate the potential future exposure of the netting set referred to in Article 278 by applying all of the following:

Removed:(i) the multiplier referred to in Article 278(1) shall be based on the inputs CMV, NICA and VM, as applicable, in accordance with point (b) of this paragraph;

Removed:(ii) shall be calculated in accordance with Article 278, separately for each hypothetical sub-netting set referred to in point (a)’;

Removed:(b) in paragraph 6, the following subparagraph is added:

Removed:‘By way of derogation from the first sub-paragraph, institutions shall replace a vanilla digital option whose strike equals to K with the relevant collar combination of two sold and bought vanilla call or put options that meet with the following requirements:

Removed:(a) the two options of the collar combination shall have:

Removed:(i) the same expiry date and same spot or forward price of the underlying instrument as the vanilla digital option;

Removed:(ii) strikes equal to 0.95∙K and 1.05∙K respectively;

Removed:(b) the collar combination exactly replicates the vanilla digital option payoff outside the range between the two strikes referred to in point (a);

Removed:The risk position of the two options of the collar combination shall be calculated separately in accordance with Article 279.’;

Removed:(130a) in Article 291(5), point (f) is replaced by the following:

Removed:‘(f) to the extent that this uses existing market risk calculations for own funds requirements for default risk as set out in Title IV, Chapter 1a, Section 4 or 5 or for default risk using an internal default risk model as set out in Title IV, Chapter 1b, Section 3 that already contain an LGD assumption, the LGD in the formula used shall be 100 %.’;

Removed:(131) in Part Three, Title III is replaced by the following:

Removed:‘TITLE III OWN FUNDS REQUIREMENTS FOR OPERATIONAL RISK

Removed:For the purposes of this Title, the following definitions shall apply:

Removed:(a) ‘operational risk event’ means any event linked to an operational risk which generates a loss or multiple losses, within one or multiple financial years;

Removed:(b) ‘aggregated gross loss’ means the sum of all gross losses linked to the same operational risk event over one or multiple financial years;

Removed:(c) ‘aggregated net loss’ means the sum of all net losses linked to the same operational risk event over one or multiple financial years.

Removed:The own funds requirement for operational risk shall be the business indicator component calculated in accordance with Article 313.

Removed:Institutions shall calculate their business indicator component in accordance with the following formula:

Removed:where:

Removed:BIC = the business indicator component;

Removed:BI = the business indicator, expressed in billions of euro, calculated in accordance with Article 314.

Removed:1. Institutions shall calculate their business indicator in accordance with the following formula:

Removed:where:

Removed:BI = the business indicator, expressed in billions of euro;

Removed:ILDC = the interest, leases and dividend component, expressed in billions of euros and calculated in accordance with paragraph 2;

Removed:SC = the services component, expressed in billions of euros and calculated in accordance with paragraph 3;

Removed:FC = the financial component, expressed in billions of euros and calculated in accordance with paragraph 4.

Removed:2. For the purposes of paragraph 1, the interest, leases and dividend component shall be calculated in accordance with the following formula:

Removed:where:

Removed:ILDC = the interest, leases and dividend component;

Removed:IC = the interest component, determined at jurisdiction level for the purpose of taking into consideration high and low net interest margin jurisdictions which is the institution’s interest income from all financial assets and other interest income, including finance income from financial leases and income from operating leases and profits from leased assets, minus the institution’s interest expenses from all financial liabilities and other interest expenses, including interest expense from financial and operating leases, depreciation and impairment of, and losses from, operating leased assets, calculated as the annual average of the absolute values of the differences over the previous three financial years;

Removed:AC = the asset component, determined at jurisdiction level for the purposes of taking into consideration high and low net interest margin jurisdictions which is the sum of the institution’s total gross outstanding loans, advances, interest bearing securities, including government bonds, and lease assets, calculated as the annual average over the previous three financial years on the basis of the amounts at the end of each of the respective financial years;

Removed:DC = the dividend component, which is the institution’s dividend income from investments in stocks and funds not consolidated in the financial statements of the institution, including dividend income from non-consolidated subsidiaries, associates and joint ventures, calculated as the annual average over the previous three financial years.

Removed:3. For the purposes of paragraph 1, the services component shall be calculated in accordance with the following formula:

Removed:where:

Removed:SC = the services component;

Removed:OI = the other operating income, which is the annual average over the previous three financial years of the institution’s income from ordinary banking operations not included in other items of the business indicator but of similar nature;

Removed:OE = the other operating expenses, which is the annual average over the previous three financial years of the institution’s expenses and losses from ordinary banking operations not included in other items of the business indicator but of similar nature, and from operational risk events;

Removed:FI = the fee and commission income component, which is the annual average over the previous three financial years of the institution’s income received from providing advice and services, including income received by the institution as an outsourcer of financial services;

Removed:FE = the fee and commission expenses component, which is the annual average over the previous three financial years of the institution’s expenses paid for receiving advice and services, including outsourcing fees paid by the institution for the supply of financial services, but excluding outsourcing fees paid for the supply of non-financial services.

Removed:3a. Subject to the prior permission of the competent authority, and to the extent that the institutional protection scheme disposes of suitable and uniformly stipulated systems for the monitoring and classification of operational risks, institutions that are members of an institutional protection scheme meeting the requirements of Article 113(7) may calculate the SC net of any income received from or expenses paid to institutions, that are members of the same institutional protection scheme.

Removed:Any financial consequence resulting from the related operational risks is subject to mutualisation across institutional protection scheme members.

Removed:4. For the purposes of paragraph 1, the financial component shall be calculated in accordance with the following formula:

Removed:where:

Removed:FC = the financial component;

Removed:TC = the trading book component, which is the annual average of the absolute values over the previous three financial years of the net profit or loss, as applicable, on the institution’s trading book, including on trading assets and trading liabilities, from hedge accounting, and from exchange differences;

Removed:BC = the banking book component, which is the annual average of the absolute values over the previous three financial years of the net profit or loss, as applicable, on the institution’s banking book, including on financial assets and liabilities measured at fair value through profit and loss, from hedge accounting, from exchange differences, and realised gains and losses on financial assets and liabilities not measured at fair value through profit and loss.

Removed:5. Institutions shall not use any of the following elements in the calculation of their business indicator:

Removed:(a) income and expenses from insurance or reinsurance businesses;

Removed:(b) premiums paid and payments received from insurance or reinsurance policies purchased;

Removed:(c) administrative expenses, including staff expenses, outsourcing fees paid for the supply of non-financial services, and other administrative expenses;