What changed between the plenary report and the adopted text

Removed:(v) other indicator considered relevant by the competent authority;’;

Removed:(d) the following point (20a) is inserted:

Removed:‘(20a) ‘investment holding company’ means an investment holding company as defined in Article 4(1), point (23), of Regulation (EU) 2019/2033 of the European Parliament and of the Council;

Removed:(e) point (26) is replaced by the following:

Removed:‘(26) ‘financial institution’ means an undertaking that meets both of the following conditions:

Removed:(a) the undertaking is not an institution, a pure industrial holding company, an insurance holding company or a mixed‐activity insurance holding company as defined in Article 212(1), points (f) and (g), of Directive 2009/138/EC;

Removed:(b) the undertaking fulfils any of the following conditions:

Removed:(i) the principal activity of the undertaking is to acquire or own holdings or to pursue one or more of the activities listed Annex I, points 2 to 12 and point 15, to Directive 2013/36/EU, or to pursue one or more of the services or activities listed in Annex I, Section 1 or B, to Directive 2014/65/EU of the European Parliament and of the Council in relation to financial instruments listed in Section C of that Annex to that Directive;

Removed:(ii) the undertaking is an investment firm, a mixed financial holding company, an investment holding company, a payment services provider within the meaning of Directive (EU) 2015/2366 of the European Parliament and of the Council, an asset management company or an ancillary services undertaking;’;

Removed:(f) the following point (26a) is inserted:

Removed:‘(26a) ‘pure industrial holding company’ means an undertaking that fulfils all of the following conditions:

Removed:(a) the principal activity of the undertaking is to acquire or own holdings;

Removed:(b) neither the undertaking nor any of the undertakings in which it owns participations are referred to in point (27), points (a), (d), (e), (f), (g), (h), (k) and (l);

Removed:(c) neither the undertaking nor any of the undertakings in which it own participations perform as a principal activity any of the activities listed in Annex I to Directive 2013/36/EU, any of the activities listed in Annex I, Sections A or B, to Directive 2014/65/EU in relation to financial instruments listed in Section C of that Annex to that Directive, or are investment firms, payment services providers within the meaning of Directive (EU) 2015/2366, asset management companies, or ancillary services undertakings;’;

Removed:(g) in point (27), point (c) is deleted;

Removed:(h) point (28) is replaced by the following:

Removed:‘(28) ‘parent institution in a Member State’ means an institution in a Member State which has an institution or a financial institution as a subsidiary, or which holds a participation in an institution or financial institution▌, and which is not itself a subsidiary of another institution authorised in the same Member State, or of a financial holding company or mixed financial holding company set up in the same Member State;’;

Removed:(i) the following points (33a) and (33b) are inserted:

Removed:‘(33a) ‘stand-alone institution in the EU’ means an institution that is not subject to prudential consolidation pursuant to Part One, Title II, Chapter 2 in the EU, and that has no EU parent undertaking subject to such prudential consolidation;

Removed:(33b) ‘stand-alone subsidiary institution in a Member State’ means an institution that meets all of the following criteria:

Removed:(a) the institution is the subsidiary of an EU parent institution, an EU parent financial holding company or an EU parent mixed financial holding company;

Removed:(b) the institution is located in another Member State than its parent institution, parent financial holding company or parent mixed financial holding company;

Removed:(c) the institution has no subsidiary itself and does not hold any participation in an institution or financial institution;’;

Removed:(j) in point (37) the reference to ‘Article 1 of Directive 83/349/EEC’ is replaced by a reference to ‘Article 22 of Directive 2013/34/EU’;

Removed:(k) point (52) is replaced by the following:

Removed:‘(52) ‘operational risk’ means the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including, but not limited to, legal risk, model risk and ICT risk, but excluding strategic and reputational risk;’;

Removed:(l) the following points (52a) to (52i) are inserted:

Removed:‘(52a) ‘legal risk’ means the risk of losses, including, but not limited to, expenses, fines, penalties or punitive damages, which an institution may incur as a consequence of events that result in legal proceedings, including the following:

Removed:(a) supervisory actions and private settlements;

Removed:(b) failure to act where action is necessary to comply with a legal obligation;

Removed:(c) action taken to avoid compliance with a legal obligation;

Removed:(d) misconduct events, which are events that arise from wilful or negligent misconduct, including inappropriate supply of financial services or where the institution does not follow the obligation to provide fair, clear and not misleading information to its retail clients in accordance with Article 24(3) of Directive 2014/65/EU;

Removed:(e) non-compliance with any requirement derived from national or international statutory or legislative provisions;

Removed:(f) non-compliance with any requirement derived from contractual arrangements, or with internal rules and codes of conduct established in accordance with national or international norms and practices;

Removed:(g) non-compliance with ethical rules.

Removed:Legal risk does not comprise refunds to third parties or employees and goodwill payments due to business opportunities, where no breach of any rules or ethical conduct has occurred and where the institution has fulfilled its obligations on a timely basis; and external legal costs where the event giving rise to those external costs is not an operational risk event.

Removed:(52b) ‘model risk’ means the risk of loss an institution may incur as a consequence of decisions that could be principally based on the output of internal models, due to errors in the design, development, implementation▌, use or monitoring of such models, including the following:

Removed:(a) the improper set-up of a selected internal model and its characteristics;

Removed:(b) the inadequate verification of a selected internal model’s suitability for the financial instrument to be evaluated or for the product to be priced, or of the selected internal model’s suitability for the applicable market conditions;

Removed:(c) errors in the implementation of a selected internal model;

Removed:(d) incorrect mark-to-market valuations and risk measurement as a result of a mistake when booking a trade into the trading system;

Removed:(e) the use of a selected internal model or of its outputs for a purpose for which that model was not intended or designed, including manipulation of the modelling parameters;

Removed:(f) the untimely and ineffective monitoring of model performance to assess whether the selected internal model remains fit for purpose;

Removed:(52c) ‘ICT risk’ means the risk of losses or potential losses related to any reasonable identifiable circumstances in relation to the use of network and information systems which, if materialised, may compromise the security of the network and information systems, of any technology dependent tool or process, of operations and processes, or of the provision of services by producing adverse effects in the digital or physical environment;

Removed:(52d) ‘environmental, social or governance ▌risk’ or ‘ESG risk’ means the risk of ▌any negative financial impact on the institution stemming from the current or prospective impacts of environmental, social or governance (ESG) factors on the institution’s counterparties or invested assets; ESG risks materialise through the traditional categories of financial risks, including credit risk, market risk, operational and reputation risks, liquidity and funding risks;

Removed:(52e) ‘environmental risk’ means the risk of ▌ any negative financial impact on the institution stemming from the current or prospective impacts of environmental factors on the institution’s counterparties or invested assets, including factors related to the transition towards the following environmental objectives:

Removed:(a) climate change mitigation ;

Removed:(b) climate change adaptation;

Removed:(c) the sustainable use and protection of water and marine resources;

Removed:(d) the transition to a circular economy;

Removed:(e) pollution prevention and control;

Removed:(f) the protection and restoration of biodiversity and ecosystems;

Removed:Environmental risk includes both physical risk and transition risk.

Removed:(52f) ‘physical risk’, as part of the overall environmental risk, means the risk of ▌any negative financial impact on the institution stemming from the current or prospective impacts of the physical effects of environmental factors on the institution’s counterparties or invested assets;

Removed:(52g) ‘transition risk’, as part of the overall environmental risk, means the risk of ▌any negative financial impact on the institution stemming from the current or prospective impacts of the transition ▌to an environmentally sustainable economy on the institution’s counterparties or invested assets;

Removed:(52h) ‘social risk’ means the risk of ▌any negative financial impact on the institution stemming from the current or prospective impacts of social factors on its counterparties or invested assets;

Removed:(52i) ‘governance risk’ means the risk of ▌any negative financial impact on the institution stemming from the current or prospective impacts of governance factors on the institution’s counterparties or invested assets;’;

Removed:(m) points (54), (55) and (56) are replaced by the following:

Removed:‘(54) ‘probability of default’ or ‘PD’ means the probability of default of an obligor over a one-year period, and, in the context of dilution risk, the probability of dilution over a one-year period;

Removed:(55) ‘loss given default’ or ‘LGD’ means the ▌ratio of the loss on an exposure related to a single facility due to the default of an obligor or facility to the amount outstanding at default, and, in the context of dilution risk, the loss given dilution meaning the ▌ ratio of the loss on an exposure related to a purchased receivable due to dilution, to the amount outstanding of the purchased receivable;