What changed between the plenary report and the adopted text

Removed:3. The competent authorities shall approve any changes by the institution to the risk management framework referred to in paragraph 1, point (c), and to the details of the risk positions referred to in paragraph 1, point (d).

Removed:4. EBA shall develop draft regulatory technical standards to specify:

Removed:(a) the risk positions that an institution can deliberately take in order to hedge, at least partially, against the adverse movements of foreign exchange rates on any of an institution’s capital ratios referred to paragraph 1, first subparagraph;

Removed:(b) how to determine the maximum amount referred to in paragraph 1, point (a), and the manner in which an institution shall exclude this amount for each of the approaches set out in Article 325(1);

Removed:(c) the criteria that shall be met by an institution’s risk management framework referred to in paragraph 1, point(c), in order to be considered appropriate for the purpose of this Article.

Removed:EBA shall submit those draft regulatory technical standards to the Commission by [OP please insert the date = 2 years after the entry into force of this Regulation].

Removed:Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.’;

Removed:(30) Article 106 is amended as follows:

Removed:(a) in paragraph 3, the last subparagraph is replaced by the following:

Removed:‘Both an internal hedge recognised in accordance with the first subparagraph and the credit derivative entered into with the third party shall be included in the trading book to calculate the own funds requirements for market risk. To calculate the own funds requirements for market risk using the approach set out in Article 325(1), point (b), both positions shall be assigned to the same trading desk established in accordance to Article 104b(1) that manages similar risks.’

Removed:(b) in paragraph 4, the last subparagraph is replaced by the following:

Removed:‘Both an internal hedge recognised in accordance with the first subparagraph and the equity derivative entered into with the eligible third party protection provider shall be included in the trading book for the purposes of calculating the own funds requirements for market risk. For the purposes of calculating the own funds requirements for market risks using the approach set out in Article 325(1), point (b) both positions shall be assigned to the same trading desk established in accordance to Article 104b(1) that manages similar risks.’

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

Removed:‘5. Where an institution hedges non-trading book interest rate risk exposures using an interest rate risk position booked in its trading book, that interest rate risk position shall be considered to be an internal hedge to assess the interest rate risk arising from non-trading positions in accordance with Articles 84 and 98 of Directive 2013/36/EU where the following conditions are met:

Removed:(a) to calculate the own funds requirements for market risk using the approaches referred to in Article 325(1), points (a), (b) and (c), the interest rate risk position has been assigned to a separate portfolio from the other trading book positions, the business strategy of which is solely dedicated to manage and mitigate the market risk of internal hedges of interest rate risk exposure▌;

Removed:(b) to calculate the own funds requirements for market risk using the approaches referred to in Article 325(1), point (b), the position has been assigned to a trading desk established in accordance with Article 104b the business strategy of which is solely dedicated to manage and mitigate the market risk of internal hedges of interest rate risk exposure;

Removed:(c) the institution has fully documented how the position mitigates the interest rate risk arising from non-trading book positions for the purposes of the requirements laid down in Articles 84 and 98 of Directive 2013/36/EU.’;

Removed:(d) the following paragraphs 5a and 5b are inserted:

Removed:‘5a. For the purposes of paragraph 5, point (a), the institution may assign to that portfolio other interest rate risk positions entered into with third parties, or with its own trading book, as long as the institution perfectly offsets the market risk of those interest rate risk positions entered into with its own trading book by entering into opposite interest rate risk positions with third parties.

Removed:5b. The following requirements apply to the trading desk referred to in paragraph 5, point (b):

Removed:(a) that trading desk may include other interest rate risk positions entered into with third parties or with other trading desks of the institution, as long as those positions meet the requirements for inclusion in the trading book referred to in Article 104 and those other trading desks perfectly offset the market risk of those other interest rate risk positions by entering into opposite interest rate risk positions with third parties;

Removed:(b) no trading book positions other than those referred to in point (a) are assigned to that trading desk;

Removed:(c) by way of derogation from Article 104b, that trading desk shall not be subject to the requirements set out in paragraphs 1, 2 and 3 of that Article.

Removed:(e) paragraphs 6 and 7 are replaced by the following:

Removed:‘6. The own funds requirements for the market risk of all the positions assigned to the separate portfolio referred to in paragraph 5, point (a), or to the trading desk referred to in point (b) of that paragraph, shall be calculated on a stand-alone basis, in addition to the own funds requirements for the other trading book positions.

Removed:7. Where an institution hedges a CVA risk exposure using a derivative instrument entered into with its trading book, the position in that derivative instrument shall be recognised as an internal hedge for the CVA risk exposure for the purpose of calculating the own funds requirements for CVA risks in accordance with the approaches set out in Articles 383 or 384, where the following conditions are met:

Removed:(a) the derivative position is recognised as an eligible hedge in accordance with Article 386;

Removed:(b) where the derivative position is subject to any of the requirements set out in Article 325c(2), points (b) or (c), or in Article 325e(1), point (c), the institution perfectly offsets the market risk of that derivative position by entering into opposite positions with third parties;

Removed:The opposite trading book position of the internal hedge recognised in accordance with the first subparagraph shall be included in the institution’s trading book to calculate the own funds requirements for market risk.’

Removed:(31) in Article 107, paragraphs 1, 2 and 3 are replaced by the following:

Removed:‘1. Institutions shall apply either the Standardised Approach provided for in Chapter 2 or, where permitted by the competent authorities in accordance with Article 143, the Internal Ratings Based Approach provided for in Chapter 3 to calculate their risk-weighted exposure amounts for the purposes of Article 92(4), points (a) and (f).

Removed:2. For trade exposures and for default fund contributions to a central counterparty, institutions shall apply the treatment set out in Chapter 6, Section 9 to calculate their risk-weighted exposure amounts for the purposes of Article 92(4), points (a) and (f). For all other types of exposures to a central counterparty, institutions shall treat those exposures as follows:

Removed:(a) as exposures to an institution for other types of exposures to a qualifying CCP;

Removed:(b) as exposures to a corporate for other types of exposures to a non- qualifying CCP.

Removed:3. For the purposes of this Regulation, exposures to third country investment firms and exposures to third country credit institutions and exposures to third country clearing houses and exchanges, as well as exposures to third country financial institutions authorised and supervised by third country authorities and subject to prudential requirements comparable to those applied to institutions in terms of robustness, shall be treated as exposures to an institution only if the third country applies prudential and supervisory requirements to that entity that are at least equivalent to those applied in the Union.”’;

Removed:(32) Article 108 is replaced by the following:

Removed:‘Article 108 Use of credit risk mitigation techniques under the Standardised Approach and the IRB Approach for credit risk and dilution risk

Removed:1. For an exposure to which an institution applies the Standardised Approach under Chapter 2 or applies the IRB Approach under Chapter 3 but without using its own estimates of loss given default (LGD) under Article 143, the institution may take into account the effect of FCP in accordance with Chapter 4 in the calculation of risk-weighted exposure amounts for the purposes of Article 92(4), points (a) and (f), or, where relevant, expected loss (EL) amounts for the purposes of the calculation referred to in Article 36(1), point (d), and Article 62, point (d).

Removed:2. For an exposure to which an institution applies the IRB Approach by using its own estimates of LGD under Article 143, the institution may take into account the effect of FCP in accordance with Chapter 3 in the calculation of risk-weighted exposure amounts for the purposes of Article 92(4), points (a) and (f), and expected loss (EL) amounts for the purposes of the calculation referred to in Article 36(1), point (d), and Article 62, point (d).

Removed:2a. Where an institution applies the IRB Approach by using its own estimates of LGD under Article 143 for both the original exposure and for comparable direct exposures to the protection provider, the institution may take into account the effect of UFCP in accordance with Chapter 3 in the calculation of risk-weighted exposure amounts for the purposes of Article 92(4), points (a) and (f), and expected loss (EL) amounts for the purposes of the calculation referred to in Article 36(1), point (d), and Article 62, point (d). In all other cases, the institution may take into account the effect of UFCP in risk-weighted exposure amounts and EL amounts for the purposes in accordance with Chapter 4.

Removed:3. Subject to the conditions set out in paragraph 4, ▌loans to natural persons may be regarded as exposures secured by a mortgage on residential property, instead of being treated as guaranteed exposures, for the purposes of Part three, Title II, Chapters 2, 3 and 4 as applicable, where in a Member State the following conditions for those▌loans to natural persons have been fulfilled:

Removed:(a) the majority of loans to natural persons for the purchase of residential properties in that Member State are not provided as mortgages in legal form;

Removed:(b) the majority of loans to natural persons for the purchase of residential properties in that Member State are guaranteed by a guarantor with a credit assessment by an nominated ECAI corresponding to a credit quality step of 1 or 2, that is required to repay the institution in full where the original borrower defaults;

Removed:(c) the institution has the legal right to take a mortgage on the residential property in the event that the guarantor referred to in point (b) does not meet its obligations under the guarantee provided.

Removed:Competent authorities shall inform EBA where the conditions referred in points (a), (b) and (c) are met in the national territories of their jurisdictions, and shall provide the names of guarantors eligible to that treatment which fulfil the conditions of this paragraph and paragraph 4.

Removed:EBA shall publish the list of all such eligible guarantors on its website and update that list yearly.

Removed:4. For the purposes of paragraph 3, loans referred to in that paragraph may be treated as exposures secured by a mortgage on residential property, instead of being treated as guaranteed exposures, where all of the following conditions are met:

Removed:(a) for an exposure that is treated under the Standardised Approach the exposure meets all of the requirements to be assigned to the Standardised Approach ‘exposures secured by mortgages on immovable property’ exposure class pursuant to Articles 124 and 125 with the exception that the institution granting the loan does not hold a mortgage over the residential property;

Removed:(b) for an exposure that is treated under the IRB Approach, the exposure meets all of the requirements to be assigned to the IRB exposure class ‘retail exposures secured by residential property’ referred to in Article 147(2), (d)(ii), with the exception that the institution granting the loan does not hold a mortgage over the property;

Removed:(c) there is no mortgage lien on the residential property when the loan is granted and for the loans granted from 1 January 2014 the borrower is contractually committed not to grant any mortgage lien without the consent of the institution that originally granted the loan;

Removed:(d) the guarantor is an eligible protection provider as referred to in Article 201, and the guarantor has a credit assessment by an ECAI corresponding to a credit quality step of 1 or 2;

Removed:(e) the guarantor is an institution or a financial sector entity subject to capital requirements at least comparable to those applicable to institutions or insurance undertakings;

Removed:(f) the guarantor has established a fully-funded mutual guarantee fund or equivalent protection for insurance undertakings to absorb credit risk losses, the calibration of which is periodically reviewed by its competent authority and is subject to periodic stress testing, at least every two years;

Removed:(g) the institution is contractually and legally allowed to take a mortgage on the residential property in the event that the guarantor does not meet its obligations under the guarantee provided;

Removed:▌

Removed:4a. Institutions that exercise the option provided for in paragraph 3 for a given eligible guarantor under the mechanism referred to in that paragraph, shall do so for all its exposures to natural persons guaranteed by that guarantor under that mechanism.”;

Removed:(33) the following Article 110a is inserted:

Removed:‘Article 110a Monitoring of contractual arrangements that are not commitments

Removed:‘Institutions shall monitor contractual arrangements that meet all the conditions specified in Article 5, point (9), second subparagraph, points (a) to (e), and shall document to the satisfaction of their competent authorities their compliance with all those conditions.’;

Removed:(34) Article 111 is replaced by the following: