What changed between the draft committee report and the plenary report

Added:(b) if the exposures to the institution are assigned a risk weight of 50 %, the covered bond shall be assigned a risk weight of 25 %;

Added:(ba) if the exposures to the institution are assigned a risk weight of 75 %, the covered bond shall be assigned a risk weight of 35 %;

Added:(c) if the exposures to the institution are assigned a risk weight of 100 %, the covered bond shall be assigned a risk weight of 50 %;

Added:(d) if the exposures to the institution are assigned a risk weight of 150 %, the covered bond shall be assigned a risk weight of 100 %.’;▌(51a) in Article 132c(2), subparagraph 1 is replaced by the following:

Added:‘Institutions shall calculate the exposure value of a minimum value commitment that meets the conditions set out in paragraph 3 of this Article as the discounted present value of the guaranteed amount using a discount factor that is derived from a risk free rate. Institutions may reduce the exposure value of the minimum value commitment by any losses recognised with respect to the minimum value commitment under the applicable accounting standard.’;

Added:(52) Article 133 is replaced by the following:

Added:‘Article 133 Equity exposures

Added:1. All of the following shall be classified as equity exposures:

Added:(a) any exposure meeting all of the following conditions:

Added:(i) the exposure is irredeemable in the sense that the return of invested funds can be achieved only by the sale of the investment or sale of the rights to the investment or by the liquidation of the issuer;

Added:(ii) the exposure does not embody an obligation on the part of the issuer; and

Added:(iii) the exposure conveys a residual claim on the assets or income of the issuer;

Added:(b) instruments that would qualify as Tier 1 items if issued by an institution;

Added:(c) instruments that embody an obligation on the part of the issuer and meet any of the following conditions:

Added:(i) the issuer may defer the settlement of the obligation indefinitely;

Added:(ii) the obligation requires, or permits at the issuer’s discretion, settlement by issuance of a fixed number of the issuer’s equity shares;

Added:(iii) the obligation requires, or permits at the issuer’s discretion, settlement by issuance of a variable number of the issuer’s equity shares and, ceteris paribus, any change in the value of the obligation is attributable to, comparable to, and in the same direction as, the change in the value of a fixed number of the issuer’s equity shares;

Added:(iv) the holder of the instrument has the option to require that the obligation be settled in equity shares, unless one of the following conditions is met:

Added:– in the case of a traded instrument, the institution has demonstrated to the satisfaction of the competent authority that the instrument is traded on the market more like the debt of the issuer than like its equity;

Added:– in the case of non-traded instruments, the institution has demonstrated to the satisfaction of the competent authority that the instrument should be treated as a debt position.

Added:For the purposes of point (c)(iii), obligations are included that require or permit settlement by issuance of a variable number of the issuer’s equity shares, for which the change in the monetary value of the obligation is equal to the change in the fair value of a fixed number of equity shares multiplied by a specified factor, where both the factor and the referenced number of shares are fixed.

Added:For the purposes of point (iv), where one of the conditions laid down in that point is met, the institution may decompose the risks for regulatory purposes, subject to the prior permission by the competent authority.

Added:(d) debt obligations and other securities, partnerships, derivatives or other vehicles structured in a way that the economic substance is similar to the exposures referred to in points (a), (b) and (c), including liabilities from which the return is linked to that of equities;

Added:(e) equity exposures that are recorded as a loan but arise from a debt/equity swap made as part of the orderly realisation or restructuring of the debt.

Added:2. Equity investments shall not be treated as equity exposures in any of the following cases:

Added:(a) the equity investments are structured in a way that their economic substance is similar to the economic substance of debt holdings which do not meet the criteria in any of the points in paragraph 1;

Added:(b) the equity investments constitute securitisation exposures.

Added:3. Equity exposures, other than those referred to in paragraph 4 to 7, shall be assigned a risk weight of 250 %, unless those exposures are required to be deducted or risk-weighted in accordance with Part Two.

Added:4. The following equity exposures to unlisted companies shall be assigned a risk weight of 400 %, unless those exposures are required to be deducted or risk-weighted in accordance with Part Two:

Added:(a) investments for short-term resale purposes;

Added:(b) investments in venture capital firms or similar investments which are acquired in anticipation of significant short-term capital gains.

Added:By way of derogation from the first subparagraph, long-term equity investment, including investments in equities of corporate clients with which the institution has or intends to establish a long-term business relationship ▌and debt-equity swaps for corporate restructuring purposes shall be assigned a risk weight in accordance with paragraph 3 or 5, as applicable. For the purposes of this Article, a long-term equity investment is an equity investment that is held for three years or longer or incurred with the intention to be held for three years or longer as approved by the institution’s senior management.

Added:5. Institutions that have received the prior permission of the competent authorities, may assign a risk weight of 100 % to equity exposures incurred under legislative programmes to promote specified sectors of the economy, up to the part of such equity exposures that in aggregate does not exceed 10 % of the institution’s own funds, that comply with all of the following conditions:

Added:(a) the legislative programs provide significant subsidies or guarantees, including by multilateral development banks, public development credit institutions as defined in Article 429a(2) or international organisations, for the investment to the institution;

Added:(b) the legislative programs involve some form of government oversight;

Added:(ba) legislative programmes or guarantees involve restrictions on the equity investment, such as limitations on the size and types of businesses in which the institution is investing, on allowable amounts of ownership interests, on the geographical location and on other pertinent factors that limit the potential of the investment for the investing institution;

Added:▌

Added:6. Equity exposures to central banks shall be assigned a risk weight of 0 %.

Added:7. Equity exposures that are recorded as a loan but arise from a debt/equity swap made as part of the orderly realisation or restructuring of the debt shall not be assigned a risk weight lower than the risk weight that would apply had the equity holdings remained in the debt portfolio.’;

Added:(53) Article 134 is amended as follows:

Added:(a) paragraph 3 is replaced by the following:

Added:‘3. Cash items in the process of collection shall be assigned a 20 % risk weight. Cash owned and held by the institution or in transit, and equivalent cash items shall be assigned a 0 % risk weight.’;

Added:(b) the following paragraph 8 is added:

Added:‘8. The exposure value of any other item for which no risk weight is provided under Chapter 2 shall be assigned a risk weight of 100 %.’;

Added:(54) in Article 135, the following paragraphs are added:

Added:‘3. EBA, EIOPA and ESMA shall by [OP please insert the date = 1 year after entry into force] prepare a report on the impediments to the availability of credit assessments by ECAIs, in particular for corporates, and on possible measures to address them taking into account differences across economic sectors and geographical areas. EBA, EIOPA and ESMA shall submit the report to the European Parliament, to the Council and to the Commission.’

Added:3a. ESMA shall by [OP please insert the date = 1 year after entry into force] prepare a report on whether ESG risks are appropriately reflected in ECAI credit risk rating methodologies. Based on this report and if appropriate, the Commission shall submit a legislative proposal to the European Parliament and the Council by [OP please insert the date = 18 months after entry into force]’

Added:;

Added:(55) Article 138 is amended as follow:

Added:(a) the following point (g) is added:

Added:‘(g) an institution shall not use an ECAI credit assessment in relation to an institution that incorporates assumptions of implicit government support, unless the respective ECAI credit assessment refers to an institution owned by or ▌sponsored by central governments, regional governments or local authorities.’;

Added:(b) the following subparagraph is added:

Added:‘For the purposes of point (g), in case of institutions, other than institutions owned by or ▌sponsored by central governments, regional governments or local authorities, for which only ECAI credit assessment exist which do incorporate assumptions of implicit government support, exposures to such institutions shall be treated as exposures to unrated institutions in accordance with Article 121.

Added:Implicit government support means that the central government, regional government or local authority is expected to act to prevent creditors of the institution from incurring losses in the event of the institution’s default or distress.’;

Added:(56) in Article 139(2), points (a) and (b) are replaced by the following:

Added:‘(a) the credit assessment produces a higher risk weight than would be the case when the exposure is treated as unrated and the exposure concerned:

Added:(i) is not a specialised lending exposure;

Added:(ii) ranks pari passu or junior in all respects to the specific issuing program or facility or to senior unsecured exposures of that issuer, as relevant;

Added:(b) the credit assessment produces a lower risk weight and the exposure concerned:

Added:(i) is not a specialised lending exposure;