Legal provisions of COM(2009)362 - Amendment of Directives 2006/48/EC and 2006/49/EC as regards capital requirements for the trading book and for re-securitisations, and the supervisory review of remuneration policies SEC(2009) 974 final SEC(2009) 975 final

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dossier COM(2009)362 - Amendment of Directives 2006/48/EC and 2006/49/EC as regards capital requirements for the trading book and for ...
document COM(2009)362 EN
date December 15, 2010

Contents

Article 1 - Amendments to Directive 2006/48/EC

Directive 2006/48/EC is hereby amended as follows:

1.Article 4 is amended as follows:

(a)the following points are inserted:

‘(40a)“re-securitisation” means a securitisation where the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is a securitisation position;

(40b)“re-securitisation position” means an exposure to a re-securitisation;’;

(b)the following point is added:

‘(49)“discretionary pension benefits” means enhanced pension benefits granted on a discretionary basis by a credit institution to an employee as part of that employee’s variable remuneration package, which do not include accrued benefits granted to an employee under the terms of the company pension scheme.’.

2.In Article 11(1), the following subparagraph is added:

‘The Committee of European Banking Supervisors shall ensure the existence of guidelines for the assessment of the suitability of the persons who effectively direct the business of the credit institution.’.

3.Article 22 is amended as follows:

(a)paragraph 1 is replaced by the following:

‘1.   Home Member State competent authorities shall require that every credit institution have robust governance arrangements, which include a clear organisational structure with well-defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks it is or might be exposed to, adequate internal control mechanisms, including sound administration and accounting procedures, and remuneration policies and practices that are consistent with and promote sound and effective risk management.’;

(b)the following paragraphs are added:

‘3.   Home Member State competent authorities shall use the information collected in accordance with the criteria for disclosure established in point 15(f) of part 2 of Annex XII to benchmark remuneration trends and practices. The competent authorities shall provide the Committee of European Banking Supervisors with that information.

4. The Committee of European Banking Supervisors shall ensure the existence of guidelines on sound remuneration policies which comply with the principles set out in points 23 and 24 of Annex V. The guidelines shall take into account the principles on sound remuneration policies set out in the Commission Recommendation of 30 April 2009 on remuneration policies in the financial services sector (10).

The Committee of European Banking Supervisors shall, inter alia, ensure the existence of guidelines to:

(a)set specific criteria to determine the appropriate ratios between the fixed and the variable component of the total remuneration within the meaning of point 23(l) of Annex V;

(b)specify instruments that can be eligible as instruments within the meaning of point 23(o)(ii) of Annex V that adequately reflect the credit quality of credit institutions within the meaning of point 23(o) of that Annex.

The Committee of European Securities Regulators shall cooperate closely with the Committee of European Banking Supervisors in ensuring the existence of guidelines on remuneration policies for categories of staff involved in the provision of investment services and activities within the meaning of point 2 of Article 4(1) of Directive 2004/39/EC.

The Committee of European Banking Supervisors shall use the information received from the competent authorities in accordance with paragraph 3 to benchmark remuneration trends and practices at the Union level.

5. Home Member State competent authorities shall collect information on the number of individuals per credit institution in pay brackets of at least EUR 1 million including the business area involved and the main elements of salary, bonus, long-term award and pension contribution. That information shall be forwarded to the Committee of European Banking Supervisors, which shall disclose it on an aggregate home Member State basis in a common reporting format. The Committee of European Banking Supervisors may elaborate guidelines to facilitate the implementation of this paragraph and ensure the consistency of the information collected.

4.In Article 54, the following paragraph is added:

‘Member States shall ensure that, for the purposes of the first paragraph, their respective competent authorities have the power to impose or apply financial and non-financial penalties or other measures. Those penalties or measures shall be effective, proportionate and dissuasive.’.

5.In the first paragraph of Article 57, point (r) is replaced by the following:

‘(r)the exposure amount of securitisation positions which receive a risk weight of 1 250 % under this Directive and the exposure amount of securitisation positions in the trading book that would receive a 1 250 % risk weight if they were in the same credit institutions non-trading book.’.

6.In Article 64, the following paragraph is added:

‘5.   Credit institutions shall apply the requirements of Part B of Annex VII to Directive 2006/49/EC to all their assets measured at fair value when calculating the amount of own funds and shall deduct from the total of the items (a) to (ca) minus (i) to (k) in Article 57 the amount of any additional value adjustments necessary. The Committee of European Banking Supervisors shall establish guidelines regarding the details of the application of this provision.’.

7.In Article 66, paragraph 2 is replaced by the following:

‘2.   Half of the total of the items in Article 57(l) to (r) shall be deducted from the total of the items in points (a) to (ca) minus (i) to (k) of that Article, and half from the total of the items in points (d) to (h) of that Article, after application of the limits laid down in paragraph 1 of this Article. To the extent that half of the total of the items in points (l) to (r) exceeds the total of the items in Article 57(d) to (h), the excess shall be deducted from the total of the items in points (a) to (ca) minus (i) to (k) of that Article.

Items in Article 57(r) shall not be deducted if they have been included for the purposes of Article 75 in the calculation of risk-weighted exposure amounts as specified in this Directive or in the calculation of capital requirements as specified in Annex I or V to Directive 2006/49/EC.’.

8.In Article 75, points (b) and (c) are replaced by the following:

‘(b)in respect of their trading-book business, for position risk and counter-party risk and, in so far as it is authorised that the limits laid down in Articles 111 to 117 are exceeded, for large exposures exceeding such limits, the capital requirements determined in accordance with Article 18 and Articles 28 to 32 of Directive 2006/49/EC;

(c)in respect of all their business activities, for foreign exchange risk, for settlement risk and for commodities risk, the capital requirements determined in accordance with Article 18 of Directive 2006/49/EC;’.

9.In Article 101, paragraph 1 is replaced by the following:

‘1.   A sponsor credit institution, or an originator credit institution which in respect of a securitisation has made use of Article 95 in the calculation of risk-weighted exposure amounts or has sold instruments from its trading book to a securitisation special purpose entity to the effect that it is no longer required to hold own funds for the risks of those instruments shall not, with a view to reducing potential or actual losses to investors, provide support to the securitisation beyond its contractual obligations.’.

10.Article 136 is amended as follows:

(a)in the second subparagraph of paragraph 1, the following points are added:

‘(f)requiring credit institutions to limit variable remuneration as a percentage of total net revenues when it is inconsistent with the maintenance of a sound capital base;

(g)requiring credit institutions to use net profits to strengthen the capital base.’;

(b)in paragraph 2, the following subparagraph is added:

‘For the purposes of determining the appropriate level of own funds on the basis of the review and evaluation carried out in accordance with Article 124, the competent authorities shall assess whether any imposition of a specific own funds requirement in excess of the minimum level is required to capture risks to which a credit institution is or might be exposed, taking into account the following:

(a)the quantitative and qualitative aspects of the credit institutions’ assessment process referred to in Article 123;

(b)the credit institutions’ arrangements, processes and mechanisms referred to in Article 22;

(c)the outcome of the review and evaluation carried out in accordance with Article 124.’.

11.In Article 145, paragraph 3 is replaced by the following:

‘3.   Credit institutions shall adopt a formal policy to comply with the disclosure requirements laid down in paragraphs 1 and 2, and have policies for assessing the appropriateness of their disclosures, including their verification and frequency. Credit institutions shall also have policies for assessing whether their disclosures convey their risk profile comprehensively to market participants.

Where those disclosures do not convey the risk profile comprehensively to market participants, credit institutions shall publicly disclose the information necessary in addition to that required in accordance with paragraph 1. However, they shall only be required to disclose information which is material and not proprietary or confidential in accordance with the technical criteria set out in Part 1 of Annex XII.’.

12.The title of Title VI is replaced by the following:

‘DELEGATED ACTS AND POWERS OF EXECUTION’.

13.Article 150 is amended as follows:

(a)paragraph 1 is replaced by the following:

‘1.   Without prejudice, as regards own funds, to the proposal that the Commission is to submit pursuant to Article 62, the technical adjustments in the following areas shall be adopted by means of delegated acts in accordance with Article 151a, and subject to the conditions of Articles 151b and 151c:

(a)clarification of the definitions to ensure uniform application of this Directive;

(b)clarification of the definitions in order to take account, in the application of this Directive, of developments on financial markets;

(c)the alignment of terminology on, and the framing of definitions in accordance with, subsequent acts on credit institutions and related matters;

(d)expansion of the content of the list referred to in Articles 23 and 24 and set out in Annex I or adaptation of the terminology used in that list to take account of developments on financial markets;

(e)the areas in which the competent authorities shall exchange information as listed in Article 42;

(f)technical adjustments in Articles 56 to 67 and in Article 74 as a result of developments in accounting standards or requirements which take account of Union legislation or with regard to the convergence of supervisory practices;

(g)amendment of the list of exposure classes in Articles 79 and 86 in order to take account of developments on financial markets;

(h)the amount specified in Article 79(2)(c), Article 86(4)(a), Annex VII, Part 1, point 5 and Annex VII, Part 2, point 15, to take into account the effects of inflation;

(i)the list and classification of off-balance sheet items in Annexes II and IV;

(j)adjustment of the provisions in Annexes III and V to XII in order to take account of developments on financial markets (in particular new financial products) or in accounting standards or requirements which take account of Union legislation, or with regard to the convergence of supervisory practices.

1a.   The following measures shall be adopted in accordance with the regulatory procedure referred to in Article 151(2a):

(a)technical adjustments to the list in Article 2;

(b)alteration of the amount of initial capital prescribed in Article 9 to take account of developments in the economic and monetary field.’;

(b)paragraph 2 is amended as follows:

(i)in the first subparagraph, the introductory part is replaced by the following:

‘The Commission may adopt the following measures:’;

(ii)the second subparagraph is replaced by the following:

‘The measures referred to in points (a), (b), (c) and (f) of the first subparagraph shall be adopted by means of delegated acts in accordance with Article 151a, and subject to the conditions of Articles 151b and 151c. The measures referred to in points (d) and (e) of the first subparagraph shall be adopted in accordance with the regulatory procedure referred to in Article 151(2a).’.

14.In Article 151, paragraphs 2 and 3 are deleted.

15.The following articles are inserted:

‘Article 151a

Exercise of the delegation

1. The power to adopt delegated acts referred to in Article 150(1) and the first sentence of the second subparagraph of Article 150(2) shall be conferred on the Commission for a period of 4 years from 15 December 2010. The Commission shall draw up a report in respect of the delegated power at the latest 6 months before the end of the four-year period. The delegation of power shall be automatically extended for periods of an identical duration, unless the European Parliament or the Council revokes it in accordance with Article 151b.

2. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

3. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in Articles 151b and 151c.

Article 151 - b Revocation of the delegation

1. The delegation of power referred to in Article 150(1) and the first sentence of the second subparagraph of Article 150(2) may be revoked at any time by the European Parliament or by the Council.

2. The institution which has commenced an internal procedure for deciding whether to revoke a delegation of power shall endeavour to inform the other institution and the Commission within a reasonable time before the final decision is taken, indicating the delegated power which could be subject to revocation.

3. The decision of revocation shall put an end to the delegation of the power specified in that decision. It shall take effect immediately or at a later date specified therein. It shall not affect the validity of the delegated acts already in force. It shall be published in the Official Journal of the European Union.

Article 151 - c Objections to delegated acts

1. The European Parliament or the Council may object to a delegated act within a period of 3 months from the date of notification. At the initiative of the European Parliament or the Council that period shall be extended by 3 months.

2. If, on the expiry of the period referred to in paragraph 1, neither the European Parliament nor the Council has objected to the delegated act, it shall be published in the Official Journal of the European Union and shall enter into force on the date stated therein. The delegated act may be published in the Official Journal of the European Union and enter into force before the expiry of that period if the European Parliament and the Council have both informed the Commission of their intention not to raise objections.

3. If either the European Parliament or the Council objects to the delegated act within the period referred to in paragraph 1, it shall not enter into force. In accordance with Article 296 TFEU, the institution which objects shall state the reasons for objecting to the delegated act.’.

16.In Article 152, the following paragraphs are inserted:

‘5a.   Credit institutions calculating risk-weighted exposure amounts in accordance with Articles 84 to 89 shall until 31 December 2011 provide own funds which are at all times more than or equal to the amount indicated in paragraph 5c or paragraph 5d if applicable.

5b.   Credit institutions using the Advanced Measurement Approaches as specified in Article 105 for the calculation of their capital requirements for operational risk shall until 31 December 2011 provide own funds which are at all times more than or equal to the amount indicated in paragraph 5c or 5d if applicable.

5c.   The amount referred to in paragraphs 5a and 5b shall be 80 % of the total minimum amount of own funds that the credit institutions would be required to hold under Article 4 of Directive 93/6/EEC and Directive 2000/12/EC, as applicable prior to 1 January 2007.

5d.   Subject to the approval of the competent authorities, for credit institutions referred to in paragraph 5e, the amount referred to in paragraphs 5a and 5b may amount to up to 80 % of the total minimum amount of own funds that those credit institutions would be required to hold under any of Articles 78 to 83, 103 or 104 and Directive 2006/49/EC, as applicable prior to 1 January 2011.

5e.   A credit institution may apply paragraph 5d only if it started to use the IRB Approach or the Advanced Measurement Approaches for the calculation of its capital requirements on or after 1 January 2010.’.

17.Article 154(5) is replaced by the following:

‘5.   Until 31 December 2012, the exposure weighted average LGD for all retail exposures secured by residential properties and not benefiting from guarantees from central governments shall not be lower than 10 %.’.

18.In Article 156, the following paragraphs are inserted after the third paragraph:

‘By 1 April 2013 the Commission shall review and report on the provisions on remuneration, including those set out in Annexes V and XII, with particular regard to their efficiency, implementation and enforcement, taking into account international developments. That review shall identify any lacunae arising from the application of the principle of proportionality to those provisions. The Commission shall submit its report to the European Parliament and the Council together with any appropriate proposals.

In order to ensure consistency and a level playing field, the Commission shall review the implementation of Article 54 with regard to the consistency of the penalties and other measures imposed and applied across the Union and, if appropriate, shall put forward proposals.

The Commission’s periodic review of the application of this Directive shall ensure that the way it is applied does not result in manifest discrimination between credit institutions on the basis of their legal structure or ownership model.

In order to ensure consistency in the prudential approach to capital, the Commission shall review the relevance of the reference to instruments within the meaning of Article 66(1a)(a) in point 23(o)(ii) of Annex V as soon as it takes an initiative to review the definition of capital instruments as provided for in Articles 56 to 67.’.

19.The following article is inserted:

‘Article 156a

By 31 December 2011 the Commission shall review and report on the desirability of changes to align Annex IX of this Directive taking into consideration international agreements regarding the capital requirements of credit institutions for securitisation positions. The Commission shall submit that report to the European Parliament and the Council together with any appropriate legislative proposals.’.

20.The Annexes are amended as set out in Annex I to this Directive.

Article 2 - Amendments to Directive 2006/49/EC

Directive 2006/49/EC is hereby amended as follows:

1.In the first subparagraph of Article 3(1), the following point is added:

‘(t)“securitisation position” and “re-securitisation position” mean, respectively, securitisation position and re-securitisation position as defined in Directive 2006/48/EC.’.

2.In the first subparagraph of Article 17(1), the introductory part is replaced by the following:

‘Where an institution calculates risk-weighted exposure amounts for the purposes of Annex II to this Directive in accordance with Articles 84 to 89 of Directive 2006/48/EC, the following shall apply for the purposes of the calculation provided for in point 36 of Part 1 of Annex VII to Directive 2006/48/EC:’.

3.In Article 18(1), point (a) is replaced by the following:

‘(a)the capital requirements, calculated in accordance with the methods and options laid down in Articles 28 to 32 and Annexes I, II, and VI and, as appropriate, Annex V, for their trading book business, and points 1 to 4 of Annex II for their non-trading book business;’.

4.The title of Section 2 of Chapter VIII is replaced by the following:

‘Delegated acts and powers of execution’.

5.Article 41(2) is replaced by the following:

‘2.   The measures referred to in paragraph 1 shall be adopted by means of delegated acts in accordance with Article 42a, and subject to the conditions of Articles 42b and 42c.’.

6.In Article 42, paragraph 2 is deleted.

7.The following articles are inserted:

‘Article 42a

Exercise of the delegation

1. The power to adopt delegated acts referred to in Article 41 shall be conferred on the Commission for a period of 4 years from 15 December 2010. The Commission shall draw up a report in respect of the delegated power at the latest 6 months before the end of the four-year period. The delegation of power shall be automatically extended for periods of an identical duration, unless the European Parliament or the Council revokes it in accordance with Article 42b.

2. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

3. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in Articles 42b and 42c.

Article 42 - b Revocation of the delegation

1. The delegation of power referred to in Article 41 may be revoked at any time by the European Parliament or by the Council.

2. The institution which has commenced an internal procedure for deciding whether to revoke a delegation of power shall endeavour to inform the other institution and the Commission within a reasonable time before the final decision is taken, indicating the delegated power which could be subject to revocation.

3. The decision of revocation shall put an end to the delegation of the power specified in that decision. It shall take effect immediately or at a later date specified therein. It shall not affect the validity of the delegated acts already in force. It shall be published in the Official Journal of the European Union.

Article 42 - c Objections to delegated acts

1. The European Parliament or the Council may object to a delegated act within a period of 3 months from the date of notification. At the initiative of the European Parliament or the Council that period shall be extended by 3 months.

2. If, on the expiry of the period referred to in paragraph 1, neither the European Parliament nor the Council has objected to the delegated act, it shall be published in the Official Journal of the European Union and shall enter into force on the date stated therein. The delegated act may be published in the Official Journal of the European Union and enter into force before the expiry of that period if the European Parliament and the Council have both informed the Commission of their intention not to raise objections.

3. If either the European Parliament or the Council objects to the delegated act within the period referred to in paragraph 1, it shall not enter into force. In accordance with Article 296 of the Treaty on the Functioning of the European Union, the institution which objects shall state the reasons for objecting to the delegated act.’.

8.Article 47 is replaced by the following:

‘Until 30 December 2011 or any earlier date specified by the competent authorities on a case-by-case basis, institutions that have received specific risk-model recognition prior to 1 January 2007 in accordance with point 1 of Annex V may, for that existing recognition, apply points 4 and 8 of Annex VIII to Directive 93/6/EEC as those points stood prior to 1 January 2007.’.

9.The Annexes are amended as set out in Annex II to this Directive.

Article 3 - Transposition

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with:

(a)points 3, 4, 16 and 17 of Article 1 and points 1, 2(c), 3 and 5(b)(iii) of Annex I, by 1 January 2011; and

(b)the provisions of this Directive other than those specified in point (a), by 31 December 2011.

When Member States adopt the measures referred to in this paragraph, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States.

2. The laws, regulations and administrative provisions necessary to comply with point 1 of Annex I shall require credit institutions to apply the principles laid down therein to:

(i)remuneration due on basis of contracts concluded before the effective date of implementation in each Member State and awarded or paid after that date; and

(ii)for services provided in 2010, remuneration awarded, but not yet paid, before the date of effective implementation in each Member State.

3. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 4 - Report

With regard to the international nature of the Basel framework and the risks associated with a non- simultaneous implementation of the changes to that framework in major jurisdictions, the Commission shall report to the European Parliament and the Council by 31 December 2010 on progress made towards the international implementation of the changes to the capital adequacy framework, together with any appropriate proposals.

Article 5 - Entry into force

This Directive shall enter into force on the day following its publication in the Official Journal of the European Union.

Article 6 - Addressees

This Directive is addressed to the Member States.