Delegated regulation 2015/63 - Supplement to Directive 2014/59/EU with regard to ex ante contributions to resolution financing arrangements - Main contents

EN

Official Journal of the European Union

L 11/44

Directive 2014/59/EU requires Member States to establish resolution financing arrangements for the purpose of ensuring the effective application by the resolution authority of the resolution tools and powers. Those resolution financing arrangements should have adequate financial resources to allow for an effective functioning of the resolution framework and are therefore empowered to raise ex-ante contributions from the institutions authorised in their territory including Union branches (institutions).

Member States are obliged to raise ex ante contributions to resolution financing arrangements not only from institutions, but in accordance with Article 103(1) of that Directive also from Union branches. Union branches are also covered by the empowerments of the Commission to adopt delegated acts pursuant to Article 103(7) and (8) of that Directive. However, in consideration of the fact, by virtue of Article 47 of Directive 2013/36/EU of the European Parliament and of the Council (2), that the prudential requirements and supervisory treatment of Union branches fall under the responsibility of Member States, many of the risk adjustment metrics set out in this Delegated Regulation are not appropriate to apply directly to the Union branches. Therefore, while Union branches do not fall within the scope of this Regulation, they may be subject to a specific regime developed by the Commission in a future Delegated Act.

Pursuant to Articles 6, 15, 16, 95 and 96 of Regulation (EU) No 575/2013 of the European Parliament and of the Council (3), certain investment firms which are authorized to carry out only limited services and activities are not subject or may be exempted from certain capital and liquidity requirements. Consequently, many of the risk adjustment metrics that should be set out would not apply to them. Whilst Member States are subject to the obligation to raise ex ante contributions from these investment firms in accordance with Article 103(1) of Directive 2014/59/EU, it is appropriate to leave to Member States the power of establishing the risk adjustment in order not to disproportionately burden these firms. Those investment firms should therefore not fall within the scope of this Regulation.

In accordance with Article 102(1) of Directive 2014/59/EU, Member States should ensure that, within a period starting from the entry into force of the Directive until 31 December 2024, the available financial means of their financing arrangements reach at least 1 % of the amount of covered deposits of all the institutions authorised in their territory. During that period of time, contributions to the financing arrangements should be spread out in time as evenly as possible until the target level is reached, by taking into account of the phase of the business cycle and the impact that pro-cyclical contributions may have on the financial position of contributing institutions.

Article 103(1) of Directive 2014/59/EU requires that contributions be raised at least annually in order to reach the target level specified in Article 102 of that Directive. Pursuant to Article 103(2) of Directive 2014/59/EU, annual contribution should reflect an institution's size, as the contribution should be based on a fixed amount determined on the basis of that institution's liabilities (basic annual contribution); second, it reflects the risk level of the relevant activities of an institution as the basic annual contribution should be adjusted in proportion to the risk profile of that institution (additional risk adjustment). The size of an institution represents a first indicator of the risk posed by an institution. The larger an institution is, the more likely it is that, in case of distress, the resolution authority would consider it in the public interest to resolve that institution and to make use of the resolution financing arrangement to ensure an effective application of the resolution tools.

To clarify how resolution authorities should adjust the contributions in proportion to the risk profile of institutions it is necessary to specify the risk pillars and indicators which should be used to determine the risk profile of institutions, the mechanism for applying the risk adjustment to the basic annual contribution, and the basic annual contribution, as the starting point for the risk adjustment. Those elements which would supplement the risk criteria provided for in Article 103(7) of Directive 2014/59/EU should be established in a way to preserve a level playing field among the Member States and a strong internal market by avoiding discrepancies between Member States' approaches to the calculation of contributions to their respective resolution financing arrangements. This allows contributions paid by institutions to the resolution financing arrangements to be comparable and predictable across types of banks, which is an important element of a level playing field in the internal market.

Article 5(1) of Regulation (EU) No 806/2014 of the European Parliament and of the Council (4) provides that the Single Resolution Board (the Board) established by Article 42(1) of that Regulation is considered, for the application of that Regulation and of Directive 2014/59/EU, as the relevant national resolution authority where it performs tasks and exercises powers which, pursuant to that Directive are to be performed or exercised by the national resolution authority. Considering that Article 70(7) of Regulation (EU) No 806/2014 empowers the Board to calculate the contributions of institutions to the Single Resolution Fund which would replace the financing arrangements of the participant Member States in the Single Resolution Mechanism as of 1 January 2016 by applying this Regulation based on Article 103(7) of Directive 2014/59/EU, the notion of resolution authority under this Regulation should also include the Board.

The calculation of contributions at individual level would lead, in case of groups, to the double counting of certain liabilities when determining the basic annual contribution of the different group entities, since the liabilities related to the agreements that the entities of the same group conclude with each other would be, part of the total liabilities to be considered to determine the basic annual contribution of each entity of the group. Therefore, the determination of the basic annual contribution should be further specified in case of groups to reflect the interconnectedness of the group entities and avoid double counting intragroup exposures. In order to ensure a level playing field between entities which are part of a group and institutions which are members of the same IPS or are permanently affiliated to the same central body, the same treatment should apply to the latters.

For the purpose of calculating the basic annual contribution of a group entity, the total liabilities to be considered should not include the liabilities arisen from any contract which that group entity concluded with any other entity which is part of the same group. However, such exclusion should only be possible where each group entity is established in the Union, is included in the same consolidation on a full basis, is subject to an appropriate centralized risk evaluation, measurement and control procedures, and if there are no current or foreseen material practical or legal impediments to the prompt repayment of the relevant liabilities when due. This should prevent liabilities from being excluded from the basis of calculation of the contributions if there are no guarantees that intragroup lending exposures would be covered where the financial health of the group deteriorates. Moreover, to avoid that the exclusion of intragroup liabilities grants an advantage to group entities which benefit from this exemption, such exclusion should not allow the institutions concerned to benefit from the simplified contribution system granted to small institutions, where, following the exclusion of intragroup liabilities, an institution would qualify for the simplified system. In order to ensure a level playing field between entities which are part of a group and institutions which are members of the same IPS or are permanently affiliated to the same central body, the same treatment should apply to the latters.

By way of derogation from the rule that the calculation of contributions should be performed at individual level, in the case of a central body with credit institutions affiliated to it that are wholly or partially exempted from prudential requirements in national law in accordance with Article 10 of Regulation (EU) No 575/2013 of the European Parliament and of the Council, the rules on ex ante contributions should only apply to the central body and the affiliated credit institutions as a whole on a consolidated basis because the solvency and liquidity of the central body and of all the affiliated institutions are monitored as a whole on the basis of consolidated accounts of these institutions.

The determination of the basic annual contribution should also be further specified in case of financial market infrastructures (FMIs). Some FMIs such as central counterparties (CCPs) or central securities depositories (CSDs) are also authorized as credit institutions. Notably some CSDs provide banking-type services which are ancillary to their activity as market infrastructures. Contrary to credit institutions, CSDs do not hold covered deposits but mostly intraday or overnight balances resulting from the settlement of the securities transactions they provide to financial institutions or central banks. Generally these do not result in cash balances which could be assimilated to funding raised in order to perform banking activities. As the banking-type services performed by FMIs are ancillary to their main activities of clearing or settlement for which those entities are subject to strict prudential requirements under Regulations (EU) No 648/2012 (5) and (EU) No 909/2014 (6) of the European Parliament and of the Council, as well as the relevant provisions under Regulation (EU) No 575/2013 and Directive 2013/36/EU, and as the business model of the FMIs does not entail risks comparable to those of a credit institution, only the liabilities related to the banking-type activities of those entities should be taken into account when determining the amount of their total liabilities for the purpose of calculating their basic annual contribution.

Accounting of derivatives is not harmonized in the Union with respect to individual accounts and therefore this could have an implication in the amount of liabilities to be considered for the calculation of the contributions of each bank. The leverage ratio methodology referred to in Article 429(6) and (7) of Regulation (EU) No 575/2013 applies to all banks and ensures that the same derivative contract, and in particular the netting between derivative contracts, will be considered in the same manner irrespective of the accounting framework to which that bank is subject. Therefore, to ensure a harmonised treatment of derivatives in the determination of the basic annual contribution allowing for the comparability of their valuation between institutions and for a level playing field across the Union, derivatives should be valued in accordance with Article 429(6) and (7) of Regulation (EU) No 575/2013. However, to ensure the predictability of the valuation of derivatives under Regulation (EU) No 575/2013, it should be foreseen that such valuation may not lead to a value which is less than 75 % of the value of the derivatives concerned under the relevant accounting framework.

Some credit institutions are promotional banks whose purpose is to advance the public policy objectives of a Member State's central or regional government, or local authority predominantly through the provision of promotional loans on a non-competitive, not for profit basis. The loans that such institutions grant are directly or indirectly partially guaranteed by the central or regional government or the local authority. Promotional loans are granted on a non-competitive, not for profit basis in order to promote public policy objectives of the Union or a Member State's central or regional government. The promotional loans are sometimes extended via another institution as intermediary (pass through loans). In such cases, the intermediary credit institution receives promotional loans from a multilateral development bank or a public sector entity and extends them to other credit institutions which would provide them to the final clients. As the intermediary credit institutions pass through liquidity of these loans from the originating promotional bank towards a lending institution or another intermediary institution, such liabilities should not be included in the total liabilities to be considered for the purpose of calculating the basic annual contribution.

Article 103(1) of Directive 2014/59/EU requires all institutions to contribute to the resolution financing arrangements. However, a proportionate and fair balance needs to be found between the obligation of any institution to contribute to a resolution financing arrangement, and its size, risk profile, the scope and complexity of its activities, its interconnectedness to the other institutions or to the financial system in general, the impact of its failure on the financial markets, on other institutions, on funding conditions, or on the wider economy, and therefore the probability that an institution enters into resolution and makes use of the financing arrangement. Such elements are taken into account by the resolution authorities, pursuant to Article 4 of Directive 2014/59/EU, when deciding whether certain institutions should benefit from simplified obligations as regards the requirements to prepare recovery and resolution plans. Also, the administrative burden deriving for certain institutions and resolution authorities from the calculation of the annual contributions should be taken into account when assessing the right balance between complying with the requirements set out in Directive 2014/59/EU and the specificities of the various institutions subject to that Directive.

Small institutions do not generally have a high risk profile, are often less systemically risky compared to large institutions, and, in many cases, the impact of their failure on the wider economy is lower than that of large institutions. At the same time, the potential impact of the failure of small institutions on the financial stability cannot be ruled out as even small institutions can create systemic risk because of their role in the wider banking system, the cumulative effects of their networks, or the contagion effect that they might create through the loss of confidence in the banking system.

Considering that in most cases small institutions do not pose systemic risk and are less likely to be placed under resolution, which consequently decreases the likelihood that they benefit from the resolution financing arrangements, compared to large institutions, the methodology for calculating their annual contributions to the resolution financing arrangements should be simplified. The annual contributions of small institutions should consist of a lump-sum based only on their basic annual contribution, proportioned to their size. Such a methodology should allow for a proportionate system of annual contributions as, in determining the annual contribution of each institution, the resolution authority has to comply with an annual target level of the financing arrangement. Therefore, a lump-sum reflects the fact that, in many cases, small institutions are less risky and allows for a wider adjustment of the contribution of larger institutions, which are generally more systemic, in proportion to their risk profile.

To determine which institutions are considered small, a double threshold should be used whereby the first threshold based on total liabilities (excluding own funds) less covered deposits should be equal or less to EUR 300 million, and the second threshold based on the total assets should not exceed EUR 1 billion. The latter should prevent larger institutions which meet the first threshold related to the amount of liabilities from benefitting from the simplified system.

A distinction should be made within the category of small institutions as some are very small, while others are close to the maximum thresholds allowing them to benefit from the simplified system. Under a single lump-sum system, the annual contributions of very small institutions would be disproportionately higher than those of the small institutions which are close to reaching the maximum thresholds. At the same time, it should be avoided that the simplified system leads to a disproportionate difference in terms of annual contributions between the biggest among small institutions and the institutions which do not qualify for the simplified system as they are just above the thresholds. To avoid such unwanted effects it is therefore appropriate to foresee a system of several categories of small institutions whose annual contributions should consist of different lump sum amounts. This should allow for a progression of contributions within the simplified system, and between the highest lump sum and the lowest contribution pursuant to the method whereby the basic annual contribution is adjusted according to the risk profile of the institution.

Where the resolution authority determines that a small institution has a particularly high risk profile, the resolution authority should have the ability to decide that the institution concerned should no longer benefit from the simplified system, but its contribution should instead be calculated pursuant to the method whereby the basic annual contribution is adjusted according to risk factors other than the institution's size.

Institutions referred to in Article 45(3) of Directive 2014/59/EU will not be recapitalized through the use of the resolution financing arrangements in accordance with Articles 44 and 101 of Directive 2014/59/EU because they will be wound-up through national insolvency procedures, or other types of procedure implemented in accordance with Article 38, 40 or 42 of Directive 2014/59/EU and will cease their activities. These procedures ensure that creditors of those institutions, including holders of covered bonds where relevant, will bear the losses in a way that meets the resolution objectives. Therefore, their contributions to the resolution financing arrangements should reflect these specificities. The resolution financing arrangements could, however, be used for the other purposes referred to in Article 101 of Directive 2014/59/EU. In case any such institution uses the resolution financing arrangement for any of such purposes, the resolution authority should be able to compare the risk profile of all other institutions covered by Article 45(3) of Directive 2014/59/EU with that of the institution which used the resolution financing arrangement and apply the methodology set out this Delegated Act to those institutions which present a risk profile similar or higher than that of the institutions which used the resolution financing arrangement. It is also appropriate to establish a list of elements that the resolution authority should take into account when carrying out the comparison of risk profiles.

In order to enable the resolution authorities of the Member States to have a harmonised interpretation of the criteria set out in Article 103(7) of Directive 2014/59/EU so that the determination of the risk indicator of institutions for the purpose of calculating the individual contributions to the resolution financing arrangements is carried out in a similar manner across the Union, a number of risk pillars, and corresponding risk indicators for each of those risk pillars, should be provided for, to be taken into account by the resolution authorities when assessing the risk profile of institutions. To ensure consistency with the supervisory practices, the risk indicators should consist of current regulatory benchmarks already available or in the course of being established.

Where the relevant legislation provides for waivers that exempt institutions from setting some of the risk indicators at the institution's level, and provided, where applicable, that the competent authorities authorise the application of such waivers, the resolution authorities should assess the relevant indicators at consolidated level or sub-consolidated, as applicable, in order to be consistent with the supervisory practice and ensure that groups that make use of those waivers are not unduly penalized.

In order to enable the resolution authorities to have a consistent approach as to the importance of the risk pillars and indicators that they should take into account for the purpose of determining the risk profile of institutions, this Regulation should also determine the relative weight of each risk pillar and indicator. It is important, however, that resolution authorities be granted enough flexibility in assessing the risk profile of institutions by being able to modulate the application of risk pillars and indicators in accordance to the specificities of each institution. As this cannot be achieved exclusively by providing for a range for assessing the risk profile, but requires a certain degree of discretion in deciding upon the importance of certain risk indicators on a case by case basis, the weight of some risk indicators should only be indicative, or a range should be set out in their respect to allow the resolution authorities to decide upon the relevance of those indicators in a given case.

When determining the importance of the various indicators corresponding to a given pillar, aggregation within pillars should be done by means of an arithmetic weighted average of the individual indicators. As regards the calculation of final composite risk indicator corresponding to each institution, to avoid compensation effects between pillars whereby an institution performing moderately well under several pillars and very poorly under another would generally be given a middle score pursuant to an arithmetic average of the different pillars, such calculation should be based on the geometric weighted average of the individual pillars.

The range for assessing the degree of risk posed by an institution should be such to allow for a sufficient modulation of the risk profile of institutions according to the various risk pillars and indicators set out in this Regulation, while offering at the same time enough certainty and predictability as regards the annual amounts that institutions would have to contribute pursuant to Directive 2014/59/EU and this Regulation.

In order to ensure that contributions are effectively paid, it is necessary to specify the conditions and means of payment. In particular, for contributions which are not paid in cash but in irrevocable payment commitments in accordance with Article 103 of Directive 2014/59/EU, it is necessary to specify the share of irrevocable payment commitments that each institution can use and the kind of collateral which is accepted to back these irrevocable payment commitments, so as to allow the resolution authority to ensure the actual payment when executing the irrevocable payment commitment where the resolution authority encounters difficulties in executing the irrevocable payment commitment. In order to ensure that the annual contributions are effectively paid, it is necessary to provide for the specific power of resolution authorities to impose administrative penalties and other administrative measures on institutions which breach the requirements set out in this Regulation for the calculation and adjustment of the contributions such non-compliance with the obligation to provide the information requested by the resolution authority. The resolution authority should also have the power to impose a daily penalty to an institution where the institution concerned only partially pays the annual contribution which is due, or where it does not pay it, or where that institution does not comply with the requirements set out in the notification made by the resolution authority. In addition, it is necessary to provide for specific obligations of information sharing between competent authorities and resolution authorities.

In order to ensure that the risk adjustment continues to reflect developments in the banking sector and therefore meets the requirements of Directive 2014/59/EU on an ongoing basis, based on the experience gained with its application the Commission will review the risk adjustment for the calculation of the annual contributions and, in particular, the appropriateness of the risk adjustment multiplier set out in this Regulation and the need for a possible increase of the upper limit the risk adjustment multiplier before 1 June 2016.

Since according to Article 130(1) of Directive 2014/59/EU, the obligation of Member States to raise annual contributions from institutions authorised on their territory applies from 1 January 2015, this Regulation should also apply from 1 January 2015,

the methodology for the calculation and for the adjustment to the risk profile of institutions, of the contributions to be paid by institutions to resolution financing arrangements;

the obligations of institutions as regards the information to provide for the purposes of the calculation of the contributions and as regards the payment of the contributions to resolution financing arrangements;

the measures to ensure the verification by the resolution authorities that the contributions have been paid correctly.

‘institutions’ means credit institutions, as defined in point (2) of Article 2(1) of Directive 2014/59/EU, or investment firms as defined in point (2) of this Article, as well as a central body and all credit institutions permanently affiliated to the central body as referred to in Article 10 of Regulation (EU) No 575/2013 as a whole on a consolidated basis, where the conditions provided for in Article 2(1) are met;

‘investment firms’ means investment firms as defined in point (3) of Article 2(1) of Directive 2014/59/EU, excluding investment firms which fall within the definition of Article 96(1)(a) or (b) of Regulation (EU) No 575/2013 or investment firms which carry out activity 8 of Annex I Section A of Directive 2004/39/EC of the European Parliament and of the Council (8) but which do not carry out activities 3 or 6 of Annex I Section A of that Directive;

‘annual target level’ means the total amount of annual contributions determined for each contribution period by the resolution authority to reach the target level referred to in Article 102(1) of Directive 2014/59/EU;

‘financing arrangement’ means an arrangement for the purpose of ensuring the effective application by the resolution authority of the resolution tools and powers as referred to in Article 100(1) of Directive 2014/59/EU;

‘annual contribution’ means the amount referred to in Article 103 of Directive 2014/59/EU raised by the resolution authority for the national financing arrangement during the contribution period from each of the institutions referred to in Article 2 of this Regulation;

‘contribution period’ means a calendar year;

‘resolution authority’ means the authority referred to in point (18) of Article 2(1) of Directive 2014/59/EU, or any other relevant authority appointed by the Member States for the purposes of Article 100(2) and (6) of Directive 2014/59/EU;

‘competent authority’ means a competent authority as defined in Article 4(1)(40) of Regulation (EU) No 575/2013;

‘deposit guarantee schemes’ (DGS) means schemes referred to in point (a), (b), or (c) of Article 1(2) of Directive 2014/49/EU;

‘covered deposits’ means the deposits referred to in Article 6(1) of Directive 2014/49/EU, excluding temporary high balances as defined in Article 6(2) of that Directive;

‘total liabilities’ means total liabilities as defined in Section 3 of Council Directive 86/635/EEC (9), or as defined in accordance with the International Financial Reporting Standards referred to in Regulation (EC) No 1606/2002 of the European Parliament and of the Council (10);

‘total assets’ means total assets as defined in Section 3 of Directive 86/635/EEC, or defined in accordance with the International Financial Reporting Standards referred to in Regulation (EC) No 1606/2002;

‘Total Risk Exposure’ (TRE) means the total risk exposure amount as defined in Article 92(3) of Regulation (EU) No 575/2013;

‘Common Equity Tier 1 Capital Ratio’ means the ratio as referred to in Article 92(2)(a) of Regulation (EU) No 575/2013;

‘MREL’ means the minimum requirement for own funds and eligible liabilities as defined in Article 45(1) of Directive 2014/59/EU;

‘own funds’ means own funds as defined in point (118) of Article 4(1) of Regulation (EU) No 575/2013;

‘eligible liabilities’ means liabilities and capital instruments as defined in point (71) of Article 2(1) of Directive 2014/59/EU;

‘Leverage Ratio’ means leverage ratio as defined in Article 429 of Regulation (EU) No 575/2013;

‘Liquidity Coverage Ratio’ (LCR) means a liquidity coverage ratio as defined in Article 412 of Regulation (EU) No 575/2013 and further specified in Commission Delegated Regulation (EU) 2015/61 (11);

‘Net Stable Funding Ratio’ (NSFR) means a net stable funding ratio as reported in accordance with Article 415 of Regulation (EU) No 575/2013;

‘central counterparty’ (CCP) means a legal person as defined in Article 2(1) of Regulation (EU) No 648/2012;

‘derivatives’ means derivatives according to Annex II of Regulation (EU) No 575/2013;

‘central securities depository’ (CSD) means a legal person as defined in point (1) of Article 2(1) and in Article 54 of Regulation (EU) No 909/2014 of the European Parliament and of the Council (12);

‘settlement’ means the completion of a securities transaction as defined in point (2) of Article 2(1) of Regulation (EU) No 909/2014;

‘clearing’ means the process of establishing positions as defined in Article 2(3) of Regulation (EU) No 648/2012;

‘financial market infrastructure’ means, for the purpose of this Regulation, a CCP as referred to in point 21 of this Article or a CSD as referred to in point 23 of this Article that are authorised as institutions in accordance with Article 8 of Directive 2013/36/EU;

‘promotional bank’ means any undertaking or entity set up by a Member State, central or regional government, which grants promotional loans on a non-competitive, not for profit basis in order to promote that government's public policy objectives, provided that that government has an obligation to protect the economic basis of the undertaking or entity and maintain its viability throughout its lifetime, or that at least 90 % of its original funding or the promotional loan it grants is directly or indirectly guaranteed by the Member State's central or regional government;

‘promotional loan’ means a loan granted by a promotional bank or through an intermediate bank on a non-competitive, non for profit basis, in order to promote the public policy objectives of central or regional governments in a Member State;

‘intermediary institution’ means a credit institution which intermediates promotional loans provided that it does not give them as credit to a final customer.

the intragroup liabilities arising from transactions entered into by an institution with an institution which is part of the same group, provided that all the following conditions are met:

the liabilities created by an institution, which is member of an IPS as referred to in point (8) of Article 2(1) of Directive 2014/59/EU and which has been allowed by the competent authority to apply Article 113(7) of Regulation (EU) No 575/2013, through an agreement entered into with another institution which is member of the same IPS;

in the case of a central counterparty established in a Member State having availed itself of the option in Article 14(5) of Regulation (EU) No 648/2012, liabilities related to clearing activities as defined in Article 2(3) of that Regulation, including those arising from any measures the central counterparty takes to meet margin requirements, to set up a default fund and to maintain sufficient pre-funded financial resources to cover potential losses as part of the default waterfall in accordance with that Regulation, as well as to invest its financial resources in accordance with Article 47 of that Regulation;

in the case of a central securities depository, the liabilities related to the activities of a central securities depository, including liabilities to participants or service providers of the central securities depository with a maturity of less than seven days arising from activities for which it has obtained an authorisation to provide banking-type ancillary services in accordance with Title IV of Regulation (EU) No 909/2014, but excluding other liabilities arising from such banking-type activities;

in the case of investment firms, the liabilities that arise by virtue of holding client assets or client money including client assets or client money held on behalf of UCITS as defined in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the Council (13) or of AIFs as defined in point (a) of Article 4(1) of Directive 2011/61/EU of the European Parliament and of the Council (14), provided that such a client is protected under the applicable insolvency law;

in case of institutions operating promotional loans, the liabilities of the intermediary institution towards the originating or another promotional bank or another intermediary institution and the liabilities of the original promotional bank towards its funding parties in so far as the amount of these liabilities is matched by the promotional loans of that institution.

Risk exposure;

Stability and variety of sources of funding;

Importance of an institution to the stability of the financial system or economy;

Additional risk indicators to be determined by the resolution authority.

Own funds and eligible liabilities held by the institution in excess of MREL;

Leverage Ratio;

Common Equity Tier 1 Capital Ratio;

Total Risk Exposure divided by Total Assets.

Net Stable Funding Ratio;

LCR.

Trading activities, off-balance sheet exposures, derivatives, complexity and resolvability;

Membership in an Institutional Protection Scheme;

Extent of previous extraordinary public financial support.

The increase in the risk profile of the institution due to:

The decrease of the risk profile of the institution due to:

whether the amount of funds which are available without delay for both recapitalisation and liquidity funding purposes in order to support the affected institution in case of problems is sufficiently large to allow for a credible and effective support of that institution;

the degree of legal or contractual certainty that the funds referred to in point (a) will be fully utilized before any extraordinary public support may be requested.

any institution that is part of a group that has been put under restructuring after receiving any State or equivalent funds such as from a resolution financing arrangement, and is still within the restructuring or winding down period, except for the last 2 years of implementation of the restructuring plan;

any institution that is liquidated, until the end of the liquidation plan (to the extent that it is still liable to pay the contribution).

Risk exposure: 50 %;

Stability and variety of sources of funding: 20 %;

Importance of an institution to the stability of the financial system or economy: 10 %;

Additional risk indicators to be determined by the resolution authority: 20 %.

Own funds and eligible liabilities held by the institution in excess of MREL: 25 %;

Leverage Ratio: 25 %;

Common Equity Tier 1 Capital Ratio: 25 %;

Total Risk Exposure divided by Total Assets: 25 %.

Trading activities and off-balance sheet exposures, derivatives, complexity and resolvability: 45 %;

Membership in an Institutional Protection Scheme: 45 %;

Extent of previous extraordinary public financial support: 10 %.

the business model of an institution;

the information reported by that institution pursuant to Article 14;

the risk pillars and indicators referred to in Article 6;

the assessment of the competent authority as regards the risk profile of that institution.

the business model of that institution;

the information reported by that institution pursuant to Article 14;

the risk pillars and indicators referred to in Article 6;

the assessment of the competent authority as regards the risk profile of that institution.

electronically or by other comparable means of communication allowing for an acknowledgment of receipt;

by registered mail with a form of acknowledgment of receipt.

1.

In the notation that follows, n indexes institutions, i indexes indicators within pillars and j indexes pillars.

2.

For each raw indicator resulting from Step 1, xij , except for the indicator ‘extent of previous extraordinary public financial support’, the resolution authority shall calculate the number of bins, kij , as the nearest integer to:

,

where:

N is the number of institutions, contributing to the resolution financing arrangement, for which the indicator is calculated;

;

;

.

3.

For each indicator, except for the indicator ‘extent of previous extraordinary public financial support’, the resolution authority shall assign the same number of institutions to each bin, starting by assigning institutions with the lowest values of the raw indicator to the first bin. In case the number of institutions cannot be exactly divided by the number of bins, each of the first r bins, starting from the bin containing the institutions with the lowest values of the raw indicator, where r is the remainder of the division of the number of institutions, N, by the number of bins, kij , is assigned one additional institution.

4.

For each indicator, except for the indicator ‘extent of previous extraordinary public financial support’, the resolution authority shall assign to all the institutions contained in a given bin the value of the order of the bin, counting from the left to the right, so that the value of the discretized indicator is defined as Iij,n = 1, …, kij .

5.

This Step shall apply to the indicators listed under points (a) and (b) of Article 6(5) only if the resolution authority determines them as continuous variables.

1.

The resolution authority shall apply the following signs to the indicators:

For indicators with positive sign, higher values correspond to higher riskiness of an institution. For indicators with negative sign, higher values correspond to lower riskiness of an institution.

The resolution authority shall determine the indicators trading activities, off-balance sheet exposures, derivatives, complexity and resolvability, and specify their sign accordingly.

2.

The resolution authority shall apply the following transformation to each rescaled indicator resulting from Step 3, RIij,n , in order to include its sign:

1.

The resolution authority shall aggregate the indicators i within each pillar j through a weighted arithmetic average by applying the following formula:

,

where:

2.

In order to compute the composite indicator, the resolution authority shall aggregate the pillars j through a weighted geometric average by applying the following formula:

,

where:

3.

The resolution authority shall apply the following transformation in order for the final composite indicator to be defined as taking higher values for institutions with higher risk profiles:

.

1.

The resolution authority shall rescale the final composite indicator resulting from Step 5, FCIn , over the range defined in Article 9 by applying the following formula:

,

where the arguments of the minimum and the maximum functions shall be the values of all institutions, contributing to the resolution financing arrangement, for which the final composite indicator is calculated.

2.

The resolution authority shall compute the annual contribution of each institution n, except in respect of institutions which are subject to Article 10 and except for the lump-sum portion of the contributions of institutions to which Member States apply Article 20(5), as:

,

where:

Total Assets as defined in Article 3(12)

Total Liabilities as defined in Article 3(11)

Liabilities covered by points (a), (b), (c), (d), (e) and (f) of Article 5(1)

Liabilities arising from derivatives contracts

Liabilities arising from derivatives contracts valued in accordance with Article 5(3)

Covered deposits

Total Risk Exposure

Own funds

Common Equity Tier 1 Capital Ratio

Eligible liabilities

Leverage Ratio

Liquidity Coverage Ratio

Net Stable Funding Ratio

Interbank loans

Interbank deposits