Activities of Othmar KARAS related to 2021/0343(COD)
Shadow reports (1)
REPORT on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 and Directive 2014/59/EU as regards the prudential treatment of global systemically important institution groups with a multiple point of entry resolution strategy and a methodology for the indirect subscription of instruments eligible for meeting the minimum requirement for own funds and eligible liabilities
Amendments (19)
Amendment 18 #
Proposal for a regulation
Recital 2
Recital 2
(2) Article 12a of Regulation (EU) No 575/2013 provides that global systemically important institution (G-SII) groups with a resolution strategy under which more than one group entity might be resolved (Multiple Point of Entry (MPE) resolution strategy) are to calculate their risk-based requirement for own funds and eligible liabilities under the theoretical assumption that only one entity of the group would be resolved, with the losses and recapitalisation needs of any subsidiaries of that group being transferred to the resolution entity (Single Point of Entry (SPE) resolution strategy). In line with the TLAC standard, that calculation should take into account all third-country entities belonging to a G-SII that would be resolution entities were they established in the Union, that is, entities which, according to the decision of the third- country resolution authority, are planned to enter into third-country resolution proceedings in case of failure.
Amendment 20 #
Proposal for a regulation
Recital 5
Recital 5
(5) According to Article 72e(4), first subparagraph, of Regulation (EU) No 575/2013, resolution authorities may permit a G-SII with an MPE resolution strategy to deduct certain holdings of own funds and eligible liabilities instruments of its subsidiaries that do not belong to the same resolution group by deducting a lower, adjusted amount specified by the resolution authority. Article 72e(4), second subparagraph, of that Regulation requires that in such cases, the difference between the adjusted amount and the original amount is deducted from the loss absorbing and recapitalisation capacity of the subsidiaries concerned. In line with the TLAC standard, that approach should take into account the risk-based and non-risk- based requirements for own funds and eligible liabilities of the subsidiary concerned. Furthermore, that approach should be applicable to all third-country subsidiaries belonging to that G-SII, as long as those subsidiaries are subject to a local resolution regime that is equivalent to internationally agreed standardsaccording to the relevant EU resolution authority is materially at least fully equivalent to internationally agreed standards, more specifically the Financial Stability Board’s ‘Key Attributes of Effective Resolution Regimes for Financial Institutions’1a and the TLAC standard, and where the third-country resolution authorities have issued decisions that the third-country subsidiaries of that G-SII are planned to enter into third-country resolution proceedings in case of failure. __________________ 1aFinancial Stability Board, Key Attributes of Effective Resolution Regimes for Financial Institutions, 15.10.2014.
Amendment 24 #
Proposal for a regulation
Recital 6
Recital 6
(6) To operationalise the approach of indirect subscription of internal MREL eligible instruments within resolution groups and to ensure that that approach is prudentially sound, the European Banking Authority (EBA) was mandated under Article 45f(6) of Directive 2014/59/EU, as amended by Directive (EU) 2019/879, to develop draft regulatory technical standards to specify a methodology for such an indirect issuancesubscription of eligible instruments. However, as highlighted by the EBA in its letter to the Commission dated 25 January 2021, there were several inconsistencies between the requirements for the delegation laid down in Directive 2014/59/EU and the existing prudential rules laid down in Regulation (EU) No 575/2013, which did not allow the application of the prudential treatment needed for the mandate to be fulfilled as originally intended. More precisely, the EBA noted that Regulation (EU) No 575/2013 did not allow for the deduction of internal MREL eligible instruments and, subsequently, for the application of an appropriate risk weight in all the cases relevant for the mandate under Directive 2014/59/EU. Similar issues were identified in the area of the leverage ratio requirement laid down in Regulation (EU) No 575/2013. In light of those legal constraints, the methodology developed by the EBA should be incorporated directly into Regulation (EU) No 575/2013. Consequently, the mandate to develop draft regulatory technical standards set out in Article 45f(6) of Directive 2014/59/EU , as amended by Directive (EU) 2019/879, should be deleted.
Amendment 25 #
Proposal for a regulation
Recital 7
Recital 7
(7) In the context of the indirect subscription of internal MREL eligible instruments by resolution entities pursuant to the revised Union bank resolution framework, intermediate parents should be required to deduct from their own internal MREL eligible resources the full holding of own funds and eligible liabilities that meet the conditions of Article 45f(2) of Directive 2014/59/EU issued by their subsidiaries belonging to the same resolution group. This ensures the proper functioning of the internal loss-absorbing and recapitalisation mechanisms within a group and avoids the double-counting of the internal MREL eligible resources of the subsidiary for the purposes of compliance by the intermediate parent with its own internal MREL. Additionally, withouTo ensure that those deductions, the individual solvency ratios of regime remains proportionate, intermediate parents wshould not reflect appropriately and prudently their actual loss-absorbing capacity, as those ratios would also include the loss- absorbing capacity of their subsidiaribe able to choose the mix of instruments (own funds versus eligible liabilities) with which they fund the acquisition of ownership of internal MREL eligible resources. This cwould compromise the proper implementation of the chosen resolution strategy, as the intermediate parent could use up not only its own loss absorption capacity but also that of its subsidiary, before the intermediate parent or the subsidiary are no longer viable. Tallow intermediate parents to completely avoid any own funds related deductions as long as they have issued sufficient eligible liabilities. The deductions should therefore first be applied to the eligible liabilities items of the intermediate parents. Where the intermediate entity is required to comply with internal MREL pursuant to Directive 2014/59/EU on an individual basis, the deductions should first be applied to the eligible liabilities items of the intermediate parentsmeeting the conditions of Article 45f(2) of that Directive. In case the amount to be deducted would exceed the amount of the eligible liabilities items of the intermediate parents, the remaining amount should be deducted from their Tier 2 items. To ensure that the deduction regime remains proportionate, that regime should not be applicable in the exceptional cases where internal MREL is applied on a consolidated basis only. Common Equity Tier 1, Additional Tier 1 and Tier 2 items, starting with Tier 2 items in accordance with Article 66, point (e), of Regulation (EU) No 575/2013. In such a case, it is necessary that the deductions corresponding to the remaining amount are also applied when calculating own funds for the purposes of the requirements laid down in Regulation (EU) No 575/2013 and Directive 2013/36/EU1a. Otherwise, the solvency ratios of intermediate entities that have issued own funds instruments, rather than eligible liabilities instruments, to fund the acquisition of ownership of internal MREL eligible resources may be overstated. Additionally, by keeping the treatment of holdings of internal MREL eligible resources aligned for prudential and resolution purposes, an undue increase in complexity is avoided, as institutions would be able to continue to calculate, report and disclose one set of total risk exposure amount and total exposure measure for prudential and resolution purposes. Article 49(2) of Regulation (EU) No 575/2013 should thus be amended accordingly. To further enhance the proportionality of the deduction regime, that regime should not be applicable in the exceptional cases where, pursuant to Articles 45f(1), third subparagraph, and 45f(4) of Directive 2014/59/EU, internal MREL is applied on a consolidated basis only, in what concerns the holdings of internal MREL eligible resources issued by entities included in the perimeter of consolidation. The same exception should apply when the requirement for own funds and eligible liabilities for material subsidiaries of non-EU G-SIIs laid down in Article 92b of Regulation (EU) No 575/2013 is complied with on a consolidated basis, pursuant to Article 11(3a) of Regulation (EU) No 575/2013. __________________ 1aDirective 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).
Amendment 30 #
Proposal for a regulation
Recital 8
Recital 8
(8) The indirect subscription of internal MREL eligible instruments should ensure that, when a subsidiary reaches the point of non-viability, losses are effectively passed on to, and the subsidiary concerned is recapitalised by, the resolution entity. Those losses should thus not be absorbed by the intermediate parent, which should become a mere vehicle to pass through those losses to the resolution entity. Consequently, and to ensure that the outcome of the indirect subscription is equivalent to that of a full direct subscription, as envisaged under the mandate set out in Article 45f(6) of Directive 2014/59/EU, the deducted exposures should receive a 0 % risk weight for the calculation of the total risk exposure amount and be excluded from the calculation of the total exposure measure. This treatment of not applying risk weights and excluding those exposures from the total exposure measure should strictly be limited to exposures that are deducted in accordance to Article 72e(5), first subparagraph, for the sake of operationalising the approach of indirect subscription of internal MREL eligible instruments.
Amendment 31 #
Proposal for a regulation
Recital 8 a (new)
Recital 8 a (new)
(8a) The templates for the public disclosure of harmonised information on the minimum requirement for own funds and eligible liabilities and on the requirement for own funds and eligible liabilities for material subsidiaries of non- EU G-SIIs set out in Commission Implementing Regulation(EU) 2021/7631a should be amended to reflect the new deduction regime for internal MREL eligible instruments. The disclosure templates should also be amended to include the total risk exposure amount and the total exposure measure that intermediate entities would have if they did not exclude the exposures deducted under that new deduction regime. __________________ 1a Commission Implementing Regulation (EU) 2021/763 of 23 April 2021 laying down implementing technical standards for the application of Regulation (EU) No 575/2013 of the European Parliament and of the Council and Directive 2014/59/EU of the European Parliament and of the Council with regard to the supervisory reporting and public disclosure of the minimum requirement for own funds and eligible liabilities (OJ L 168,12.5.2021, p. 1).
Amendment 33 #
Proposal for a regulation
Recital 10
Recital 10
(10) To ensure that institutions have sufficient time to implement the dedicated treatment for the indirect subscription of instruments eligible for internal MREL, including the new deduction regime, the provisions laying down that treatment should become applicable six months after the entry into force of this Regulation. and that markets can digest additional issuances of internal MREL eligible resources, where needed, the provisions laying down that treatment should become applicable on 1 January 2024, in line with the deadline for compliance with the final MREL requirements.
Amendment 36 #
Proposal for a regulation
Recital 10 a (new)
Recital 10 a (new)
(10a) In order to duly assess potential unintended consequences of the indirect subscription of instruments eligible for internal MREL, including the new deduction regime, and to ensure a proportionate treatment, including by excluding liquidation entities from internal MREL, and a level playing field between different types of banking group structures, in particular groups headed by holding companies that may be particularly affected by the new rules, the Commission should review the implementation of the indirect subscription of internal MREL eligible resources by the different types of banking group structures as soon as possible but not later than by 31 December 2022.
Amendment 40 #
Proposal for a regulation
Article 1 – paragraph 1 – point 2
Article 1 – paragraph 1 – point 2
Regulation (EU) No 575/2013
Article 12 a – paragraph 2
Article 12 a – paragraph 2
Resolution authorities shall act in accordance with Articles 45d(4) and Article 45h(2) of Directive 2014/59/EU.;
Amendment 41 #
Proposal for a regulation
Article 1 – paragraph 1 – point 5 – point a
Article 1 – paragraph 1 – point 5 – point a
Regulation (EU) No 575/2013
Article 72 e – paragraph 4 – subparagraph 1
Article 72 e – paragraph 4 – subparagraph 1
4. Where an EU parent institution or a parent institution in a Member State that is subject to Article 92a has direct, indirect or synthetic holdings of own funds instruments or eligible liabilities instruments of one or more subsidiaries which are resolution entities or which are third-country entities planned to enter into third-country resolution proceedings in case of failure which do not belong to the same resolution group as that parent institution, the resolution authority of that parent institution, after duly considering the opinion of the resolution authorities or relevant third-country authorities of any subsidiaries concerned, may permit the parent institution to deduct such holdings by deducting a lower amount specified by the resolution authority of that parent institution. That adjusted amount shall be at least equal to the amount (m) calculated as follows:
Amendment 43 #
Proposal for a regulation
Article 1 – paragraph 1 – point 5 – point a
Article 1 – paragraph 1 – point 5 – point a
Regulation (EU) No 575/2013
Article 72 e – paragraph 4 – subparagraph 9
Article 72 e – paragraph 4 – subparagraph 9
ri = the ratio applicable to subsidiary i at the level of its resolution group in accordance with Article 92a(1), point (a), of this Regulation and Article 45c(3), first subparagraph, point (a), of Directive 2014/59/EU or, for third-country subsidiaries, an materially at least fully equivalent resolution requirement applicable to subsidiary i in the third country where it has its head office, insofar as that requirement is met with instruments that would be considered own funds or eligible liabilities under this Regulation;
Amendment 46 #
Proposal for a regulation
Article 1 – paragraph 1 – point 5 – point a
Article 1 – paragraph 1 – point 5 – point a
Regulation (EU) No 575/2013
Article 72 e – paragraph 4 – subparagraph 11
Article 72 e – paragraph 4 – subparagraph 11
wi = the ratio applicable to subsidiary i at the level of its resolution group in accordance with Article 92a(1), point (b), of this Regulation and of Article 45c(3), first subparagraph, point (b), of Directive 2014/59/EU or, for third-country subsidiaries, an materially at least fully equivalent resolution requirement applicable to subsidiary i in the third country where it has its head office, insofar as that requirement is met with instruments that would be considered own funds or eligible liabilities under this Regulation;
Amendment 53 #
Proposal for a regulation
Article 1 – paragraph 1 – point 5 – point b
Article 1 – paragraph 1 – point 5 – point b
Regulation (EU) No 575/2013
Article 72 e – paragraph 5 – subparagraph 1
Article 72 e – paragraph 5 – subparagraph 1
Institutions and entities required to comply with Article 45c of Directive 2014/59/EU that are not themselves resolution entities shall deduct from eligible liabilities items their holdings of own funds instruments and eligible liabilities instruments that meet the conditions of Article 45f(2) of that Directive of their subsidiaries that belong to the same resolution group.
Amendment 60 #
Proposal for a regulation
Article 1 – paragraph 1 – point 7
Article 1 – paragraph 1 – point 7
Regulation (EU) No 575/2013
Article 113 – paragraph 1
Article 113 – paragraph 1
1. To calculate risk-weighted exposure amounts, risk weights shall be applied to all exposures, unless the exposure amounts are deducted from own funds or subject to the treatment set out in Article 72e(5), first subparagraph, in accordance with the provisions of Section 2. The application of risk weights shall be based on the exposure class to which the exposure is assigned and, to the extent specified in Section 2, its credit quality. Credit quality may be determined by reference to the credit assessments of ECAIs or the credit assessments of export credit agencies in accordance with Section 3.;
Amendment 62 #
Proposal for a regulation
Article 1 – paragraph 1 – point 8
Article 1 – paragraph 1 – point 8
Regulation (EU) No 575/2013
Article 151 – paragraph 1
Article 151 – paragraph 1
1. The risk-weighted exposure amounts for credit risk for exposures belonging to one of the exposure classes referred to in Article 147(2), points (a) to (e) and point (g), shall, unless the exposure amounts are deducted from own funds or subject to the treatment set out in Article 72e(5), first subparagraph, be calculated in accordance with Sub-section 2.;
Amendment 64 #
Proposal for a regulation
Article 1 – paragraph 1 – point 9
Article 1 – paragraph 1 – point 9
(q) the exposure amounts that are subject to the treatment set out in Article 72e(5), first subparagraph.
Amendment 65 #
Proposal for a regulation
Article 2 – title
Article 2 – title
Amendments to Directive 2014/59/EU
Amendment 71 #
Proposal for a regulation
Article 2 – paragraph 1 a (new)
Article 2 – paragraph 1 a (new)
Directive 2014/59/EU
Article 129 – subparagraph 4
Article 129 – subparagraph 4
(1a) in Article 129, the following subparagraph is added: "By 31 December 2022, the Commission shall review the implementation of the indirect subscription of instruments eligible for meeting the minimum requirement for own funds and eligible liabilities by the different types of banking group structures and assess the exclusion of liquidation entities from internal MREL. The Commission shall submit a report thereon to the European Parliament and to the Council. Where appropriate, that report shall be accompanied by a legislative proposal."
Amendment 75 #
Proposal for a regulation
Article 3 – paragraph 3
Article 3 – paragraph 3
However, Article 1, point (3), point (5)(b), and points (7), (8) and (9) and Article 2 shall apply from [OP please insert the date = 6 months after date of entry into force]1 January 2024.