BETA

22 Amendments of Olle SCHMIDT related to 2009/0099(COD)

Proposal for a directive – amending act
Recital 14

(14) There should be a separate capital treatment for securitisations which re- package other securitisations and are subject to a higher credit risk than normal securitisations and provides credit institutions and investment firms with clear disincentives against investment in securitisations of particularly high complexity and risk.deleted

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Recital 15

(15) Banks investing in re-securitisations are required under Directive 2006/48/EC to exercise due diligence also with regard to the underlying securitisations and the non-securitisation exposures ultimately underlying the former. Depending on the complexity of the layers of securitisation structures and depending on the complexity and the diversity (or both) of the non-securitisation exposures that ultimately underlie the re-securitisations, the required due diligence may be impossible or uneconomical (or both) to carry out. This is in particular the case where the ultimate underlying exposures are, for example, leveraged buy-out or project finance debt. In these cases, institutions should not invest in such highly complex re-securitisations. In their review of the required due diligence, competent authorities should devote particular attention to such highly complex securitisations and require their full deduction from capital, unless it has been convincingly demonstrated to their satisfaction that in each individual case of highly complex re-securitisation exposures, the institution has performed the due diligence required by Directive 2006/48/EC, including with regard to the ultimate underlying exposures.deleted

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Recital 16

(16) In order to promote the convergence of supervisory practices with regard to the supervision of due diligence for highly complex re-securitisations, the Committee of European Banking Supervisors should establish guidelines, which should include a definition of or criteria for the types of re-securitisations that should be considered as 'highly complex' for this purpose. That definition or those criteria should be adapted to developments in market practices.deleted

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Recital 26 a (new)

(26a) The Basel Committee is conducting impact studies on the capital charges for securitisation positions in the trading book and on the capital charges for correlation trading portfolios. Because of (i) a desire to achieve agreement as quickly as possible on comprehensive structural reforms of the regulatory capital rules; (ii) uncertainty regarding the quantum of incremental capital charges required as a result of the changes subject to the impact studies; (iii) the incremental quantum of incremental capital required as the result of additional regulatory capital changes in the process of adoption (including reforms to tier 1 and tier 2 instruments and the introduction of new liquidity ratios); (iv) the practical limits on the amount of additional capital that credit institutions can raise in the capital markets in the immediate to medium term; and (v) the essential requirement from a public policy standpoint that credit institutions continue to make new credit available to their commercial and retail customers in significant volumes during the period of decreasing leverage of credit institutions resulting from the increased capital requirements, it is appropriate that the implementation of this Directive therefore occur over the transitional period and that certain existing transactions, on credit institutions’ balance sheets as at 31 December 2009, are grandfathered.

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Article 1 – point 9

Directive 2006/48/EC
Article 122b

(9) The following Article 122b is inserted after Article 122a: 1. Notwithstanding the risk weights for general re-securitisation positions in Annex IX, Part 4, the competent authorities shall require that credit institutions apply a 1250 % risk weight to positions in highly complex re- securitisations, unless the credit institution has demonstrated to the competent authority for each such re- securitisation position concerned that it has complied with the requirements set out in Article 122a(4) and (5). 2. Paragraph 1 shall apply in respect of positions in new re-securitisations issued after 31 December 2010. In respect of positions in existing re-securitisations, paragraph 1 shall apply from 31 December 2014 where new underlying exposures are added or substituted after that date."deleted "Article 122b

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Article 1 – point 10 a (new)

Directive 2006/48/EC
Article 156 a (new)

(10a) The following Article is inserted: “Article 156a By 31 December 2010 the Commission shall review and report on changes necessary to align Annex IX of this Directive with any internationally agreed calibration arising from the impact assessment and internationally agreed re- calibration. That report shall be submitted to the European Parliament and the Council together with any appropriate legislative proposals”.

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Article 2 – point 3 a (new)

Directive 2006/49/EC
Article 18 – paragraph 1 – point a a (new)

(3a) In Article 18(1), the following point is inserted: "(aa) By 31 December 2010, the Commission shall review and report on changes necessary to align Annex I, II, V and VII of this Directive with any internationally agreed calibration arising from the impact assessment and internationally agreed re-calibration. That report shall be submitted to the European Parliament and the Council together with any appropriate legislative proposals."

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Article 2 - point 3 b (new)

Directive 2006/49/EC
Article 18 – paragraph 1 – point a b (new)

(3b) In Article 18(1), the following point is inserted: "(ab) By 31 October 2010, the Commission shall report to the European Parliament and the Council on any measures agreed at international level to strengthen the capital requirements resulting from the application of point 5l of Annex V regarding the methodology and, if appropriate, minimum levels for the resulting capital requirements. That report shall be accompanied, if appropriate, by proposals for technical adaptations referred to in point (i) of Article 41(1)."

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Article 2 a (new)

Article 2a Articles 1 and 2 shall not apply in respect of any positions held by a credit institution as of 31 December 2009, or in respect of a hedge to such positions, until 1 January 2012.

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Article 3 – paragraph 1 – subparagraph 1

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by ~~31 December 2010 at the latest. They~~1 January 2011. In derogation from the first subparagraph: (a) Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with the amendments to the following by 1 January 2011: (i) point 5 of Annex V of Directive 2006/49/EC, and (ii) points 5a to 5k of Annex V of Directive 2006/49/EC, save as provided in point (b)(ii) of this subparagraph. (b) Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with the amendments to the following by 1 January 2013: (i) point 14 of Annex I of Directive 2006/49/EC, (ii) points 14a and 14b of Annex I of Directive 2006/49/EC, provided that, until Points 14a and 14b have entered into force, the correlation trading portfolios described therein shall be subject to the provisions of Points 5a to 5k of Annex V of Directive 2006/49/ as if such provisions have entered into force, (iii) point 16a of Annex I of Directive 2006/49/EC, (iv) points 34 and 35 of Annex I of Directive 2006/49/EC, and (v) point 5l of Annex V of Directive 2006/49/EC, Member States shall forthwith communicate to the Commission the text of those provisions and a correlation table between those provisions and this Directive.

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Article 3 – paragraph 1 – subparagraph 1

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 31 ~~December 2010 at the latest~~January 2012. They shall forthwith communicate to the Commission the text of those provisions and a correlation table between those provisions and this Directive.

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Article 3 –paragraph 1 a (new)

1a. The provisions of point 16a of Annex I of Directive 2006/49/EC shall not apply to any securitisation positions and their hedges held in the trading book on 31 December 2009 (collectively, the “Grandfathered Portfolio”) nor to any position or hedge entered into after 31 December 2009 with respect to hedge positions in the Grandfathered Portfolio that have been demonstrated to reduce the risk, for example through VAR or stressed VAR, of the institution’s Grandfathered Portfolio (the “Qualifying Grandfathered Portfolio Hedges”). Instead, the provisions of Directive 2006/49/EC shall apply to the Grandfathered Portfolio and to the Qualifying Grandfathered Portfolio Hedges (including, without limitation, points 5b, 10b and 14) notwithstanding the stated exclusion of securitisation positions from such provisions.

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Article 3 –paragraph 1 b (new)

1b. Having regard to the international nature of the Basel framework and to the dangers of timing differences in major jurisdictions, the Commission shall report to the European Parliament and the Council by 31 December 2010 on progress made towards international implementation of the changes to the capital adequacy framework. The Commission, under advice from the EBA, shall adjust the transposition timetable as set out in Article 3(1)(a) and (b) to match the implementation timetable in other major jurisdictions but no earlier than the dates specified in Article 3(1)(a) and (b).

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Annex I – point 1 a (new)

Directive 2006/48/EC
Annex V – section 11 – point 22 a (new)

(1a) In Section 11 of Annex V, the following point is inserted: "22a. Member States may, after consulting the social partners, give them, at the appropriate level and subject to the conditions laid down by the Member States, the option of upholding or concluding collective agreements which, while respecting the purpose of balanced remuneration policies, may establish arrangements which are appropriate to national law and practice and may differ from those referred to in this Annex."

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Annex II – point 1 – point -a (new)

Directive 2006/49/EC
Annex I – point 8 – point v - paragraph 3

(-a) The third paragraph of Point 8(v) is replaced by the following: “Where an nth-to-default credit derivative is externally rated, the protection seller shall calculate the specific risk capital charge using the rating of the derivative and apply the respective securitisation risk weights as applicable.”

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Annex II – point 1 – point a – point i

Directive 2006/49/EC
Annex I – point 14

14. ~~The institution shall assign its net positions in the trading book in instruments that ar~~By way of derogation from point 14, an institution may determine the specific risk capital charge for the correlation trading portfolio as follows: the institution computes (i) the ntotal specuritisation positions as calculated in accordance with point 1 to the appropriate categories in Table 1 on the basis of their issuer/obligor, external or internal credit assessment, and residual maturity, and then multiply them bific risk capital charges that would apply just to the net long positions of the correlation trading portfolio and (ii) the total specific risk capital charges that would apply just to the net short positions of the correlation trading portfolio. The larger of these total amounts shall be the specific risk capital charge for the correlation trading portfolio. For the purpose of this Directive, the correlation trading portfolio shall consist of securitisation positions and nth-to-default credit derivatives that meet the following criteria: (a) the positions are neither re- securitisation positions, nor options on a securitisation tranche, nor any othe ~~weightings shown in that table. It shall sum its weighted positions resulting from the application of this point and of point 16a (regardless of whet~~r derivatives of securitisation exposures that do not provide a pro-rata share in the proceeds of a securitisation tranche; and (b) all reference instruments are single- name instruments, including single- name credit derivatives, for which a liquid two- way market exists. This shall also include commonly traded indices based on these reference entities. A two-way market is deemed to exist where theyre are ~~long or short) in order to calculate its capital requirement against specific risk~~independent bona fide offers to buy and sell so that a price reasonably related to the last sales price or current bona fide competitive bid and offer quotations can be determined within one day and settled at such price within a relatively short time conforming to trade custom.

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Annex II – point 1 – point a a (new)

Directive 2006/49/EC
Annex I – point 14 a (new)

(aa) The following point is inserted: "14a. By way of derogation from point 14, an institution may determine the specific risk capital charge for the correlation trading portfolio as follows: the institution computes (i) the total specific risk capital charges that would apply just to the net long positions of the correlation trading portfolio and (ii) the total specific risk capital charges that would apply just to the net short positions of the correlation trading portfolio. The larger of these total amounts shall be the specific risk capital charge for the correlation trading portfolio. For the purpose of this Directive, the correlation trading portfolio shall consist of securitisation positions and nth-to-default credit derivatives that meet the following criteria: (a) the positions are neither re- securitisation positions, nor options on a securitisation tranche, nor any other derivatives of securitisation exposures that do not provide a pro-rata share in the proceeds of a securitisation tranche; and (b) all reference instruments are single- name instruments, including single- name credit derivatives, for which a liquid two- way market exists. This shall also include commonly traded indices based on these reference entities. A two-way market is deemed to exist where there are independent bona fide offers to buy and sell so that a price reasonably related to the last sales price or current bona fide competitive bid and offer quotations can be determined within one day and settled at such price within a relatively short time conforming to trade custom. An institution may include in the correlation trading portfolio positions which are neither securitisation positions nor nth-to-default credit derivatives but which hedge other positions of this portfolio, provided that a liquid two-way market as described in point (b) exists for the instrument or its underlyings."

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Annex II – point 1 – point a b (new)

Directive 2006/49/EC
Annex I – point 14 b (new)

(ab) The following point is inserted: "14b. Positions which refer to either of the following cannot be part of the correlation trading portfolio: (a) an underlying that could be assigned to the exposure classes in Article 79(1)(i) and (h) of Directive 2006/48/EC in a credit institution’s non-trading book; or (b) a claim on a special purpose entity. An institution may include in the correlation trading portfolio positions which are neither securitisation positions nor nth-to-default credit derivatives but which hedge other positions of this portfolio, provided that a liquid two-way market as described in point 14a (b) exists for the instrument or its underlyings.”

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Annex II – point 3 – point c

Directive 2006/49/EC
Annex V – point 5 – paragraph 1 – point f a (new)

(fa) any effects of product leverage.

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Annex II – point 3 – point c

Directive 2006/49/EC
Annex V – point 5 – paragraph 3

The institution may choose to exclude from the calculation of its specific risk capital requirement using an internal model those positions in securitisations or nth-to- default credit derivatives for which it meets a capital requirement for position risks according to point 16a of Annex I with the exception of those positions subject to the approach set out in point 5l.

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Annex II – point 3 – point d

Directive 2006/49/EC
Annex V – point 5 k a (new)

5ka. [In place of a capital charge for the correlation trading portfolio in accordance with Annex I, point 14a] Competent authorities shall recognise the use of an internal approach for calculating an additional capital charge instead of a capital charge for the correlation trading portfolio in accordance with Annex I, point 14a provided that all conditions in this point are fulfilled. Such internal approach shall adequately capture all price risks at the 99,9 % confidence interval over a capital horizon of one year under the assumption of a constant level of risk, and adjusted where appropriate to reflect the impact of liquidity, concentrations, hedging and optionality. The institution may incorporate any positions in this approach that are jointly managed with positions of the correlation trading portfolio and may then exclude those positions from the approach required under point 5a. In particular, the following risks shall be adequately captured: (a) the cumulative risk arising from multiple defaults, including the ordering of defaults, in tranched products; (b) credit spread risk, including the gamma and cross-gamma effects; (c) volatility of implied correlations, including the cross effect between spreads and correlations; (d) basis risk, including: (i) the basis between the spread of an index and those of its constituent single names; and (ii) the basis between the implied correlation of an index and that of bespoke portfolios; (e) recovery rate volatility, as it relates to the propensity for recovery rates to affect tranche prices; and (f) to the extent the comprehensive risk measure incorporates benefits from dynamic hedging, the risk of hedge slippage and the potential costs of rebalancing such hedges. For the purpose of this point, an institution shall have sufficient market data to ensure that it fully captures the salient risks of these exposures in its internal approach in accordance with the standards set out in this point, demonstrates through back testing or other appropriate means that its risk measures can appropriately explain the historical price variation of these products and ensures that it can separate the positions for which it holds approval in order to incorporate them in the capital charge according to this point from those positions for which it does not hold such approval. With regard to portfolios subject to this point, the institution shall regularly apply a set of specific, predetermined stress scenarios. These stress scenarios shall examine the effects of stress to default rates, recovery rates, credit spreads, and correlations on the profit and loss of the correlation trading desk. The institution shall apply these stress scenarios at least weekly and report at least quarterly to the competent authorities the results, including comparisons with the institution’s capital charge according to this point. Any instances where the stress tests indicate a material shortfall of this capital charge must be reported to the competent authorities in a timely manner. Based on these stress testing results, the competent authorities shall consider a supplemental capital charge against the correlation trading portfolio as set out in Article 136(2) of Directive 2006/48/EC. An institution shall calculate the capital charge to capture all price risks at least weekly.

2010/03/31
Committee: ECON

Proposal for a directive – amending act
Annex II – point 3 – point h – point i

Directive 2006/49/EC
Annex V – point 10 – point c

(c) a 10-day equivalent holding period;

2010/03/31
Committee: ECON