Legal provisions of COM(2021)663 - Amendment of Directive 2013/36/EU as regards supervisory powers, sanctions, third-country branches, and environmental, social and governance risks - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2021)663 - Amendment of Directive 2013/36/EU as regards supervisory powers, sanctions, third-country branches, and environmental, ... |
|---|---|
| document | COM(2021)663  |
| date | October 27, 2021 |
Contents
Article 1 - Amendments to Directive 2013/36/EU
(1) in Article 3, paragraph 1 is amended as follows:
(a)the following point (8a) is inserted:
‘(8a)‘management body in its management function’ means the management body acting in its role of directing effectively the institution and includes the persons who direct the business of the institution;’;
(b)point (9) is replaced by the following:
‘(9)‘senior management’ means those natural persons who exercise executive functions within an institution and are directly accountable to the institution’s management body but are not members of that body, and who are responsible for the day-to-day management of the institution under the direction of the management body of the institution;’;
(c)the following points (9a) to (9d) are inserted:
‘(9a)‘key function holders’ means persons who have significant influence over the direction of the institution but are not members of the management body, including the heads of internal control functions and the chief financial officer, where those heads or that officer are not members of the management body;
(9b)‘chief financial officer’ means the person responsible for the financial resources management, financial planning and financial reporting of the institution;
(9c)‘heads of internal control functions’ means the persons at the highest hierarchical level responsible for effectively managing the day-to-day operation of the independent risk management, compliance and internal audit functions of the institution;
(9d)‘internal control functions’ means risk management, compliance and internal audit functions;’;
(d)point (11) is replaced by the following:
‘(11)‘model risk’ means model risk as defined in Article 4(1), point (52b), of Regulation (EU) No 575/2013;’;
(e)the following point (29a) is inserted:
‘(29a)‘stand-alone institution in the EU’ means stand-alone institution in the EU as defined in Article 4(1), point (33a), of Regulation (EU) No 575/2013;’;
(f)the following point (47a) is inserted:
‘(47a)‘eligible capital’ means the eligible capital as defined in Article 4(1), point (71), of Regulation (EU) No 575/2013;’;
(g)the following points (66) to (69) are added:
‘(66)‘large institution’ means an institution as defined in Article 4(1), point (146), of Regulation (EU) No 575/2013;
(67) ‘relevant subsidiary’ means a material subsidiary as defined in Article 4(1), point (135), of Regulation (EU) No 575/2013 or a large subsidiary as defined in Article 4(1), point (147), of that Regulation;
(68) ‘periodic penalty payments’ means daily penalties, aimed at ending ongoing breaches and compelling legal or natural person to return to compliance with their obligations under this Directive and Regulation (EU) No 575/2013;
(69) ‘environmental, social and governance risk’ means environmental, social and governance risk as defined in Article 4(1), point (52d), or Regulation (EU) No 575/2013;’;
(2) in Article 4, paragraph 4 is replaced by the following:
‘4. Member States shall ensure that competent authorities have the expertise, resources, operational capacity, powers and independence necessary to carry out the functions relating to prudential supervision, investigations and the powers to impose periodic penalty payments and penalties set out in this Directive and in Regulation (EU) No 575/2013.
For the purposes of preserving the independence of competent authorities in the exercise of their powers, Member State shall provide all the necessary arrangements to ensure that those competent authorities, including their staff and members of their governance bodies, can act independently and objectively, without seeking or taking instructions, or being subject to influence from supervised institutions, from any government of a Member State or body of the Union or from any other public or private body. These arrangements shall be without prejudice to the rights and obligations of the competent authorities as stemming from being part of the European system of financial supervision as stemming from Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010*1, the Single Supervisory Mechanism as stemming from Council Regulation (EU) No 1024/2013 of 15 October 2013*2 and Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014*3, for the Single Resolution Board as stemming from stemming from Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014*4.
Member States shall, in particular, ensure that competent authorities have in place all the necessary arrangements to prevent conflicts of interests of their staff and members of their governance bodies. For those purposes, Member States shall lay down rules proportionate to the role and responsibilities of those staff and members of the governance bodies, and at a minimum prohibiting them from:
(a)trading in financial instruments issued by or referenced to the institutions supervised by the competent authorities, their direct or indirect parent undertakings, subsidiaries or affiliates;
(b)following the end of their employment at the competent authority, being hired by or accepting any kind of contractual agreement for the provision of professional services with any of the following:
(i)institutions they have directly supervised, including their direct or indirect parent undertakings, subsidiaries or affiliates, over at least the two preceding years from the date when taking up any new role;
(ii)firms that provide services to any of the undertakings referred to in point (i) that were directly supervised over at least the two preceding years from the date when taking up any new role, unless they are strictly precluded from taking part in any provision of those services while the prohibition referred to herein remains in force.
Members of staff and of governance bodies subject to the prohibitions provided for in the third subparagraph, point (b), shall be entitled to an appropriate compensation for the inability to take up a prohibited role.
EBA shall issue guidelines addressed to the competent authorities, in accordance with Article 16 of Regulation (EU) No 1093/2010, on the prevention of conflicts of interests in and independence of competent authorities, taking into account international best practices, for a proportionate application of this Article.’;
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*1 Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12).
*2 Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287,29.10.2013, p. 63).
*3 Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014 establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities (SSM Framework Regulation) (ECB/2014/17) (OJ L 141, 14.5.2014, p. 1).
*4 Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ L 225, 30.7.2014, p. 1).
(3) In Article 18 the following point (g) is added:
‘(g)meets all of the following conditions:
(i)it has been determined to be failing or likely to fail in accordance with Article 32(1), point (a) of Directive 2014/59/EU or in accordance with Article 18(1), point (a), of Regulation (EU) No 806/2014;
(ii)the resolution authority considers that the condition in Article 32(1), point (b) of Directive 2014/59/EU or in Article 18(1), point (b), of Regulation (EU) No 806/2014 is met with respect to that credit institution;
(iii)the resolution authority considers that the condition in Article 32(1), point (c) of Directive 2014/59/EU or in Article 18(1), point (c), of Regulation (EU) No 806/2014 is not met with respect to that credit institution.’;
(4) Article 21a is amended as follows:
(a)paragraph 1 is replaced by the following:
‘1. Parent financial holding companies in a Member State, parent mixed financial holding companies in a Member State, EU parent financial holding companies and EU parent mixed financial holding companies shall seek approval in accordance with this Article. Other financial holding companies or mixed financial holding companies shall seek approval in accordance with this Article where they are required to comply with this Directive or Regulation (EU) No 575/2013 on a sub-consolidated basis.
Competent authorities shall perform a review of the parent undertakings of an institution, or of the parent undertakings of an entity requesting an authorisation pursuant to Article 8, in order to detect the presence or not of an undertaking complying with the criteria to be considered as a parent financial holding company in a Member State, a parent mixed financial holding company in a Member State, an EU parent financial holding company or an EU parent mixed financial holding company.
For the purposes of the second sub-paragraph, where the parent companies are located in other Member States than the Member State in which the institution, or the entity requesting an authorisation pursuant to Article 8, is established, competent authorities of those two Member States shall cooperate closely to perform the review.
Competent authorities shall publish the outcome of the review referred to in the second sub-paragraph.’;
(b)paragraph 2 is amended as follows:
(i)in the first subparagraph, point (b) is replaced by the following:
‘(b) information regarding the nomination of at least two persons effectively directing the financial holding company or mixed financial holding company and compliance with the requirements set out in Article 91(1);’;
(ii)the second subparagraph is replaced by the following:
‘Where the approval of a financial holding company or mixed financial holding company takes place concurrently with the assessment referred to in Article 22 and Article 27a, the competent authority for the purposes of that Article shall coordinate, as appropriate, with the consolidating supervisor and, where different, the competent authority in the Member State where the financial holding company or mixed financial holding company is established. In that case, the assessment period referred to in Article 22(3), second subparagraph, and Article 27a(6) shall be suspended for a period exceeding 20 working day until the procedure set out in this Article is complete.’;
(5) in Article 21b(6), the following second and third subparagraphs are added:
‘EBA shall develop draft implementing technical standards to specify the uniform formats, definitions and the IT solutions to be applied in the Union for the reporting of the information referred to in the first subparagraph.
EBA shall submit those draft implementing technical standards to the Commission by [OP please insert the date = 12 months from date of entry into force of this amending Directive].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the second subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.’;
(6) the following new Article 21c is inserted:
Article 21 - c Requirement to establish a branch for the provision of banking services by third country undertakings and exception for the reverse solicitation of services
1. Member States shall require undertakings established in a third country as referred to in Article 47(1) and (2) to establish a branch in their territory and apply for authorisation in accordance with Title VI to commence or continue conducting the activities referred to in paragraph (1) of that Article in the relevant Member State.2. Where a retail client, an eligible counterparty or a professional client within the meaning of Sections I and II of Annex II to Directive 2014/65/EU established or situated in the Union approaches an undertaking established in a third country at its own exclusive initiative for the provision of any service or activity referred to in Article 47(1), the requirement laid down in paragraph 1 of this Article shall not apply to the provision to that person of the relevant service or activity, including a relationship specifically related to the provision of that service or activity. Without prejudice to intragroup relationships, where a third country undertaking, including through an entity acting on its behalf or having close links with such third-country undertaking or any other person acting on behalf of such undertaking, solicits clients or potential clients in the Union, it shall not be deemed to be a service provided at the own exclusive initiative of the client.
3. An initiative by a client or counterparty as referred to in paragraph 2 shall not entitle the third-country undertaking to market other categories of products, activities or services than those that the client or counterparty had solicited, other than through a third country branch established in a Member State.’;
(7) In Title III, the following Chapters 3, 4 and 5 are added:
‘CHAPTER 3
Acquisition or divesture of a qualifying holding
Article 27 - a Notification and assessment of the acquisition
1. Member States shall require any institution, parent financial holding companies in a Member State, parent mixed financial holding companies in a Member State, EU parent financial holding companies and EU parent mixed financial holding companies, or other financial holding companies or mixed financial holding companies required to seek for approval in accordance with Article 21a(1) on a sub-consolidated basis (the “acquirer”) to notify their competent authority where they intend to acquire, directly or indirectly, a qualifying holding which exceeds 15% of the eligible capital of the acquirer (the “proposed acquisition”), indicating the size of the intended holding and the relevant information, as specified in Article 27b(5).2. The competent authorities shall acknowledge receipt of the notification under paragraph 1 or of any additional information under paragraph 5 promptly and in any event within two working days following receipt of that notification.
By way of derogation from the paragraph 2 of this Article, and of Article 22(2), when the proposed acquisition referred to in paragraph 1 of this Article or in Article 22(1) is deemed complex by the competent authorities, acknowledgment of the receipt of the notification of any additional information shall be done promptly and in any event within ten working days following the receipt of that notification.
3. The competent authorities shall have 60 working days from the date of the written acknowledgement of receipt of the notification and from the receipt of all documents, including those required by the Member State to be attached to the notification in accordance with Article 27b(4) (the “assessment period”), to carry out the assessment provided for in Article 27b(1) (the “assessment”).
If the proposed acquisition consists in a qualifying holding in a credit institution as referred in Article 22(1), the acquirer shall also still be subject to the notification requirement and the assessment under that Article.
4. The competent authorities shall inform the proposed acquirer of the date of the expiry of the assessment period at the time of acknowledging receipt referred to in paragraph 3.
5. The competent authorities may, during the assessment period where necessary, and no later than on the 50th working day of the assessment period, request additional information that is necessary to complete the assessment. Such a request shall be made in writing and shall specify the additional information needed.
6. The assessment period shall be suspended between the date of request for additional information by the competent authorities and the date of receipt of a response thereto by the acquirer, providing all the requested information. The suspension shall not exceed 20 working days. Any further requests by the competent authorities for completion or clarification of the information shall be at their discretion but shall not result in a suspension of the assessment period.
7. The competent authorities may extend the suspension referred to in the second subparagraph of paragraph 6 up to 30 working days in the following situations:
(a)the entity acquired is situated or regulated in a third country;
(b)exchange of information with authorities responsible for supervising the obliged entities listed in Article 2(1) points (1) and (2) of Directive (EU) 2015/849 of the European Parliament and of the Council*5 is necessary to perform the assessment referred to in Article 27b(1) of this Directive.
8. Where the approval of a financial holding company or mixed financial holding company pursuant to Article 21a takes place concurrently with the assessment referred in this Article, the competent authority for the purposes of that Article shall coordinate, as appropriate, with the consolidating supervisor and, where different, the competent authority in the Member State where the financial holding company or mixed financial holding company is established. In that case, the assessment period shall be suspended for a period not exceeding 20 working days until the procedure set out in Article 21a is complete.
9. Where competent authorities decide to oppose the proposed acquisition, they shall, within two working days of completion of the assessment, and not exceeding the assessment period, inform the acquirer in writing, providing the reasons for their objection. Subject to national law, an appropriate statement of the reasons for the decision opposing the proposed acquisition may be made accessible to the public at the request of the acquirer. The absence of provisions in the national law regarding an appropriate statement of the reasons for the decision opposing the proposed acquisition shall not prevent Member States from allowing the competent authority to publish such information in the absence of a request by the acquirer.
10. Where the competent authorities do not oppose the proposed acquisition within the assessment period in writing, it shall be deemed approved.
11. Competent authorities may set a maximum period for completing the proposed acquisition and extend it where appropriate.
12. Member States may not impose requirements for notification to, or approval by, competent authorities of direct or indirect acquisitions or capital that are more stringent than those set out in Article 89 of Regulation (EU) No 575/2013.
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*5 Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ L 141, 5.6.2015, p. 73).
Article 27 - b Assessment criteria
1. In dealing with the notification of the proposed acquisition provided for in Article 27a(1) and the information referred to in Article 27a(5), the competent authorities shall assess the sound and prudent management of the acquirer after the acquisition and in particular of the risks to which the acquirer is or might be exposed, in accordance with the following criteria:(a)the sufficiently good repute and sufficient knowledge, skills and experience, as set out in Article 91(1), of any new member of the management body of the acquirer to be appointed as a result of the proposed acquisition.
(b)whether the acquirer will be able to comply and continue to comply with the prudential requirements set out in this Directive and Regulation (EU) No 575/2013, and where applicable, other acts of Union law.
(c)whether there are reasonable grounds to suspect that, in connection with the proposed acquisition, money laundering or terrorist financing within the meaning of Article 1 of Directive (EU) 2015/849 is being or has been committed or attempted, or that the proposed acquisition could increase the risk thereof.
2. For the purposes of assessing the criterion laid down in paragraph 1, point (c), and criterion laid down in Article 23(1), point (e), competent authorities shall consult, in the context of their verifications, the authorities competent for the supervision of the undertakings in line with Directive (EU) 2015/849.
3. The competent authorities may oppose the proposed acquisition only if there are reasonable grounds for doing so on the basis of the criteria set out in paragraph 1 or if the information provided by the acquirer is incomplete, despite a request made in accordance with Article 27a.
For the purposes of this paragraph and Article 23(2), and with regard to the criterion laid down in paragraph 1, point (c), an objection in writing by the authorities competent for the supervision of the undertakings under Directive (EU) 2015/849 shall constitute a reasonable ground for opposition.
4. Member States shall neither impose any prior conditions in respect of the level of holding that must be acquired nor allow their competent authorities to examine the proposed acquisition in terms of the economic needs of the market.
5. Member States shall publish a list specifying the information required to carry out the assessment. That information shall be provided to the competent authorities at the time of the notification referred to in Article 27a(1). The information shall be proportionate and appropriate to the nature of the entity to be acquired. Member States shall not require information that is not relevant for the prudential assessment under this Article.
6. Notwithstanding Article 27a, paragraphs 2 to 7, where two or more proposals to acquire qualifying holdings in the same entity have been notified, the competent authority shall treat the acquirers in a non-discriminatory manner.
7. EBA shall develop draft regulatory technical standards specifying:
(a)the minimum list of information to be provided to the competent authorities at the time of the notification referred to in Article 23(1), Article 27a(1), Article 27f(1) and Article 27k(1);
(b)a common assessment methodology of the criteria set out in this Article, Article 27g and Article 27l;
(c)the process applicable to notification and the prudential assessment required under Article 27a, Article 27f and Article 27k.
For the purpose of the first sub-paragraph, the EBA shall take into consideration the Directive (EU) 2017/1132 of the European Parliament and of the Council*6.
EBA shall submit those draft implementing technical standards to the Commission by [OP please insert the date = 18 months from the date of entry into force of this amending Directive].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
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*6 Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law (codification).
Article 27 - c Cooperation between competent authorities
1. The relevant competent authorities shall consult each other when carrying out the assessment referred to in Article 27b where the entity acquired is one of the following:(a)a credit institution, insurance undertaking, reinsurance undertaking, investment firm or a management company within the meaning of Article 2(1) point (b) of Directive 2009/65/EC (“UCITS management company”) authorised in another Member State or in a sector other than that of the proposed acquirer;
(b)a parent undertaking of a credit institution, insurance undertaking, reinsurance undertaking, investment firm or a management company within the meaning of Article 2(1), point (b) of Directive 2009/65/EC (“UCITS management company”) authorised in another Member State or in a sector other than that of the proposed acquirer;
(c)a legal person controlling a credit institution, insurance undertaking, reinsurance undertaking, investment firm or UCITS management company authorised in another Member State or in a sector other than that in which the acquisition is proposed.
The competent authorities shall, without undue delay, provide each other with any information which is essential or relevant for the assessment. For those purposes, the competent authorities shall communicate to each other upon request or on their own initiative all relevant information for the assessment.
2. The competent authorities shall seek to coordinate their assessments and ensure the consistency of their decisions. To this end, the decision by the competent authority of the acquirer shall indicate any views or reservations made by the competent authority that has authorised the credit institution controlled by the parent undertaking in which the acquisition is proposed.
3. EBA shall develop draft implementing technical standards to establish common procedures, forms and templates for the consultation process between the relevant competent authorities as referred to in this Article.
EBA shall submit those draft implementing technical standards to the Commission by [OP please insert the date = 18 months from the date of entry into force of this amending Directive].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Article 27 - d Notification in the case of divestiture
Member States shall require institutions, parent mixed financial holding companies in a Member State, EU parent financial holding companies and EU parent mixed financial holding companies, as well as financial holding companies and mixed financial holding companies, to notify the competent authorities where they intend to dispose, directly or indirectly, of a qualifying holding that exceeds 15% of the eligible capital of the acquirer. That notification shall be made in writing and in advance of the divestiture, indicating the size of the holding concerned.Article 27 - e Information obligations and penalties
Where the acquirer fails to notify the proposed acquisition in advance in accordance with Article 27a(1) or has acquired a qualifying holding as referred to that Article despite the competent authorities’ opposition, Member States shall require those competent authorities to take appropriate measures. Such measures may include injunctions, periodic penalty payments and penalties, in accordance with Articles 65 to 72, against members of the management body and senior management. Where a qualifying holding is acquired despite opposition by the competent authorities, Member States shall, without prejudice to potential penalties, provide either for exercise of the corresponding voting rights to be suspended or for votes cast to be declared null and void.CHAPTER 4
Material transfers of assets and liabilities
Article 27 - f Notification and assessment of material transfers of assets and liabilities
1. Member States shall require institutions, parent financial holding companies in a Member State, parent mixed financial holding companies in a Member State, EU parent financial holding companies, EU parent mixed financial holding companies, or other financial holding companies and mixed financial holding companies required to seek for approval in accordance with Article 21a(1) on a sub-consolidated basis to notify their competent authority of any material transfer of assets or liabilities which they intend to execute either through a sale or any other type of transaction (the “intended operation”). The notification shall indicate the size of the intended operation and provide the information specified in Article 27g(5).When the intended operation involves only institutions from the same group, these institutions shall also be subject to the first sub-paragraph.
For the purposes of the first and second sub-paragraphs, each of the institutions involved in the same intended operation shall be subject individually to the obligation to notify set out in those subparagraphs.
2. For the purposes of paragraph 1:
(a)the intended operation shall be deemed material for an institution where it is at least equal to 10 % of its total assets or liabilities, where the intended operation is performed between entities of the same group, the intended operation is deemed material for an institution where it is at least equal to 15 % of its total assets or liabilities;
(b)transfers of non-performing assets, or of assets for the purpose of being included in a cover pool, within the meaning of Article 3(3) of Directive (EU) 2019/2162 of the European Parliament and of the Council*7, or to be securitised, shall not be taken into account for calculating the percentage in point (a);
(c)transfers of assets or liabilities in the context of the use of resolution tools, powers and mechanisms provided for in Title IV of Directive 2014/59/EU shall not be taken into account for calculating the percentage referred to in point (a).
3. Competent authorities shall acknowledge receipt of the notification under paragraph 1 or of additional information under paragraph 6 promptly and in any event within two working days following receipt of the notification.
4. From the date of the written acknowledgement of receipt of the notification and of the documents, including those required by the Member State to be attached to the notification in accordance with Article 27g(5), competent authorities shall have a maximum of 60 working days to carry out the assessment provided for in Article 27g(1) (the “assessment period”).
5. Competent authorities shall inform the institution of the date of the expiry of the assessment period at the time of acknowledging receipt.
6. Competent authorities may request further necessary information to complete the assessment at any time during the assessment period and no later than the 50th working day of the assessment period. Such a request shall be made in writing and specify the additional information needed.
7. For the period between the date of request for information by the competent authorities and the receipt of a response thereto by the institution providing all the requested information, the assessment period shall be suspended. The suspension shall not exceed 20 working days. Any further requests by the competent authorities for the completion or clarification of the information shall be at their discretion but shall not result in a suspension of the assessment period.
8. Where competent authorities decide to oppose the intended operation, they shall inform the institution in writing and provide the reasons thereto within two working days of completion of the assessment and not later than the date of the expiry of the assessment period. Subject to national law, an appropriate statement of the reasons for the decision may be made accessible to the public at the request of the institution. The absence of provisions in the national law regarding an appropriate statement of the reasons for the decision opposing the proposed acquisition shall not prevent a Member State from allowing the competent authority to publish such information in the absence of a request by the institution.
9. Where the competent authorities do not oppose the intended operation in writing within the assessment period, it shall be deemed approved.
10. The competent authorities may set a maximum period for completing the intended operation and extend it where appropriate.
11. Member States may not impose requirements for notification on, or approval by, the competent authorities that are more stringent than those set out in Article 27f.
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*7 Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issue of covered bonds and covered bond public supervision and amending Directives 2009/65/EC and 2014/59/EU (OJ L 328, 18.12.2019, p. 29).
Article 27 - g Assessment criteria
1. In dealing with the notification provided for in Article 27f(1) and the information referred to in Article 27f(6), competent authorities shall assess the intended operation in accordance with the following criteria:(a)whether the institution will be able to comply and continue to comply with the prudential requirements set out in this Directive and Regulation (EU) No 575/2013, and where applicable, other acts of Union law.
(b)whether there are reasonable grounds to suspect that, in connection with the intended operation, money laundering or terrorist financing within the meaning of Article 1 of Directive (EU) 2015/849 is being or has been committed or attempted, or that the proposed acquisition could increase the risk thereof.
2. For the purposes of assessing the criterion laid down in paragraph 1, point (b), competent authorities shall consult, in the context of their verifications, the authorities competent for the supervision of the undertakings under Directive (EU) 2015/849.
3. The competent authorities may oppose the intended operation only where the criteria set out in paragraph 1 are not met or where the information provided by the institution is incomplete despite a request made in accordance with Article 27f.
With regard to the criterion laid down in paragraph 1, point (b), an objection in writing by the competent authorities under Directive (EU) 2015/849 shall constitute a reasonable ground for opposition.
4. Member States may neither subject the intended operation to meeting a specified level or amount, nor allow their competent authorities to examine the intended operation in terms of the economic needs of the market.
5. Member States shall publish a list of information items that are necessary to carry out the assessment referred to in paragraph 1. That information shall be provided to the competent authorities at the time of the notification referred to in Article 27f(1). Member States shall not require information that is not relevant for a prudential assessment of the intended operation.
Article 27 - h Cooperation between competent authorities
1. The relevant competent authorities shall consult each other when carrying out the assessment referred to in Article 27g where the parties involved in the intended operation are one of the following:(a)a credit institution, insurance undertaking, reinsurance undertaking, investment firm or a management company within the meaning of Article 2(1), point (b) of Directive 2009/65/EC (“UCITS management company”) authorised in another Member State or in a sector other than that in which the acquisition is proposed;
(b)a parent undertaking of a credit institution, insurance undertaking, reinsurance undertaking, investment firm or a management company within the meaning of Article 2(1), point (b) of Directive 2009/65/EC (“UCITS management company”) authorised in another Member State or in a sector other than that in which the acquisition is proposed;
(c)a legal person controlling a credit institution, insurance undertaking, reinsurance undertaking, investment firm or UCITS management company authorised in another Member State or in a sector other than that in which the acquisition is proposed.
2. Competent authorities shall, without undue delay, provide each other with any information which is essential or relevant for the assessment. For these purposes, competent authorities shall communicate to each other upon request or on their own initiative all relevant information for the assessment.
3. The competent authorities shall seek to coordinate their assessments, ensure the consistency of their decisions, and shall indicate in their decisions any views or reservations made by the competent authority supervising other entities involved in the intended operation.
4. EBA shall develop draft implementing technical standards to establish common procedures, forms and templates for the consultation process between the relevant competent authorities as referred to in this Article.
EBA shall submit those draft implementing technical standards to the Commission by [OP please insert the date = 18 months from the date of entry into force of this amending Directive].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Article 27 - i Information obligations and penalties
Member States shall require that, where the institutions fail to notify the intended operation in advance in accordance with Article 27f(1), or has performed the intended operation as referred to that Article despite opposition by the competent authorities, the competent authorities take appropriate measures. Such measures may consist in injunctions, periodic penalty payments, penalties, subject to Articles 65 to 72, against members of the management body and managers.CHAPTER 5
Mergers and divisions
Article 27 - j Definitions
For the purposes of this Chapter, the following definitions shall apply:(a)‘merger’ means any of the following operations whereby:
(i)one or more companies, on being dissolved without going into liquidation, transfer all or parts of their assets and liabilities to another existing company, in exchange for the issue to their members of securities or shares representing the capital of that other company and, where applicable, a cash payment not exceeding 10 % of the nominal value (unless stated otherwise by the applicable national law), or, in the absence of a nominal value, of the accounting par value of those securities or shares;
(ii)one or more companies, on being dissolved without going into liquidation, transfer all or parts their assets and liabilities to another existing company, the acquiring company, without the issue of any new shares by the acquiring company, provided that one person holds directly or indirectly all the shares in the merging companies or the members of the merging companies hold their securities and shares in the same proportion in all merging companies;
(iii)two or more companies, on being dissolved without going into liquidation, transfer all or parts of their assets and liabilities to a company that they form in exchange for the issue to their members of securities or shares representing the capital of that new company and, where applicable, a cash payment not exceeding 10 % of the nominal value (unless stated otherwise by the applicable national law), or, in the absence of a nominal value, of the accounting par value of those securities or shares;
(iv)a company, on being dissolved without going into liquidation, transfers all or parts of its assets and liabilities to the company holding all the securities or shares representing its capital.
(b)‘division’ means any of the following operations:
(i)an operation whereby, after being wound up without going into liquidation, a company transfers to more than one company all its assets and liabilities in exchange for the allocation to the shareholders of the company being divided of shares in the companies receiving contributions as a result of the division and, where applicable, a cash payment not exceeding 10 % of the nominal value (unless stated otherwise by the applicable national law), or, in the absence of a nominal value, of the accounting par value of those securities or shares;
(ii)an operation whereby, after being wound up without going into liquidation, a company transfers to more than one newly-formed company all its assets and liabilities in exchange for the allocation to the shareholders of the company being divided of shares in the recipient companies, and, where applicable, a cash payment not exceeding 10 % of the nominal value (unless stated otherwise by the applicable national law), or, in the absence of a nominal value, of the accounting par value of those securities or shares;
(iii)an operation consisting in a combination of operations described under points (i) and (ii);
(iv)an operation whereby a company being divided transfers part of its assets and liabilities to one or more recipient companies, in exchange for the issue to the shareholders of the company being divided of shares in the recipient companies, in the company being divided or in both the recipient companies and the company being divided, and, where applicable, a cash payment not exceeding 10 % of the nominal value (unless stated otherwise by the applicable national law), or, in the absence of a nominal value, of the accounting par value of those securities or shares;
(v)an operation whereby a company being divided transfers part of its assets and liabilities to one or more recipient companies, in exchange for the issue to the company being divided of securities or shares in the recipient companies.
Article 27 - k Notification and assessment of the merger or division
1. Member States shall require institutions, parent financial holding companies in a Member State, parent mixed financial holding companies in a Member State, EU parent financial holding companies, EU parent mixed financial holding companies, or financial holding companies and mixed financial holding companies required to seek for approval in accordance with Article 21a(1) on a sub-consolidated basis (the ‘financial stakeholders’) carrying out a merger or division (the “proposed operation”), to notify in advance of the completion of the proposed operation the competent authorities which will be responsible for the supervision of the entities resulting from such proposed operation, indicating the relevant information, as specified in accordance with Article 27l(4).For the purpose of the first sub-paragraph, the ECB shall considered as the competent authority to be notified and in charge the assessment when the entities resulting from the proposed operation would meet on a consolidated bases any of the following conditions:
(a)the total value of its assets exceeds EUR 30 billion;
(b)the ratio of its total assets over the GDP of the participating Member State of establishment exceeds 20%, unless the total value of its assets is below EUR 5 billion.
For the purpose of the first sub-paragraph, in case the proposed operation consists in a division, the competent authority in charge of the supervision of the entity carrying out the proposed operation shall be the competent authority to be notified and in charge of the assessment.
2. The competent authorities shall acknowledge receipt of the notification referred to in paragraph 1 or of the additional information submitted in accordance with paragraph 3 promptly and in any event within 10 working days following receipt of the notification or of the additional information.
Where the proposed operation involves only financial stakeholders from the same group, the competent authorities shall have a maximum of 60 working days as from the date of the written acknowledgement of receipt of the notification and all documents required by the Member State to be attached to the notification in accordance with Article 27l(5) (“the assessment period”), to carry out the assessment provided for in Article 27l(1).
The competent authority shall inform the financial stakeholder of the date of the expiry of the assessment period at the time of acknowledging receipt.
3. Competent authorities may request further information that is necessary to complete the assessment. Such a request shall be made in writing and shall specify the additional information needed.
Where the proposed operation involves only financial stakeholders from the same group, competent authorities may request additional information by no later than the fiftieth working day of the assessment period.
For the period between the date of request of additional information by the competent authorities and the receipt of a response thereto by the financial stakeholders providing all the requested information, the assessment period shall be suspended. The suspension shall not exceed 20 working days. Any further requests by the competent authorities for completion or clarification of the provided information shall be at their discretion but shall not result in a suspension of the assessment period.
4. By way of derogation from paragraph 3, third subparagraph, competent authorities may extend the suspension referred to therein to a maximum of 30 working days in the following cases:
(a)the entity acquired is situated or regulated in a third country;
(b)an exchange of information with authorities responsible for supervising the obliged entities referred to in Article 2(1), points (1) and (2), of Directive (EU) 2015/849 is necessary to perform the assessment foreseen under Article 27l(1) of this Directive.
5. The proposed operations shall not be completed before the issuance of a positive opinion by the competent authorities.
6. The competent authorities shall, within two working days from the completion of their assessment, issue in writing a motivated positive or negative opinion to the financial stakeholders. Subject to national law, an appropriate statement of the reasons for the opinion may be made accessible to the public at the request of the financial stakeholders. This shall not prevent a Member State from allowing the competent authority to publish such information in the absence of a request by the financial stakeholder.
The financial stakeholders shall transmit the motivated opinion issued by their competent authorities under the first subparagraph to the authorities in charge, under the national law, of the scrutiny of the proposed operation.
7. When the proposed operation involves only financial stakeholders from the same group, and the competent authorities do not oppose the proposed operation within the assessment period in writing, the opinion shall be deemed to be positive.
8. The positive opinion issued by the competent authority may be limited in time.
9. Member States shall not impose requirements related to notification and approval as described in this Chapter that are more stringent than those set out herein.
10. This Chapter is without prejudice to the application of the Council Regulation (EC) No 139/2004*8 and Directive (EU) 2017/1132 of the European Parliament and of the Council.
11. The assessment under Article 27k(1) shall not be performed where the proposed operation requires an authorisation in accordance with Article 8, or an approval in accordance with Article 21a.
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*8 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation).
Article 27 - l Assessment criteria
1. In assessing the notification provided for in Article 27k(1) and the information referred to in Article 27k(3), competent authorities shall, in order to ensure the soundness of the prudential profile of the financial stakeholders after the completion of the proposed operation and in particular the risks to which the financial stakeholder is or might be exposed in the course of the proposed operation and the risks to which the financial stakeholder resulting from the proposed operation might be exposed, assess the proposed operation in accordance with the following criteria:(a)the reputation of entities involved in the proposed operation;
(b)the sufficiently good repute and sufficient knowledge, skills and experience, as set out in Article 91(1), of any member of the management body who will direct the business of the financial stakeholder resulting from the proposed operation;
(c)the financial soundness of entities involved in the proposed operation, in particular in relation to the type of business pursued and envisaged for the financial stakeholder resulting from the proposed operation;
(d)whether the entity resulting from the proposed operation will be able to comply and continue to comply with the prudential laid down in this Directive and Regulation (EU) No 575/2013, and where applicable, other acts of Union law, in particular Directives 2002/87/EC and 2009/110/EC;
(e)whether the implementation plan of the proposed operation is realistic, sound and efficient from a prudential perspective;
(f)whether there are reasonable grounds to suspect that, in connection with the proposed operation, money laundering or terrorist financing within the meaning of Article 1 of Directive (EU) 2015/849 is being or has been committed or attempted, or that the proposed operation could increase the risk thereof.
The implementation plan referred to in point (d) shall be subject to appropriate monitoring by the competent authority until completion of the proposed operation.
2. For the purposes of assessing the criterion laid down in paragraph 1, point (f), competent authorities shall consult, in the context of their verifications, the authorities competent for the supervision of the undertakings under Directive (EU) 2015/849.
3. The competent authorities may issue a negative opinion to the proposed operation only if the criteria set out in paragraph 1 are not met or where the information provided by the financial stakeholder is incomplete despite a request made in accordance with Article 27k.
With regard to the criterion laid down in paragraph 1, point (f), an objection in writing by the authorities competent for the supervision of the undertakings in line with Directive (EU) 2015/849 shall constitute a reasonable ground for negative opinion.
4. Member States shall not allow their competent authorities to examine the proposed operation in terms of the economic needs of the market.
5. Member States shall publish a list of information items that are necessary to carry out the assessment referred to in Article 27k(1) and that must be provided to the competent authorities at the time of notification referred to that Article. The information required shall be proportionate and appropriate to the proposed operation. Member States shall not require information that is not relevant for a prudential assessment.
Article 27 - m Cooperation between competent authorities
1. The relevant competent authorities shall consult each other when carrying out the assessment referred to in Article 27l where the proposed operation involves, in addition to the financial stakeholder, entities that are one of the following:(a)a credit institution, insurance undertaking, reinsurance undertaking, investment firm or a management company within the meaning of Article 2(1), point (b) of Directive 2009/65/EC (“UCITS management company”) authorised in another Member State or in a sector other than that in which the acquisition is proposed;
(b)a parent undertaking of a credit institution, insurance undertaking, reinsurance undertaking, investment firm or a UCITS management company authorised in another Member State or in a sector other than that in which the acquisition is proposed;
(c)a legal person controlling a credit institution, insurance undertaking, reinsurance undertaking, investment firm or UCITS management company authorised in another Member State or in a sector other than that in which the acquisition is proposed.
2. The competent authorities shall, without undue delay, provide each other with any information which is relevant for the assessment. In that regard, the competent authorities shall communicate to each other upon request all relevant information and shall communicate on their own initiative all essential information. A decision by the competent authority of the financial stakeholder shall indicate any views or reservations expressed by the competent authority that supervise one or several of the entities listed above and involved in the proposed operation.
3. The competent authorities shall seek to coordinate their assessments, ensure the consistency of their opinions, and shall indicate in their opinions any views or reservations made by the competent authority supervising other financial stakeholders.
4. EBA shall develop draft implementing technical standards to establish common procedures, forms and templates for the consultation process between the relevant competent authorities as referred to in this Article.
EBA shall submit those draft implementing technical standards to the Commission by [OP please insert the date = 18 months from the date of entry into force of this amending Directive].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Article 27 - n Information obligations and penalties
Member States shall require that, where the financial stakeholders fail to provide prior notification of the proposed operation in accordance with Article 27k(1) or have carried out the proposed operation as referred to that Article without prior positive opinion by the competent authorities, the competent authorities shall take appropriate measures. Such measures may consist in injunctions, periodic penalty payments, penalties, subject to Articles 65 to 72, against members of the management body and managers of the financial stakeholders or of the entity resulting from the proposed operation.’;(8) Title VI is replaced by the following:
‘Title VI
PRUDENTIAL SUPERVISION OF THIRD COUNTRY BRANCHES AND RELATIONS WITH THIRD COUNTRIES’
CHAPTER 1
Prudential supervision of third-country branches
Section I
General provisions
Article 47 - Scope and definition
1. This Chapter lays down the rules concerning the carrying out in a Member State of:(a)any of the activities listed in Annex I to this Directive by an undertaking established in a third country;
(b)the activities referred to in Article 4(1), point (b), of Regulation (EU) 575/2013, by an undertaking established in a third country that fulfils any of the criteria laid down in points (i) to (iii) of that point.
2. By derogation from paragraph 1, where the undertaking in the third country is not a credit institution or an undertaking that meets the criteria of paragraph 1, point (b), the carrying out of any of the activities listed in Annex I, points (4), (5), and (7) to (15), to this Directive by that undertaking in a Member State shall be subject to Title II, Chapter IV, of Directive 2014/65/EU.
3. For the purposes of this Title, the following definitions shall apply:
(a)‘third country branch’ shall mean branches established in a Member State by either:
(i)an undertaking which has its head office in a third country, for the purpose of carrying out any of the activities referred to in paragraph 1;
(ii)a credit institution which has its head office in a third country;
(b)‘head undertaking’ shall mean the undertaking with its head office in the third country that has established the third country branch in the Member State, and the undertaking’s intermediate and ultimate parent undertakings, as the case may be.
Article 48 - Prohibition of discrimination
Member States shall not apply to third country branches, when commencing or continuing to carry out their business, provisions which result in a more favourable treatment than that accorded to branches of institutions having their head office in another Member State of the European Union.Article 48 - a Classification of third country branches
1. Member States shall classify third country branches as class 1 where those branches meet any of the following conditions:(a)the total value of the assets booked by the third country branch in the Member State is equal to or higher than EUR 5 billion, as reported for the immediately preceding annual reporting period in accordance with Section II, Sub-section 4;
(b)the third country branch’s authorised activities include taking deposits and other repayable funds from retail customers;
(c)the third country branch is not a qualifying third country branch in accordance with Article 48b.
2. Member States shall classify third country branches that do not meet any of the conditions laid out in paragraph 1 as class 2.
3. Competent authorities shall update the classification of third country branches as follows:
(a)where a class 1 third country branch ceases to meet the conditions laid down in paragraph 1, it shall immediately be considered as class 2;
(b)where a class 2 third country branch starts to meet one of the conditions laid down in paragraph 1, it shall be considered as class 1 only after a period of three months from the date on which it started to meet those conditions.
Article 48 - b Conditions for ‘qualifying third country branches’
1. Where the following conditions are met in relation to a third country branch, that branch shall be regarded as a ‘qualifying third country branch’ for the purposes of this Title:(a)the head undertaking of the third country branch is established in a country that applies prudential standards and a supervisory oversight in accordance with the third country’s banking regulatory framework that are at least equivalent to this Directive and Regulation (EU) No 575/2013;
(b)the supervisory authorities of the third country branch’s head undertaking are subject to confidentiality requirements that are at least equivalent to the requirements laid down in Title VII, Chapter 1, Section II of this Directive;
(c)the country where the third country branch’s head undertaking is established is not listed as a high-risk third country that has strategic deficiencies in its regime on anti-money laundering and counter terrorist financing, in accordance with Article 9 of Directive (EU) 2015/849;
2. The Commission may adopt, by means of implementing acts, decisions as to whether the conditions laid down in paragraph 1, points (a) and (b) of this Article are met in relation to a third country’s banking regulatory framework. For those purposes, the Commission shall comply with the examination procedure referred to in Article 464(2) of Regulation (EU) No 575/2013.
3. Before adopting the decision referred to in paragraph 2, the Commission may request the EBA’s assistance in accordance with Article 33 of Regulation (EU) No 1093/2010 to conduct an assessment of the relevant third country’s banking regulatory framework and confidentiality requirements and to issue a report on that framework’s compliance with the conditions laid down in paragraph 1, points (a) and (b), of this Article. EBA shall publish the outcome of its assessment on its website.
4. EBA shall keep a public register of the third countries and third country authorities that meet the conditions laid down in paragraph 1.
5. Upon receiving an application for authorisation in accordance with Article 48c, competent authorities shall assess the conditions laid down in paragraph 1 of this Article and in Article 48a to classify the third country branch as class 1 or class 2. Where the relevant third country is not recorded on the register referred to in paragraph 4 of this Article, the competent authority shall request the Commission to assess the third country’s banking regulatory framework and confidentiality requirements for the purposes of paragraph 2 of this Article, provided that the condition referred to paragraph 1, point (c), of this Article is met. The competent authority shall classify the third country branch as class 1 pending the Commission’s adoption of a decision in accordance with paragraph 2 of this Article.
Section II
Authorisation and regulatory requirements
Sub-section 1
Authorisation requirements
Article 48 - c Conditions for the authorisation of third country branches
1. Member States shall require that third country undertakings establish a branch in their territory before commencing the activities referred to in Article 47(1). The establishment of a third country branch shall be subject to prior authorisation in accordance with this Chapter.2. Member States shall require that the applications for authorisation of third country branches be accompanied by a programme of operations setting out the envisaged business, the activities to be carried out among those referred to in Article 47(1) and the structural organisation and risk controls of the branch in the relevant Member State in accordance with Article 48h.
3. Third country branches shall only be authorised where all of the following conditions are fulfilled:
(a)the third country branch meets the minimum regulatory requirements laid down in Sub-section 2;
(b)the activities that the head undertaking seeks authorisation for in the Member State are covered by the authorisation that such head undertaking holds in the third country where it is established and subject to supervision therein;
(c)the supervisory authority of the head undertaking in the third country has been notified of the application to establish a branch in the Member State and the accompanying documents referred to in paragraph 2;
(d)the authorisation provides that the third country branch may only conduct the authorised activities within the Member State where it is established and expressly prohibits the third country branch from offering or conducting those same activities in other Member States on a cross-border basis;
(e)for the purpose of performing its supervisory functions, the competent authority is able to access all the necessary information on the third country branch’s head undertaking from its supervisory authorities and to effectively coordinate its supervisory activities with those of the third country supervisory authorities, in particular in periods of crisis or financial distress affecting the head undertaking, its group or the third country’s financial system;
(f)there are no reasonable grounds to suspect that the third country branch would be used to commit or facilitate the commission of money laundering within the meaning of Article 1, point 3 of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing or terrorist financing as defined in Article 1, point 5 of that Directive.
For the purposes of point (e) of this paragraph, the competent authorities shall endeavor to use the model administrative agreements developed by EBA in accordance with Article 33(5) of Regulation (EU) No 1093/2010.
4. For the purposes of assessing whether the condition laid down in paragraph 3, point (f), is met, competent authorities shall consult the authority responsible for supervision of anti-money laundering in the Member State in accordance with Directive (EU) 2015/849 and obtain written confirmation that the condition is fulfilled before proceeding to authorising the third country branch.
5. EBA shall develop draft regulatory technical standards to further specify:
(a)the information to be provided to the competent authorities upon application for authorisation of a third country branch, including the programme of operations and the structural organisation and governance arrangements referred to in paragraph 2;
(b)the procedure for authorisation of the third country branch, as well as the standard forms and templates for the provision of the information referred to in point (a) of this paragraph;
(c)the conditions for authorisation referred to in paragraph 3.
EBA shall submit these draft regulatory technical standards to the Commission by [OP please insert the date = 6 months from the date of entry into force of this amending Directive].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 48 - d Conditions for the refusal or withdrawal of a third country branch’s authorisation
1. Member States shall, at a minimum, provide for the following conditions for refusing or withdrawing the authorisation of a third country branch:(a)the third country branch does not meet the requirements for authorisation laid down in Article 48c or in national law;
(b)the third country branch’s head undertaking or its group do not meet the prudential requirements that apply to them under the third country law or there are reasonable grounds to suspect that they do not meet or that they will breach those requirements within the following 12 months.
For the purposes of point (b) of this paragraph, third country branches shall promptly notify their competent authorities where the circumstances referred to in that point have taken place.
2. Without prejudice to paragraph 1, competent authorities may withdraw the authorisation granted to a third country branch where any of the following conditions is met:
(a)the third country branch does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased to engage in business for more than six months, unless the Member State concerned has made provision for the authorisation to lapse in such cases;
(b)the third country branch has obtained the authorisation through false statements or any other irregular means;
(c)the third country branch no longer fulfils any additional conditions or requirements under which the authorisation was granted;
(d)the third country branch can no longer be relied on to fulfil its obligations towards its creditors, and, in particular, no longer provides security for the assets entrusted to it by its depositors;
(e)the third country branch falls within one of the other cases where national law provides for withdrawal of authorisation;
(f)the third country branch commits one of the breaches referred to in Article 67(1);
(g)there are reasonable grounds to suspect that money laundering or terrorist financing is being or has been committed or attempted in connection with the third country branch, its head undertaking or its group, or there is a heightened risk of money laundering or terrorist financing being committed or attempted in relation to the third country branch, its head undertaking or its group.
3. For the purposes of assessing whether the condition laid down in paragraph 2(g) is met, the competent authorities shall consult the authority responsible for supervision of anti-money laundering in the Member State in accordance with Directive (EU) 2015/849.
4. The EBA shall develop draft regulatory technical standards to specify:
(a)the conditions laid down in paragraphs 1 and 2 for refusing or withdrawing a third country branch’s authorisation;
(b)the procedure to withdraw the third country branch’s authorisation;
(c)the content and process of the notification to the competent authorities referred to in the last subparagraph of paragraph 1 of this Article.
EBA shall submit those draft regulatory technical standards to the Commission by [OP please insert the date = 12 months from the date of entry into force of this amending Directive].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Sub-section 2
Minimum regulatory requirements
Article 48 - e Capital endowment requirement
1. Without prejudice to other applicable capital requirements in accordance with national law, Member States shall require that third country branches maintain at all times a minimum capital endowment that is at least equal to:(a)for class 1 third country branches, 1% of the branch’s average liabilities as reported for the three immediately preceding annual reporting periods in accordance with Sub-section 4, subject to a minimum of EUR 10 million;
(b)for class 2 third country branches, EUR 5 million.
2. Third country branches shall fulfil the minimum capital endowment requirement referred to in paragraph 1 with assets in the form of any of the following:
(a)cash or cash assimilated instruments;
(b)debt securities issued by central governments or central banks of Union Member States; or
(c)any other instrument that is available to the third country branch for unrestricted and immediate use to cover risks or losses as soon as those occur.
3. Member States shall require third country branches to deposit the capital endowment instruments referred to in paragraph 2 in an escrow account with a credit institution in the Member State where the branch is authorised or, where permitted under national law, with the central bank of the Member State. The capital endowment instruments deposited in the escrow account shall be pledged or assigned by way of security in favour of the resolution authority to secure the claims of the third country branch’s creditors. Member States shall lay down rules to grant the resolution authority the power to act in a fiduciary capacity for the benefit of those creditors for the purposes of this Article and Article 48g.
4. The EBA shall issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010, to specify the requirement laid down in paragraph 2, point (c) of this Article in relation to instruments that are available for unrestricted and immediate use to cover risks or losses as soon as those occur. The EBA shall issue those guidelines by [OP please insert the date = 12 months from date of entry into force of this amending Directive].
Article 48 - f Liquidity requirements
1. Without prejudice to other applicable liquidity requirements in accordance with national law, Member States shall at a minimum require third country branches to maintain at all times a volume of unencumbered and liquid assets sufficient to cover liquidity outflows over a minimum period of 30 days.2. For the purposes of paragraph 1, Member States shall require class 1 third country branches to comply with the liquidity coverage requirement laid down in Part Six, Title I of Regulation (EU) No 575/2013 and Commission Delegated Regulation (EU) 2015/61*9.
3. Member States shall require third country branches to deposit the liquid assets held to comply with this Article in an escrow account with a credit institution in the Member State where the branch is authorised or, where permitted under national law, with the central bank of the Member State. The liquid assets deposited in the escrow account shall be pledged or assigned by way of security in favor of the resolution authority to secure the claims of the third country branch’s creditors. Member States shall lay down rules to grant the resolution authority the power to act in a fiduciary capacity for the benefit of those creditors for the purposes of this Article and Article 48g.
4. Competent authorities may waive the liquidity requirement laid down in this Article for qualifying third country branches.
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*9 Commission Delegated Regulation (EU) 2015/61 of 10 October 2014 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for Credit Institutions (OJ L 11, 17.1.2015, p. 1).
Article 48 - g Insolvency and resolution of third country branches
1. Member States shall ensure that, in the event of insolvency or resolution of a third country branch pursuant to Article 96 of Directive 2014/59/EU, resolution authorities are vested with legal power and authority to enforce the security created over the liquid assets and capital endowment instruments held in the escrow account pursuant to Articles 48e(3) and 48f(3) of this Directive. When dealing with those liquid assets and capital endowment instruments following the enforcement of security, resolution authorities shall take into account the existing national rules, as well as supervisory and judicial powers, and ensure adequate coordination with the national administrative or judicial authorities, in accordance with national insolvency law and the principles set out in Article 96 of Directive 2014/59/EU, as appropriate.2. Any surplus of liquid assets or capital endowment instruments held in the escrow account and not used in accordance with paragraph 1 shall be dealt with in accordance with the applicable national law.
Article 48 - h Internal governance and risk controls
1. Member States shall require third country branches to have at least two persons effectively directing their business in the Member State subject to prior approval by the competent authorities. Those persons shall be of good repute and possess sufficient knowledge, skills and experience and commit sufficient time to the performance of their duties.2. Member States shall require class 1 third country branches to comply with Articles 74 and 75 and Article 76(5). Competent authorities may require third country branches to establish a local management committee to ensure an adequate governance of the branch.
3. Member States shall require class 2 third country branches to comply with Articles 74, and 75 and to have internal control functions as provided for under Article 76(5), first, second and third subparagraphs.
Depending of their size, internal organisation and the nature, scope and complexity of their activities, competent authorities may require class 2 third country branches to appoint heads of internal control functions as provided under Article 76(5), fourth and fifth subparagraphs.
4. Member States shall require third country branches to establish reporting lines to the management body of the head undertaking that cover all material risks and risk management policies and changes thereof and have in place adequate ICT systems and controls to ensure that policies are duly complied with.
5. Member States shall require third country branches to monitor and manage their outsourcing arrangements, and to ensure that their competent authorities have full access to all information they need to fulfil their supervisory function.
6. Member States shall require third country branches that engage in back-to-back or intragroup operations to have adequate resources to identify and properly manage their counterparty credit risk where material risks associated with assets booked by the third country branch are transferred to the counterparty.
7. Where critical or important functions are delegated to the head undertaking, competent authorities in charge of the supervision of third country branches shall have access to all information they need to fulfil their supervisory function.
8. Competent authorities shall periodically require that an independent third party assesses the implementation of and on-going compliance with the requirements laid down in this Article and addresses a report to the competent authority with its findings and conclusions.
9. EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, on the application to third country branches of the arrangements, processes and mechanisms referred to in Article 74(1), taking into account Article 74(2), and on the application to third country branches of Article 75 and Article 76(5), by [OP please insert the date = 6 months from date of entry into force of this amending Directive].
Article 48 - i Booking requirements
1. Member States shall require third country branches to maintain a registry book enabling those branches to track and keep a comprehensive and precise record of all the assets and liabilities associated with the activities of the third country branch in the Member State and to manage those assets and liabilities autonomously within the branch. The registry book shall provide sufficient information on the risks generated by the third country branch and on how they are managed.2. Member States shall require third country branches to develop policies on booking arrangements for the management of the registry book referred to in paragraph 1 for the purposes laid down therein. Those policies shall be documented and validated by the relevant governing body of the third country branch’s head undertaking. The policy document referred to in this paragraph shall provide a clear rationale for the booking arrangements and set out how those arrangements align with the third country branch’s business strategy.
3. Competent authorities shall require that an independent written and reasoned opinion on the implementation of and on-going compliance with the requirements laid down in this Article be regularly prepared and addressed to the competent authority with its findings and conclusions.
4. EBA shall develop draft regulatory technical standards to specify the booking arrangements that third country branches shall apply for the purposes of this Article, in particular as regards:
(a)the methodology to be used by the third country branch to identify and keep a comprehensive and precise track record of the assets and liabilities associated with the third country branch’s activities in the Member State; and
(b)the specific treatment to identify and keep a record of the assets and liabilities originated by the third country branch and booked or held remotely in other branches or subsidiaries of the same group on behalf of or for the benefit of the originating third country branch.
EBA shall submit those draft regulatory technical standards to the Commission by [OP please insert the date = 6 months from the date of entry into force of this amending Directive].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Sub-section 3
Power to require authorisation under Title III and requirements on systemic branches
Article 48 - j Power to require establishing a subsidiary
1. Member States shall ensure that competent authorities have the power to require third country branches to apply for authorisation under Title III, Chapter 1, at least where:(a)the third country branch has engaged in the past or currently engages in interconnected activities with other third country branches or subsidiary institutions of the same group or in one of the activities referred to in Article 47(1) with customers or counterparts in other Member States in contravention of the internal market rules; or
(b)the third country branch meets the systemic importance indicators referred to in Article 131(3) and poses a significant risk to the financial stability of the Union or the Member State where it is established.
2. Before making the decision referred to in paragraph 1, competent authorities shall consult the competent authorities of the Member States where the relevant third country group has other third country branches and subsidiary institutions.
Where they disagree, the competent authorities of the third country group in other Member States may refer the matter to the EBA for mediation in accordance with Article 19 of Regulation (EU) No 1093/2010. EBA shall take its decision within one month of matter being referred and the competent authority of the relevant third country branch shall refrain from taking its decision during that time.
The competent authority of the relevant third country branch shall adopt the decision referred to in paragraph 1 in conformity with the decision of EBA.
3. Before imposing the requirement laid down in this Article on a third country branch in accordance with paragraph 1, point (a), the competent authority shall request EBA to issue a recommendation in accordance with Article 16 of Regulation (EU) No 1093/2010 on the interpretation of that point in relation to that third country branch.
4. EBA shall develop draft regulatory technical standards to specify the systemic importance indicators referred to in Article 131(3) as regards third country branches for the purposes of paragraph 1, point (b), of this Article and Article 48k. EBA shall have regard to the following items:
(a)the types of activities and services provided and the operations being conducted by the third country branch and, in particular, whether the third country branch provides those activities and services and conducts those operations with a very narrow set of customers or counterparts;
(b)the complexity of the third country branch’s structure, organisation and business model;
(c)the degree of interconnectedness of the third country branch with the financial system of the Union and of the Member State where it is established;
(d)the substitutability of the activities, services or operations conducted or of the financial infrastructure provided by the third country branch;
(e)the market share of the third country branch in the Union and in the Member States where it is established as regards total banking assets and in relation the activities and services it provides and the operations that it conducts;
(f)the likely impact that a suspension or closure of the third country branch’s operations or business could have on systemic liquidity or the payment, clearing and settlement systems in the Union and in the Member State where it is established;
(g)the likely impact that a suspension or closure of the third country branch’s operations could have on intragroup financing agreements or intragroup services covering critical functions in the Union and in the Member States where it is established;
(h)the cross-border activity of the third country branch with its head undertaking and with counterparts in other third countries;
(i)the role and importance of the third country branch for the activities, services and operations of the third country group in the Union and in the Member State where it is established;
(j)the volume of the third country group’s business being conducted through third country branches, relative to the business of that same group conducted through subsidiary institutions authorised in the Union and in the Member State where the third country branches are established;
(k)whether the third country branch is a qualifying third country branch in accordance with Article 48b.
EBA shall submit those draft regulatory technical standards to the Commission by [OP please insert the date = 12 months from the date of entry into force of this amending Directive].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 48 - k Assessment of systemic importance and requirements on systemic third country branches
1. The third country branch or branches in the Union that belong to the same third country group shall be subject to the assessment laid down in paragraph 2 of this Article where the aggregate amount of assets that they hold on their books in the Union as reported in accordance with Sub-section 4 is equal to or higher than EUR 30 billion, either:(a)on average for the immediately preceding three annual reporting periods; or
(b)in absolute terms for at least three annual reporting periods during the immediately preceding five annual reporting periods.
2. Competent authorities shall assess whether the third country branches referred to in paragraph 1 have systemic importance for the Union and for the Member States where they are stablished. For those purposes, competent authorities shall assess whether those third country branches meet the indicators of systemic importance referred to in Article 48j(4) and Article 131(3).
3. The assessment of systemic importance referred to in paragraph 2 of this Article shall be performed by one of the following:
(a)where Article 111 applies to the relevant third country group, the consolidated supervisor of that third country group in the Union in accordance with that Article;
(b)where Article 111 does not apply to the relevant third country group, the competent authority that would become the consolidated supervisor of that third country group in the Union in accordance with that Article, should the third country branches be treated as subsidiary institutions;
(c)where the third country group has third country branches and subsidiary institutions in only one Member State, the competent authority of that Member State; or
(d)EBA where, after three months from the starting date of the annual reporting period immediately following the last annual reporting period that triggered the obligation to conduct the assessment in accordance with paragraph 1 of this Article:
(i)the assessment has not been commenced by either of the competent authorities referred to in points (a), (b) or (c); or
(ii)the competent authority that would be the consolidated supervisor in accordance with point (b) has not been determined.
The competent authorities referred to in points (a) and (b), acting as “lead competent authority”, or, where applicable, EBA shall conduct the assessment in full cooperation with all the competent authorities concerned. The competent authorities concerned shall assist and provide all the necessary documentation to the lead competent authority or, where applicable, EBA. For those purposes, ‘competent authorities concerned’ shall mean all the authorities responsible for the supervision of the third country branches and subsidiary institutions of the relevant third country group in the Union.
Before the assessment of systemic importance is concluded, the lead competent authority, the competent authority referred to in point (c) or, where applicable, EBA shall hear the third country group and shall set reasonable timeframes for the third country group to submit documentation and make its views known in writing.
4. The lead competent authority shall conclude the assessment referred to in paragraph 2 and issue a report by no later than six months from the starting date of the annual reporting period immediately following the last reporting period that triggered the obligation to conduct the assessment in accordance with paragraph 1. Where, in accordance with paragraph 3, EBA is conducting the assessment, that period shall start to count from the date on which EBA became responsible for conducting the assessment. The report shall lay down the following:
(a)the assessment of systemic importance, which shall set out a clear and detailed analysis of the systemic importance indicators referred to in paragraph 2 in relation to the relevant third country branches and the lead competent authority’s or, where applicable, EBA’s conclusion;
(b)where the lead competent authority or, where applicable, EBA concludes that the third country branches are systemic, a proposed draft decision either:
(i)to require the third country branches to apply for authoritisation under Title III, Chapter 1;
(ii)to require the third country branches to restructure their assets or activities in the Union in such a manner that they cease to qualify as systemic in accordance with paragraph 2 of this Article;
(iii)to impose additional requirements on the third country branches or the subsidiary institutions of the third country group in the Union in accordance with Article 48p or Title VII, Chapter 2, Section IV, respectively;
(iv)not to impose any of the requirements referred to in points (i) to (iii) for a deferral period not exceeding 12 months and subject to conducting a new assessment of the third country branches before the expiry date of that period.
(c)the rationale of the proposed draft decision referred to in point (b), which shall set out a detailed explanation of how the decision relates back to the assessment referred to in point (a).
The lead competent authority or, where applicable, EBA shall only propose the decision referred to in point (b)(iv) where it can justify that the absence of requirements on the third country branches under this Article would not lead to a significant increase in the risk that those branches pose to financial stability and market integrity of the Union or the Member States during the deferral period referred to in that point.
Where applicable, the references to ‘lead competent authority” in this Article shall be understood as references to the competent authority referred to in paragraph 3, point (c). Where that competent authority is responsible for issuing the report laid down in this paragraph, the decision set out therein shall enter into force on the date of its notification to the third country branches. The competent authority shall also notify the decision to EBA.
5. The lead competent authority or, where applicable, EBA shall submit the report referred to in paragraph 5 to the competent authorities concerned. The lead competent authority and the competent authorities concerned shall do their best endeavours to reach a joint decision by consensus on the report and, where applicable, the draft decision within three months from the date on which the report was transmitted.
Where the competent authorities fail to reach a consensus after the end of the three-month period referred to in the first subparagraph, the joint decision shall be made within the month immediately following the end of the preceding three month period by a majority of votes cast. For those purposes, the voting stakes shall be allocated to the competent authorities in accordance with the following:
(a)subject to point (b), each competent authority, including the lead competent authority, shall be entitled to a voting stake equal to the percentage of assets of the third country group under its supervision relative to the total assets of that group in the Union;
(b)the voting stake of the lead competent authority shall be increased up to 25 % where it did not reach that percentage in accordance with point (a);
(c)where the voting stake of the lead competent authority has been increased to 25 % in accordance with point (b), the voting stakes of the remaining competent authorities that result from point (a) shall be adjusted as appropriate as stakes on the remaining 75 % of the voting rights.
For the purposes of point (a), the assets held in both the third country branches and subsidiary institutions of the third country group shall be included in the calculation.
After its adoption, the joint decision shall enter into force on the date it is notified to the third country branches. The joint decision shall also be notified to the EBA.
6. The third country branches shall have a period of three months from the date of the decision’s entering into force in accordance with paragraphs 5 or 6 to comply with the requirements laid down in that decision.
Where the third country branches are required to apply for authorisation as institutions in accordance with Title III, Chapter 1, their authorisation under this Title shall remain valid on an interim basis until the expiry of the deadline referred to in the first subparagraph of this paragraph is reached or, as the case may be, until the completion of the authorisation process as institutions. The third country branches may request the competent authority to extend the three-month deadline referred to in the first subparagraph where they can justify the need for such an extended deadline to comply with the relevant requirement imposed on them.
Where the threshold referred to in paragraph 1 is met by aggregation of assets of various branches, the competent authorities may impose the requirement referred to in this subparagraph in decreasing asset size order up to the point in which the total assets remaining on the books of the third country branches in the Union is less than EUR 30 billion.
7. EBA shall develop draft regulatory technical standards to specify the rules of construction for the interpretation of Article 111 of this Directive for the purposes of determining the hypothetical consolidated supervisor as referred to in paragraph 3, point (b), of this Article.
EBA shall submit those draft regulatory technical standards to the Commission by [OP please insert the date = 12 months from the date of entry into force of this amending Directive].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Sub-section 4
Reporting requirements
Article 48 - l Regulatory, financial and head undertaking information
1. Member States shall require third country branches to periodically report to their competent authorities information on:(a)the assets and liabilities held on their books in accordance with Article 48i, with a breakdown that singles out:
(i)the largest recorded assets and liabilities classified by sector and counterparty type (including, in particular, financial sector exposures);
(ii)significant exposure and funding source concentrations to specified types of counterparties;
(iii)significant internal transactions with the head undertaking and with members of the head undertaking’s group;
(b)the third country branch’s compliance with the requirements that apply to them under this Directive;
(c)on an ad hoc basis, the deposit protection arrangements available to depositors in the third country branch in accordance with Article 15(2) and (3) of Directive 2014/49;
(d)additional regulatory requirements imposed on the third country branch by Member States under national law.
For the purposes of reporting the information on the assets and liabilities held on their books in accordance with point (a), third country branches shall apply the international accounting standards adopted in accordance with the procedure laid down in Article 6(2) of Regulation (EC) No 1606/2002*10 or the applicable GAAP in the Member State.
2. Member States shall require third country branches to report to their competent authorities the following information on their head undertaking:
(a)on a periodic basis, aggregated information on the assets and liabilities held or booked, respectively, by the subsidiaries and other third country branches of that head undertaking’s group in the Union;
(b)on a periodic basis, the head undertaking’s compliance with its applicable prudential requirements on an individual and consolidated basis;
(c)on an ad hoc basis, significant supervisory reviews and assessments when those are conducted on the head undertaking and the consequent supervisory decisions;
(d)the recovery plans of the head undertaking and the specific measures that could be taken on the third country branch in accordance with those plans, and any subsequent updates and amendments to those plans;
(e)the head undertaking’s business strategy in relation to the third country branch, and any subsequent changes to that strategy;
(f)the services provided by the head undertaking to eligible counterparties or professional clients within the meaning of Section 1 of Annex II to Directive 2014/65/EU established or situated in the Union on the basis of reverse solicitation of services in accordance with Article 21c of this Directive.
3. The reporting obligations laid down in this Article shall not prevent competent authorities from imposing additional ad hoc reporting requirements on third country branches where the competent authority deems the additional information necessary to gain a comprehensive view of the branch’s or its head undertaking’s business, activities or financial soundness, verify the branch’s and its head undertaking’s compliance with applicable laws and ensure the branch’s compliance with those laws.
_______
*10 Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (OJ L 243, 11.9.2002, p. 1).’
Article 48 - m Standard forms and templates and frequency of reporting
1. EBA shall develop draft implementing technical standards to specify the uniform formats, definitions, the IT solutions and the frequency of reporting to be applied for the purposes of Article 48l.The reporting requirements referred to in the first subparagraph shall be proportionate to the classification of third country branches as either class 1 or class 2.
EBA shall submit those draft implementing technical standards to the Commission by [OP please insert the date = 6 months from the date of entry into force of this amending Directive].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
2. The regulatory and financial information referred to in this Article shall be reported at least biannually by class 1 third country branches and at least annually by class 2 third country branches.
3. Competent authorities may waive all or part of the requirements to report information on the head undertaking laid out in paragraph 48l(3) for qualifying third country branches, provided that the competent authority is able to obtain the relevant information directly from the supervisory authorities of the relevant third country.
Section III
Supervision
Article 48 - n Third country branches supervision and supervisory examination programme
1. Member States shall require that competent authorities comply with this Section and, mutatis mutandis, with Title VII for the purposes of supervising third country branches.2. Competent authorities shall include third country branches in the supervisory examination programme referred to in Article 99.
Article 48 - o Supervisory review and evaluation
1. Member States shall require that competent authorities review the arrangements, strategies, processes and mechanisms implemented by third country branches to comply with the provisions that apply to them under this Directive and, where applicable, any additional regulatory requirements under national law.2. On the basis of the review conducted in accordance with paragraph 1, the competent authorities shall evaluate whether the arrangements, strategies, processes and mechanisms implemented by the third country branches and the capital endowment and liquidity held by them ensure a sound management and coverage of their material risks and the viability of the branch.
3. Competent authorities shall conduct the review and evaluation referred to in paragraphs 1 and 2 in accordance with the principle of proportionality, as published in accordance with Article 143(1), point (c). In particular, competent authorities shall establish a frequency and intensity for the review referred to in paragraph 1 that is proportionate to the classification as class 1 and 2 third country branches and that takes into account other relevant criteria, such as the nature, scale and complexity of the third country branches’ activities.
4. Where a review, in particular the evaluation of the governance arrangements, the business model, or the activities of a third country branch, gives competent authorities reasonable grounds to suspect that, in connection with that third country branch, money laundering or terrorist financing is being or has been committed or attempted, or there is increased risk thereof, the competent authority shall immediately notify EBA and the authority that supervises the third country branch in accordance with Directive (EU) 2015/849. Where there is an increased risk of money laundering or terrorist financing, the competent authority and the authority that supervises the third country branch in accordance with Directive (EU) 2015/849 shall liaise and notify their common assessment immediately to EBA. The competent authority shall take, as appropriate, measures in accordance with this Directive, which may include withdrawing the third country branch’s permission in accordance with Article 48d(2), point (g).
5. Competent authorities, financial intelligence units and authorities that supervise third country branches shall cooperate closely with each other within their respective competences and shall exchange information relevant to this Directive, provided that such cooperation and information exchange do not impinge on an on-going inquiry, investigation or proceedings in accordance with the criminal or administrative law of the Member State where the competent authority, financial intelligence unit or authority entrusted with the public duty of supervising third country branches are located. EBA may assist the competent authorities and the authorities in charge of supervising the third country branch in accordance with Directive (EU) 2015/849 in the event of a disagreement concerning the coordination of supervisory activities under this Article on its own initiative. In such an event, EBA shall act in accordance with Article 19(1), second subparagraph, of Regulation (EU) No 1093/2010.
6. EBA shall develop draft regulatory technical standards to further specify:
(a)the common procedures and methodologies for the supervisory review and evaluation process referred to in this Article and for the assessment of the treatment of material risks;
(b)the mechanisms for cooperation and information exchange between the authorities referred to in paragraph 5 of this Article, in the context of identifying serious breaches of anti-money laundering rules.
For the purposes of point (a), the procedures and methodologies referred to therein shall be laid down in a manner that is proportionate to the classification of the third country branches as class 1 or class 2, and to other appropriate criteria such as the nature, scale and complexity of their activities.
EBA shall submit those draft regulatory technical standards to the Commission by [OP please insert the date = 12 months from the date of entry into force of this amending Directive].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 48 - p Supervisory measures and powers
1. Competent authorities shall require third country branches to take the necessary measures at an early stage in order to:(a)ensure that the third country branches comply with the requirements that apply to them under this Directive and under national law or to restore compliance with those requirements; and
(b)to ensure that the material risks that the third country branches are exposed to are covered and managed in a sound and sufficient manner and that those branches remain viable.
2. Competent authorities’ powers for the purposes of paragraph 1 shall include, at least, the power to require third country branches to:
(a)hold an amount of capital endowment in excess of the minimum requirements laid down in Article 48e or to comply with other additional capital requirements. Any additional capital endowment amount to be held by the third country branch in accordance with this point shall comply with the requirement laid down in Article 48e;
(b)meet other specific liquidity requirements in addition to the requirement laid down in Article 48f. Any additional liquid assets to be held by the third country branch in accordance with this point shall comply with the requirements laid down in Article 48f;
(c)reinforce their governance, risk control or booking arrangements;
(d)restrict or limit the scope of their business or of the activities they conduct, as well as the counterparties to those activities;
(e)reduce the risk inherent in their activities, products and systems, including outsourced activities, and stop engaging or offering such activities or products;
(f)comply with additional reporting requirements in accordance with Article 48l(3) or increase the frequency of the regular reporting;
(g)make public disclosures.
Article 48 - q Cooperation between competent authorities and colleges of supervisors
1. Competent authorities supervising third country branches and subsidiary institutions of the same third-country group shall cooperate closely and share information with each other. The competent authorities shall have written coordination and cooperation arrangements in place in accordance with article 115.2. For the purposes of paragraph 1, class 1 third country branches shall be subject to the comprehensive supervision of a college of supervisors in accordance with Article 116, subject to the following requirements:
(a)where a college of supervisors has been established in relation to the subsidiary institutions of a third country group, the class 1 third country branches of the same group shall be included within the scope of that college of supervisors;
(b)where the third country group has class 1 third country branches in more than one Member State but no subsidiary institutions in the Union subject to Article 116, a college of supervisors shall be established in relation to those class 1 third country branches;
(c)where the third country group has class 1 third country branches in more than one Member State or at least one class 1 third country branch, and one or more subsidiary institutions in the Union that are not subject to Article 116, a college of supervisors shall be established in relation to those third country branches and subsidiary institutions.
3. For the purposes of paragraph 2, points (b) and (c), there shall be a lead competent authority that performs the same role as the consolidating supervisor in accordance with Article 116. The lead competent authority shall be that of the Member State with the largest third country branch in terms of total value of booked assets.
4. In addition to the tasks set out in Article 116, the colleges of supervisors shall:
(a)prepare a report on the structure and activities of the third country group in the Union and update this report on an annual basis;
(b)exchange information on the results of the supervisory review and evaluation process referred to in Article 48o;
(c)endeavour to align the application of the supervisory measures and powers referred to in Article 48p.
5. The college of supervisors shall ensure appropriate coordination and cooperation with relevant third country supervisory authorities where appropriate.
6. EBA shall contribute to promoting and monitoring the efficient, effective and consistent functioning of the colleges of supervisors referred to in this Article in accordance with Article 21 of Regulation (EU) No 1093/2010.
7. EBA shall develop draft regulatory technical standards to specify:
(a)the mechanisms of cooperation and the draft model agreements between competent authorities for the purposes of paragraph 1 of this Article; and
(b)the conditions for the functioning of colleges of supervisors for the purposes of Articles 2 to 6 of this Article.
EBA shall submit those draft technical standards to the Commission by [OP please insert the date = 12 months from the date of entry into force of this amending Directive].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 48 - r Reporting to the EBA
Competent authorities shall notify EBA the following:(a)all the authorisations granted to third country branches and any subsequent changes to such authorisations;
(b)total assets and liabilities booked by the authorised third country branches, as periodically reported;
(c)the name of the third country group to which an authorised third country branch belongs.
EBA shall publish on its website a list of all third country branches authorised to operate in the Union in accordance with this Title, indicating the Member State in which they are authorised to operate.
CHAPTER 2
Relations with third countries
Article 48 - s Cooperation with supervisory authorities of third countries regarding supervision on a consolidated basis
1. The Union may conclude agreements with one or more third countries regarding the means of exercising supervision on a consolidated basis over the following:(a)institutions the parent undertakings of which have their head offices in a third country;
(b)institutions situated in third countries the parent undertakings of which, whether institutions, financial holding companies or mixed financial holding companies, have their head offices in the Union.
2. The agreements referred to in paragraph 1 shall, in particular, seek to ensure that:
(a)the competent authorities of Member States are able to obtain the information necessary for the supervision, on the basis of their consolidated financial situations, of institutions, financial holding companies and mixed financial holding companies situated in the Union which have as subsidiaries institutions or financial institutions situated in a third country, or holding participation therein;
(b)the supervisory authorities of third countries are able to obtain the information necessary for the supervision of parent undertakings the head offices of which are situated within their territories and which have as subsidiaries institutions or financial institutions situated in one or more Member States or holding participation therein; and
(c)the EBA is able to obtain from the competent authorities of the Member States the information received from national authorities of third countries in accordance with Article 35 of Regulation (EU) No 1093/2010.
3. Without prejudice to Article 218 TFEU, the Commission shall, with the assistance of the European Banking Committee, examine the outcome of the negotiations referred to in paragraph 1 and the resulting situation.
4. EBA shall assist the Commission for the purposes of this Article in accordance with Article 33 of Regulation (EU) No 1093/2010.;
(9) Articles 65 and 66 are replaced by the following:
‘Article 65
Administrative penalties, periodic penalty payments and other administrative measures
1. Without prejudice to the supervisory powers of competent authorities referred to in Article 64 and the right of Member States to provide for and impose criminal penalties, Member States shall lay down rules on administrative penalties, periodic penalty payments and other administrative measures in respect of breaches of national provisions transposing this Directive and of Regulation (EU) No 575/2013, and shall take all measures necessary to ensure that they are implemented. The administrative penalties, periodic penalty payments and other administrative measures shall be effective, proportionate and dissuasive..
2. Member States shall ensure that where the obligations referred to in paragraph 1 apply to institutions, financial holding companies and mixed financial holding companies in the event of a breach of national provisions transposing this Directive or of Regulation (EU) No 575/2013, administrative penalties, periodic penalty payments and other administrative measures may be applied, subject to the conditions laid down in national law, to the members of the management body and to other natural persons who under national law are responsible for the breach.
3. The application of periodic penalty payments shall not prevent competent authorities from imposing administrative penalties for the same breach.
4. Competent authorities shall have all information gathering and investigatory powers that are necessary for the exercise of their functions. Those powers shall include:
(a)the power to require the following natural or legal persons to provide all information that is necessary in order to carry out the tasks of the competent authorities, including information to be provided at recurring intervals and in specified formats for supervisory and related statistical purposes:
(i)institutions established in the Member State concerned;
(ii)financial holding companies established in the Member State concerned;
(iii)mixed financial holding companies established in the Member State concerned;
(iv) mixed-activity holding companies established in the Member State concerned;
(v)persons belonging to the entities referred to in points (i) to (iv);
(vi)parties to whom the entities referred to in points (i) to (iv) have outsourced operational functions or activities;
(b)the power to conduct all necessary investigations of any person referred to in points (a)(i) to (vi) established or located in the Member State concerned where necessary to carry out the tasks of the competent authorities, including the power to:
(i)require the submission of documents;
(ii)examine the books and records of the persons referred to in points (a)(i) to (vi) and take copies or extracts from such books and records;
(iii)obtain written or oral explanations from any person referred to in points (a)(i) to (vi) or their representatives or staff;
(iv)interview any other person who consents to be interviewed for the purpose of collecting information relating to the subject matter of an investigation; and
(v)the power, subject to other conditions set out in Union law, to conduct all necessary inspections at the business premises of the legal persons referred to in points (a)(i) to (vi) and any other undertaking included in consolidated supervision where a competent authority is the consolidating supervisor, subject to the prior notification of the competent authorities concerned. If an inspection requires authorisation by a judicial authority under national law, such authorisation shall be applied for.’;
5. By way of derogation from paragraph 1, where the legal system of the Member State does not provide for administrative penalties, this Article may be applied in such a manner that the penalty is initiated by the competent authority and imposed by judicial authorities, while ensuring that those legal remedies are effective and have an equivalent effect to the administrative penalties imposed by competent authorities. In any event, the penalties imposed shall be effective, proportionate and dissuasive. Those Member States shall notify to the Commission the provisions of their laws which they adopt pursuant to this paragraph by [OP please insert date = date of transposition of this amending Directive] and, without delay, any subsequent amendment law or amendment affecting them.
Article 66
Administrative penalties, periodic penalty payments and other administrative measures for breaches of authorisation and requirements for acquisitions or divesture of qualifying holdings, material transfers of assets and liabilities, mergers or divisions1. Member States shall ensure that their laws, regulations and administrative provisions provide for administrative penalties, periodic penalty payments and other administrative measures at least where:
(a)the business of taking deposits or other repayable funds from the public is conducted without being authorised as a credit institution in breach of Article 9;
(b)activities as a credit institution are commenced without obtaining prior authorisation in breach of Article 9;
(c)a qualifying holding in a credit institution is acquired, directly or indirectly, or further increased, directly or indirectly, such that the proportion of the voting rights or of the capital held would reach or exceed the thresholds referred to in Article 22(1) or the credit institution would become the subsidiary of the acquirer, without notifying in writing the competent authorities of the credit institution in relation to which the acquirer seeks to acquire or increase the qualifying holding, during the assessment period, or against the opposition of the competent authorities, in breach of that Article;
(d)a qualifying holding in a credit institution is disposed of, directly or indirectly or reduced as a result of which the proportion of the voting rights or of the capital held would fall below the thresholds referred to in Article 25 or the credit institution would cease to be a subsidiary of the acquirer, without notifying in writing the competent authorities in breach of that Article ;
(e)a financial holding company or mixed financial holding company as defined in article 21a(1) fail to apply for approval in breach of Article 21a or breaches any other requirement set out in that Article;
(f)an acquirer as defined in Article 27a(1) acquires directly or indirectly, a qualifying holding in an institution, or increases an already held qualifying holding, such that the proportion of voting rights or capital held by the acquirer in the institution would exceed 15% of the institution’s eligible capital without the acquirer’s notifying the competent authorities in breach of that Article;
(g)any of the parties referred to in Article 27d of this Directive disposes directly or indirectly of a qualifying holding that exceeds the threshold referred to in Article 89 of Regulation (EU) 575/2013 without notifying the competent authorities in breach of Article 27d of this Directive;
(h)any of the parties referred to in Article 27f(1) executes a material transfer of assets and liabilities without notifying the competent authorities in breach of that Article;
(i)any of the parties referred to in Article 27k(l) engages in a process of merger or division in breach of that Article.
2. Member States shall ensure that in the cases referred to in paragraph 1, the measures that can be applied include the following:
(a)administrative penalties:
(i)in the case of a legal person, administrative pecuniary penalties of up to 10 % of the total annual net turnover of the undertaking;
(ii)in the case of a natural person, administrative pecuniary penalties of up to EUR 5 000 000, or in the Member States whose currency is not the euro, the corresponding value in the national currency on 17 July 2013;
(iii)administrative pecuniary penalties of up to twice the profits gained or losses avoided because of the breach where those can be determined;
(b)periodic penalty payments:
(i)in the case of a legal person, periodic penalty payments of up to 5 % of the average daily turnover which, in the case of an ongoing breach, the legal person shall be obliged to pay per day of infringement until compliance with an obligation is restored, and which may be imposed for a period of up to six months from the date stipulated in the decision requiring the termination of a breach and imposing the periodic penalty payment;
(ii)in the case of a natural person, periodic penalty payments of up to EUR 500 000 which, in the case of an ongoing breach, the natural person shall be obliged to pay per day of infringement until compliance with an obligation is restored, and which may be imposed for a period up to six months from the date stipulated in the decision requiring the termination of a breach and imposing the periodic penalty payment;
(c)other administrative measures:
(i)a public statement which identifies the natural person, institution, financial holding company or mixed financial holding company, intermediate parent undertaking responsible and the nature of the breach;
(ii)an order requiring the natural or legal person responsible to cease the conduct and to desist from a repetition of that conduct;
(iii)suspension of the voting rights of the shareholder or shareholders held responsible for the breaches referred to in paragraph 1;
(iv)subject to Article 65(2), a temporary or a definitive ban of a member of the institution's management body or any other natural person who is held responsible for the infringement from exercising functions in the institution.
3. The total annual net turnover referred to in paragraph 2, points (a)(i) and (b)(i), of this Article shall be equal to the business indicator set out in Article 314 of Regulation (EU) No 575/2013. For the purposes of this Article, the business indicator shall be calculated on the basis of the most recent available yearly supervisory financial information, unless the result is zero or negative. If the result is zero or negative, the basis for the calculation shall be the most recent earlier yearly supervisory financial information which produces an indicator above zero. Where the undertaking concerned is part of a group the relevant total annual net turnover shall be the total annual net turnover resulting from the consolidated account of the ultimate parent undertaking.
4. The average daily turnover referred to in paragraph (2), point (b)(i), shall be the total annual net turnover referred to in paragraph 3 divided by 365.’;
(10) Article 67 is amended as follows:
(a)paragraph 1 is amended as follows:
(i)points (d) and (e) are replaced by the following:
‘(d) an institution fails to have in place governance arrangements and gender neutral remuneration policies required by the competent authorities in accordance with Article 74;
(e) an institution fails to report information or provides incomplete or inaccurate information regarding compliance with the obligation to meet own funds requirements set out in Article 92 of Regulation (EU) No 575/2013 to the competent authorities in breach of Article 430(1) of that Regulation;’;
(ii)point (j) is replaced by the following:
‘(j) an institution fails to maintain a net stable funding ratio in breach of Article 413 or 428b of Regulation (EU) No 575/2013 or repeatedly and persistently fails to hold liquid assets in breach of Article 412 of that Regulation;’;
(iii)the following points (r) to (ab) are added:
‘(r)an institution fails to meet the own fund requirements set out in Article 92(1) of Regulation (EU) No 575/2013;
(s)an institution or a natural person fails to comply with an obligation arising from a decision issued by the competent authority or an obligation arising from national provisions transposing Directive 2013/36/EU or from Regulation (EU) No 575/2013;
(t)an institution that fails to comply with the remuneration requirements in accordance with Articles 92, 94 and 95 of this Directive;
(u)an institution acts without the prior permission of the competent authority where national provisions transposing Directive 2013/36/EU or Regulation (EU) No 575/2013 require the institution to obtain such prior permission or obtained such permission on the basis of its own false statement or does not comply with the conditions under which such permission was granted;
(v)an institution fails to meet the requirements in relation to composition, conditions, adjustments and deductions related to own funds as set out in Part Two of Regulation (EU) No 575/2013;
(w)an institution fails to meet the requirements in relation to its large exposures to a client or group of connected clients set out in Part Four of Regulation (EU) No 575/2013;
(x)an institution fails to meet the requirements in relation to the calculation of the leverage ratio, including the application of derogations set out in Part Seven of Regulation (EU) No 575/2013;
(y)an institution fails to report information or provides incomplete or inaccurate information to the competent authorities in relation to the data referred to in Articles 430(1), (2) and (3) and in Articles430a and 430b of Regulation (EU) No 575/2013;
(z)an institution fails to comply with the data collection and governance requirements set out in Part Three, Title III, Chapter 2 of Regulation (EU) No 575/2013.
(aa)an institution fails to meet the requirements in relation to the calculation of the risk-weighted exposure amounts or own funds requirements or fails to have in place the governance arrangements set out in Part Three, Title II to VI of Regulation (EU) No 575/2013;
(ab)an institution fails to meet the requirements in relation to the calculation of the liquidity coverage ratio or the net stable funding ratio as set out in Part Six, Title I and Title IV of Regulation (EU) No 575/2013 and the delegated act referred to in Article 460(1) of that Regulation.’;
(b)paragraph 2 is replaced by the following:
‘2. Member States shall ensure that in the cases referred to in paragraph 1, the measures than can be applied include at least the following:
(a)administrative penalties:
(i)in the case of a legal person, administrative pecuniary penalties of up to 10 % of the total annual net turnover of the undertaking;
(ii)in the case of a natural person, administrative pecuniary penalties of up to EUR 5 000 000, or in the Member States whose currency is not the euro, the corresponding value in the national currency on 17 July 2013;
(iii)administrative pecuniary penalties of up to twice the profits gained or losses avoided because of the breach where those can be determined;
(b)periodic penalty payments:
(i)in the case of a legal person, periodic penalty payments of up to 5 % of the average daily turnover which, in the case of an ongoing infringement, the legal person shall be obliged to pay per day of infringement until compliance with an obligation is restored, and which may be imposed for a period of up to six months from the date stipulated in the decision requiring the termination of a breach and imposing the periodic penalty payment. The average daily turnover referred to in this paragraph shall be the total annual net turnover divided by 365.
(ii)in the case of a natural person, periodic penalty payments of up to EUR 500 000 which, in the case of an ongoing infringement, the natural person shall be obliged to pay per day of infringement until compliance with an obligation is restored, and which may be imposed for a period up to six months from the date stipulated in the decision requiring the termination of a breach and imposing the periodic penalty payment;
(c)other administrative measures:
(i)a public statement which identifies the natural person, institution, financial holding company or mixed financial holding company, intermediate parent undertaking responsible and the nature of the breach;
(ii)an order requiring the natural or legal person responsible to cease the conduct and to desist from a repetition of that conduct;
(iii)in the case of an institution, withdrawal of the authorisation of the institution in accordance with Article 18;
(iv)subject to Article 65(2), a temporary or a definitive ban of a member of the institution's management body or any other natural person who is held responsible for the infringement from exercising functions in the institution;
(v)suspension of the voting rights of the shareholder or shareholders held responsible for the breaches referred to in paragraph 1.’;
(c)the following paragraphs 3 and 4 are added:
‘3. The total annual net turnover referred to in paragraph 2, points (a)(i) and (b)(i), of this Article shall be equal to the business indicator set out in Article 314 of Regulation (EU) No 575/2013. For the purpose of this Article, the business indicator shall be calculated on the basis of the most recent available yearly supervisory financial information, unless the result is zero or negative. If the result is zero or negative, the basis for the calculation shall be the most recent earlier yearly supervisory financial information, which produces an indicator above zero. Where the undertaking concerned is part of a group the relevant total annual net turnover shall be the total annual net turnover resulting from the consolidated account of the ultimate parent undertaking.
4. The average daily turnover referred to in paragraph (2), point (b)(i), shall be the total annual net turnover referred to in paragraph 3 divided by 365.’
(11) Article 70 is replaced by the following:
‘Article 70
Effective application of administrative penalties and exercise of powers to impose penalties by competent authorities
1. Member States shall ensure that, when determining the type and level of administrative penalties or other administrative measures, the competent authorities shall take into account all relevant circumstances, including where appropriate:
(a)the gravity and the duration of the breach;
(b)the degree of responsibility of the natural or legal person responsible for the breach;
(c)the financial strength of the natural or legal person responsible for the breach, as indicated, including by the total turnover of a legal person or the annual income of a natural person;
(d)the importance of profits gained or losses avoided by the natural or legal person responsible for the breach, insofar as they can be determined;
(e)the losses for third parties caused by the breach, insofar as they can be determined;
(f)the level of cooperation of the natural or legal person responsible for the breach with the competent authority;
(g)previous breaches by the natural or legal person responsible for the breach;
(h)any potential systemic consequences of the breach.
(i)previous application of criminal penalties to the same natural or legal person responsible for the same breach.
2. In the exercise of their powers to impose penalties, competent authorities shall cooperate closely to ensure that penalties produce the results pursued by this Directive. They shall also coordinate their actions to prevent accumulation and overlap when applying penalties and administrative measures to cross-border cases. Competent authorities shall cooperate closely with judicial authorities when dealing with same cases.
3. Competent authorities may apply penalties in relation to the same natural or legal person responsible for the same acts or omissions in the case of an accumulation of administrative and criminal proceedings and penalties is punishing the same breach. However, such accumulation of proceedings and penalties shall be strictly necessary and proportionate to pursue different and complementary objectives of general interest. The severity of all the penalties and other administrative measures imposed in case of accumulation of administrative and criminal proceedings shall be limited to what is necessary in the view of the seriousness of the breach concerned. Member States shall lay down clear and precise rules regarding the circumstances in which acts or and omissions may be subject to such accumulation of administrative and criminal proceedings and penalties.
4. Member States shall lay down rules providing for full cooperation between competent authorities and judicial authorities to ensure a sufficiently close connection in substance and time between administrative and criminal proceedings.
5. By 18 July 2029, EBA shall submit a report to the Commission on the cooperation between competent authorities and judicial authorities in the context of application of administrative penalties. In addition, EBA shall assess any divergences in the application of penalties between competent authorities in this respect. In particular, EBA shall assess:
(a)the level of cooperation between competent authorities and judicial authorities in the context of application of penalties;
(b)the level of cooperation between competent authorities in the context of penalties applicable to cross-border cases or in case of accumulation of administrative and criminal proceedings;
(c)the application and the level of protection of ne bis in idem principle with regards to administrative and criminal penalties by Member States;
(d)the application of the principle of proportionality when both penalties are imposed in case of accumulation of administrative and criminal proceedings;
(e)the exchange of information between competent authorities when dealing with cross border cases.’;
(12) in Article 73, the first subparagraph is replaced by the following:
‘Institutions shall have in place sound, effective and comprehensive strategies and processes to assess and maintain on an ongoing basis the amounts, types and distribution of internal capital that they consider adequate to cover the nature and level of the risks to which they are or might be exposed in the short, medium and long term time horizon, including environmental, social and governance risks.’;”
(13) in Article 74, paragraph 1 is replaced by the following:
‘1. Institutions shall have robust governance arrangements, which include:
(a)a clear organisational structure with well-defined, transparent and consistent lines of responsibility;
(b)effective processes to identify, manage, monitor and report the risks they are or might be exposed to in the short, medium and long term time horizon, including environmental, social and governance risks;
(c)adequate internal control mechanisms, including sound administration and accounting procedures;
(d)remuneration policies and practices that are consistent with and promote sound and effective risk management.
The remuneration policies and practices referred to in the first subparagraph shall be gender neutral.’;
(14) Article 76 is amended as follows:
(a)paragraph 1 is replaced by the following:
‘1. Member States shall ensure that the management body approves and at least every two years reviews the strategies and policies for taking up, managing, monitoring and mitigating the risks the institution is or might be exposed to, including those posed by the macroeconomic environment in which it operates in relation to the status of the business cycle, and those resulting from the current, short, medium and long-term impacts of environmental, social and governance factors.’;
(b)in paragraph 2 the following subparagraph is added:
‘Member States shall ensure that the management body develops specific plans and quantifiable targets to monitor and address the risks arising in the short, medium and long-term from the misalignment of the business model and strategy of the institutions, with the relevant Union policy objectives or broader transition trends towards a sustainable economy in relation to environmental, social and governance factors.’;
(c)paragraph 5 is replaced by the following:
‘5. Member States shall, in accordance with the proportionality requirement laid down in Article 7(2) of Commission Directive 2006/73/EC*11, ensure that institutions have internal control functions independent from the operational functions and which shall have sufficient authority, stature, resources and access to the management body.
Member States shall ensure that the internal control functions ensure that all material risks are identified, measured and properly reported. They shall ensure that the internal control functions are actively involved in elaborating the institution's risk strategy and in all material risk management decisions and that the internal control functions can deliver a complete view of the whole range of risks of the institution.
Member States shall ensure that the internal control function can report directly to the management body in its supervisory function, independent from members of the management body in its management function or senior management, and can raise concerns and warn that body, where appropriate, where specific risk developments affect or may affect the institution, without prejudice to the responsibilities of the management body pursuant to this Directive and Regulation (EU) No 575/2013.
The heads of internal control functions shall be independent senior managers with distinct responsibility for the risk management, compliance and internal audit functions. Where the nature, scale and complexity of the activities of the institution do not justify to appoint a specific person for each internal control functions, another senior person within the institution may combine the responsibilities for those functions, provided there is no conflict of interest.
The heads of the internal control functions shall not be removed without prior approval of the management body in its supervisory function and shall be able to have direct access to the management body in its supervisory function where necessary.
________
*11 Commission Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (OJ L 241, 2.9.2006, p. 26).’;
(15) Article 78 is amended as follows:
(a)the title is replaced by the following:
‘Supervisory benchmarking of approaches for calculating own funds requirements’;
(b)paragraph 1 is replaced by the following:
‘1. Competent authorities shall ensure all of the following:
(a)that institutions permitted to use internal approaches for the calculation of risk weighted exposure amounts or own funds requirements report the results of their calculations for their exposures or positions that are included in the benchmark portfolios;
(b)that institutions using the alternative standardised approach set out in Part Three, Title IV, Chapter 1a of Regulation (EU) No 575/2013 report the results of their calculations for their exposures or positions that are included in the benchmark templates;
(c)that institutions permitted to use internal approaches under Part Three, Title II, Chapter 3 of Regulation (EU) No 575/2013, as well as significant institutions that apply the standardised approach under Part Three, Title II, Chapter 2 of that Regulation, report the results of the calculations of the approaches used for the purpose of determining the amount of expected credit losses for their exposures or positions that are included in the benchmark templates, where any of the following conditions is met:
(i)institutions prepare their accounts in conformity with the international accounting standards adopted in accordance with Article 6(2) of Regulation (EC) No 1606/2002;
(ii)institutions perform the valuation of assets and off-balance sheet items and the determination of their own funds in conformity with the international accounting standards pursuant to Article 24(2) of Regulation (EU) No 575/2013;
(iii)institutions perform the valuation of assets and off-balance sheet items in conformity with accounting standards under Directive 86/635/EEC*12 and they use an expected credit loss model that is the same as the one used in international accounting standards adopted in accordance with Article 6(2) of Regulation (EC) No 1606/2002.
Institutions shall submit the results of their calculations referred to in the first subparagraph together with an explanation of the methodologies used to produce them and any qualitative information, as requested by EBA, that can explain the impact of these calculations on own funds requirements, to the competent authorities at least annually, but with the possibility for EBA to conduct the exercise biennially after the exercise has run five times.
(c)paragraph 3 is amended as follows:
(i)the introductory wording is replaced by the following:
‘Competent authorities shall, on the basis of the information submitted by institutions in accordance with paragraph 1, monitor the range of risk weighted exposure amounts or own funds requirements, as applicable, for the exposures or transactions in the benchmark portfolio resulting from the approaches of those institutions. Competent authorities shall make an assessment of the quality of those approaches with the frequency referred to in paragraph 1, second subparagraph, paying particular attention to:’;
(ii)the second subparagraph is replaced by the following:
‘EBA shall produce a report to assist the competent authorities in the assessment of the quality of the approaches based on the information referred to in paragraph 2.’;
(d)in paragraph 5, the introductory sentence is replaced by the following:
‘The competent authorities shall ensure that their decisions on the appropriateness of corrective actions as referred to in paragraph 4, comply with the principle that such actions must maintain the objectives of the approaches within the scope of this Article and therefore do not:’;
(e)paragraph 6 is replaced by the following:
‘6. EBA may issue guidelines and recommendations in accordance with Article 16 of Regulation (EU) No 1093/2010 where it considers them necessary on the basis of the information and assessments referred to in paragraphs 2 and 3 of this Article in order to improve supervisory practices or practices of institutions with regard to the approaches within the scope of the supervisory benchmarking.’;
(f)paragraph 8 is amended as follows:
(i)in the first subparagraph, the following point (c) is added:
‘(c) the list of significant institutions referred to in paragraph 1, point (c).’;
(ii)the following second subparagraph is inserted:
‘For the purposes of point (c), when determining the list of significant institutions EBA shall take into account proportionality considerations.’;
_______
*12 Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions (OJ L 372, 31.12.1986, p. 1).
(16) paragraph 1 of Article 85 is amended as follows:
“1. Competent authorities shall ensure that institutions implement policies and processes to evaluate and manage the exposures to operational risk, including risks resulting from outsourcing, and to cover low-frequency high-severity events. Institutions shall articulate what constitutes operational risk for the purposes of those policies and procedures.”
(17) a new Article 87a is inserted:
‘Article 87a
Environmental, social and governance risks
1. Competent authorities shall ensure that institutions have, as part of their robust governance arrangements including risk management framework required under Article 74(1), robust strategies, policies, processes and systems for the identification, measurement, management and monitoring of environmental, social and governance risks over an appropriate set of time horizons.
2. The strategies, policies, processes and systems referred to in paragraph 1 shall be proportionate to the scale, nature and complexity of the environmental, social and governance risks of the business model and scope of the institution’s activities, and consider short, medium and a long-term horizon of at least 10 years.
3. Competent authorities shall ensure that institutions test their resilience to long-term negative impacts of environmental, social and governance factors, both under baseline and adverse scenarios within a given timeframe, starting with climate-related factors. For the testing, competent authorities shall ensure that institutions include a number of environmental, and social and governance scenarios reflecting potential impacts of environmental and social changes and associated public policies on the long-term business environment.
4. Competent authorities shall assess and monitor developments of institutions’ practices concerning their environmental, social and governance strategy and risk management, including the plans to be prepared in accordance with Article 76, as well as the progress made and the risks to adapt their business models to the relevant policy objectives of the Union or broader transition trends towards a sustainable economy, taking into account sustainability related product offering, transition finance policies, related loan origination policies, and environmental, social and governance related targets and limits.
5. EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, to specify:
(a)minimum standards and reference methodologies for the identification, measurement, management and monitoring of environmental, social and governance risks;
(b)the content of plans to be prepared in accordance with Article 76, which shall include specific timelines and intermediate quantifiable targets and milestones, in order to address the risks from misalignment of the business model and strategy of institutions with the relevant policy objectives of the Union, or broader transition trends towards a sustainable economy in relation to environmental, social and governance factors;
(c)qualitative and quantitative criteria for the assessment of the impact of environmental, social and governance risks on the financial stability of institutions in the short, medium and long term;
(d)criteria for setting the scenarios and methods referred to in paragraph 3, including the parameters and assumptions to be used in each of the scenarios and specific risks.
EBA shall publish those guidelines by [OP please insert the date = 18 months from date of entry into force of this amending Directive]. EBA shall update those guidelines on a regular basis, to reflect the progress made in measuring and managing environmental, social and governance factors as well as the developments of policy objectives of the Union on sustainability.’;
(18) Article 88 is amended as follows:
(a)in paragraph 1, point (e) is replaced by the following:
‘(e)the chairman of the management body in its supervisory function of an institution may not exercise simultaneously the functions of a chief executive officer within the same institution.’;
(b)in Article 88, the following paragraph 3 is added:
‘3. Member States shall ensure that institutions draw up, maintain and update individual statements setting out the roles and duties of each member of the management body, senior management and key function holders and a mapping of duties, including details of the reporting lines and the lines of responsibility, and the persons who are part of the governance arrangements as referred to in Article 74 (1) and their duties approved by the management body.
Member States shall ensure that the statements of duties and the mapping of the duties are made available and communicated in due time, upon request, to the competent authorities.
EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, ensuring the implementation of this paragraph and its consistent application. EBA shall issue those guidelines by [OP please insert the date = 12 months from date of entry into force of this amending Directive].’
(19) Article 91 is replaced by the following:
‘Article 91
Suitability criteria for members of the management body of the entities
1. Institutions and financial holding companies and mixed financial holding companies, as approved pursuant to Article 21a(1),(“the entities”), shall have the primary responsibility for ensuring that members of the management body are at all times of good repute and possess sufficient knowledge, skills and experience to perform their duties and fulfil the requirements set out in paragraphs 2 to 8 of this Article.
Competent authorities shall in particular verify whether the criteria and requirements set out in the first subparagraph of this Article are still fulfilled where they have reasonable grounds to suspect that money laundering or terrorist financing within the meaning of Article 1 of Directive (EU) 2015/849 is being or has been committed or attempted, or there is increased risk thereof in connection with that institution.
2. Each member of the management body shall commit sufficient time to perform his or her functions in the entities.
3. Each member of the management body shall act with honesty, integrity and independence of mind to effectively assess and challenge the decisions of the senior management where necessary and to effectively oversee and monitor management decision-making. Being a member of the management body of a credit institution permanently affiliated to a central body shall not in itself constitute an obstacle for acting with independence of mind.
4. The management body shall possess collective knowledge, skills and experience to be able to adequately understand the institution's activities, as well as the associated risks it is exposed to, in the short, medium and long term, taking into account the environmental, social and governance factors. The overall composition of the management body shall reflect an adequately broad range of experience.
5. The number of directorships which a member of the management body may hold simultaneously shall take into account individual circumstances and the nature, scale and complexity of the institution's activities. Unless where members of the management body represent the interests of a Member State, members of the management body of an institution that is significant in terms of its size, internal organisation and the nature, the scope and the complexity of its activities shall, from 1 July 2014, not hold more than one of the following combinations of directorships simultaneously:
(a)one executive directorship with two non-executive directorships;
(b)four non-executive directorships.
6. For the purposes of paragraph 5, the following shall count as a single directorship:
(a)executive or non-executive directorships held within the same group.
(b)executive or non-executive directorships held within either of the following:
(i)institutions which are members of the same institutional protection scheme provided that the conditions set out in Article 113(7) of Regulation (EU) No 575/2013 are fulfilled;
(ii)undertakings, including non-financial entities, in which the institution holds a qualifying holding.
For the purposes of point (a) of this paragraph, a group shall mean a group of undertakings that are related to each other as set out in Article 22 of Directive 2013/34/EU of the European Parliament and of the Council*13.
7. Directorships in organisations which do not pursue predominantly commercial objectives shall not count for the purposes of paragraph 5.
8. Competent authorities may authorise members of the management body to hold one non-executive directorship on top of the directorships referred to in paragraph 5, points (a) and (b).
9. The entities shall devote adequate human and financial resources to the induction and training of members of the management body.
10. Member States or competent authorities shall require entities and their respective nomination committees, where established, to engage a broad set of qualities and competences when recruiting members to the management body and for that purpose to put in place a policy promoting diversity in the management body.
11. Competent authorities shall collect the information disclosed in accordance with Article 435(2), point (c), of Regulation (EU) No 575/2013 and shall use that information to benchmark diversity practices. Competent authorities shall provide EBA with that information. EBA shall use that information to benchmark diversity practices at Union level.
12. EBA shall issue guidelines on the following:
(a)the notion of sufficient time commitment of a member of the management body to perform his or her functions, in relation to the individual circumstances and the nature, scale and complexity of activities of the institution;
(b)the notions of honesty, integrity and independence of mind of a member of the management body as referred to in paragraph 3;
(c)the notion of adequate collective knowledge, skills and experience of the management body as referred to in paragraph 4;
(d)the notion of adequate human and financial resources devoted to the induction and training of members of the management body as referred to in paragraph 9;
(e)the notion of diversity to be taken into account for the selection of members of the management body as referred to in paragraph 10;
EBA shall issue those guidelines by [OP please insert the date = 12 months from date of entry into force of this amending Directive].
13. This Article and Articles 91a to 91d shall be without prejudice to provisions of the Member States on the representation of employees in the management body.’;
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*13 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council (OJ L 182, 29.6.2013)
(20) the following Articles 91a to 91d are inserted:
‘Article 91a
Suitability assessment of members of the management body by the entities
1. The entities as referred to in Article 91(1) shall ensure that members of the management body fulfil the criteria and requirements set out in Article 91(1) to (8) at all times.
2. The entities shall assess the suitability of members of the management body before those members take up their positions. Where the entities conclude, based on the suitability assessment, that the member concerned does not fulfil the criteria and requirements set out in paragraph 1, the entities shall ensure that the member concerned does not take up the position considered.
However, where it is strictly necessary to replace a member of the management body immediately, the entities may assess the suitability of such replacement members after they have taken up their positions. The entities shall be able to duly justify such immediate replacement.
3. The entities shall ensure that information about the suitability of the members of the management body remains up-to-date. Where requested, the entities shall communicate that information to the competent authorities.
4. The entities that renew the mandate of members of the management body shall inform in writing the competent authorities within 15 working days of the date of that renewal of the mandate.
Article 91 - b Suitability assessment of members of the management body of the entities by competent authorities
1. Member States shall ensure that competent authorities assess whether members of the management body of the entities as referred to in Article 91(1) fulfil the criteria and requirements set out in Article 91(1) to (8) at all times.2. For the assessment referred to in paragraph 1, the entities shall submit the initial application of the relevant member of the management body to the competent authorities without undue delay after the internal suitability assessment is completed. That application shall be accompanied by all the information and documentation necessary for competent authorities to carry out the suitability assessment effectively.
3. Competent authorities shall acknowledge in writing the receipt of the application and the documentation required in accordance with paragraph 2 within two working days.
Competent authorities shall complete the assessment referred to in paragraph 1 within 80 working days (‘assessment period’) as from the date of the written acknowledgement referred to in the first subparagraph of this paragraph.
4. Competent authorities that request from the entities additional information or documentation, including interviews or hearings, may extend the assessment period for a maximum of 40 working days. However, the assessment period shall not exceed 120 working days. Request for additional information or documentation shall be made in writing and shall be specific. The entities shall acknowledge receipt of request for additional information or documentation within two working days and provide the requested additional information or documentation within 10 working days as of the date of the written acknowledgement of the request from competent authorities.
5. As soon as any new facts or other issues that may affect the suitability of the member of the management body are known to the entities or the relevant member of the management body, the entities shall inform without undue delay the relevant competent authorities thereof.
6. Competent authorities shall not reassess the suitability of members of the management body when their mandate is renewed, unless relevant information that is known to competent authorities has changed and such change may affect the suitability of the member concerned.
7. Where members of the management body do not fulfil the requirements set out in Article 91(1) to (8) at all times or where the entities do not comply with the obligations and deadlines laid down in paragraphs 2 or 4 of this Article, Member States shall ensure that competent authorities have the necessary powers to:
(a)prevent such members to be part of the management body;
(b)remove such members from the management body;
(c)require the entities concerned to take the measures necessary to ensure that such member is suitable for the position concerned.
8. In accordance with paragraphs 1 to 7, competent authorities shall carry out the suitability assessment before members of the management body take up their positions in the following entities:
(a)the EU parent institution that qualifies as large institution;
(b)the parent institution in a Member State that qualifies as large institution;
(c)central body that qualifies as large institution or that supervises large institutions affiliated to it;
(d)stand-alone institution in the EU that qualifies as large institution;
(e)relevant subsidiary;
(f)the parent financial holding companies in a Member State, parent mixed financial holding companies in a Member State, EU parent financial holding companies and EU parent mixed financial holding companies, having large institutions or relevant subsidiaries within their group.
However, where it is strictly necessary to replace a member of the management body immediately, competent authorities may carry out the suitability assessment of members of the management body after they take up their positions. The entities shall be able to duly justify such immediate replacement.
9. For the purposes of paragraph 2, EBA shall develop draft regulatory technical standards specifying information or accompanying documents required to be submitted to the competent authorities for performing the suitability assessment.
EBA shall submit those draft regulatory technical standards to the Commission by [OP please insert the date = 12 months from the date of entry into force of this amending Directive].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
10. EBA shall develop draft implementing technical standards on standard forms, templates and procedures for the provision of the information referred to in paragraph 2.
EBA shall submit those draft implementing technical standards to the Commission by [OP please insert the date = 12 months from the date of entry into force of this amending Directive].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Article 91 - c Suitability criteria and assessment by the entities of key function holders
1. The entities as referred to in Article 91(1) shall have the primary responsibility for ensuring that key function holders are of good repute, have honesty and integrity and possess the knowledge, skills and experience necessary to perform their duties at all times.2. Where the entities conclude, based on the assessment referred to in paragraph 1, that the person does not fulfil the requirements set out in that paragraph, they shall not appoint that person as a key function holder. The entities shall take all measures necessary to ensure the appropriate functioning of that position.
3. The entities shall ensure that information about the suitability of the key function holders remains up-to-date. Where requested, the entities shall communicate that information to competent authorities.
Article 91 - d Suitability assessment by competent authorities of the heads of internal control functions and chief financial officer
1. Member States shall ensure that competent authorities assess before the heads of internal control functions and the chief financial officer take up their positions whether they fulfil the suitability criteria set out in Article 91c(1), where those heads or officer are to be appointed for roles in the following entities:(a)the EU parent institution that qualifies as large institution;
(b)the parent institution in a Member State that qualifies as large institution;
(c)central body that qualifies as large institution or that supervises large institutions affiliated to it;
(d)stand-alone institution in the EU that qualifies as a large institution;
(e)relevant subsidiary.
2. For the assessment of the suitability of the heads of internal control functions and chief financial officer as referred to in paragraph 1, the entities referred to in that paragraph shall submit the initial application of the person concerned to the competent authorities without undue delay after the internal suitability assessment is completed. That application shall be accompanied by all the information and documentation necessary to competent authorities to carry out the suitability assessment effectively.
3. Competent authorities shall acknowledge in writing the receipt of the application and the documentation required in accordance with paragraph 2 within two working days.
Competent authorities shall assess the suitability of the heads of internal control functions and chief financial officer within 80 working days (‘assessment period’) as from the date of the written acknowledgement referred to in the first subparagraph.
4. Competent authorities that request from the entities referred to paragraph 1 additional information or documentation, including interviews or hearings, may extend the assessment period for maximum 40 working days. However, the assessment period shall not exceed 120 working days. Request for additional information or documentation shall be made in writing and shall be specific. The entities referred to paragraph 1 shall acknowledge receipt of request for additional information or documentation within two working days and provide the requested additional information or documentation within 10 working days as of the date of the written acknowledgement of the request from competent authorities.
5. As soon as any new facts or other issues that may affect the suitability of the member of the management body are known to the entities referred to in paragraph 1 or the relevant member of the management body, the entities referred to in that paragraph shall inform without undue delay the relevant competent authorities thereof.
6. Where the heads of internal control functions and chief financial officer do not fulfil the requirements set out in Article 91c(1), or where the entities referred to paragraph 1 of this Article do not comply with the obligations and deadlines in paragraphs 2 and 4 of this Article, Member States shall ensure that competent authorities have the necessary powers to:
(a)prevent such heads or officer to exercise their functions;
(b)remove such heads or officer;
(c)require the entities referred to paragraph 1 to take the appropriate measures to ensure that such heads or officer concerned are suitable for the position considered.
7. For the purposes of this Article, EBA shall develop draft regulatory technical standards specifying information or accompanying documents required to be submitted to the competent authorities for performing the suitability assessment.
EBA shall submit those draft regulatory technical standards to the Commission by [OP please insert the date = 12 months after the date of entry into force of this amending Directive].
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
8. EBA shall develop draft implementing technical standards on standard forms, templates and procedures for the provision of the information referred to in paragraph 2.
EBA shall submit those draft implementing technical standards to the Commission by [OP please insert the date = 12 months from date of entry into force of this amending Directive].
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
9. EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, facilitating the implementation and consistent application of procedural requirements laid down in Articles 91a to 91d of this Directive and the application of powers and actions to be taken by the competent authorities referred to in Article 91b(7) and 91d(6) of this Directive. EBA shall issue those guidelines by [OP-please insert the date = 12 months from date of entry into force of this Directive].’;
(22) Article 92 is amended as follows:
(a)in paragraph 2, points (e) and (f) are replaced by the following:
‘(e)staff engaged in internal control functions are independent from the business units they oversee, have appropriate authority, and are remunerated in accordance with the achievement of the objectives linked to their functions, independent of the performance of the business areas they control;
(f)the remuneration of the senior staff in the internal control functions is directly overseen by the remuneration committee referred to in Article 95 or, if such a committee has not been established, by the management body in its supervisory function;’;
(b)in paragraph 3, point (b) is replaced by the following:
‘(b)staff members with managerial responsibility over the institution's internal control functions or material business units;’;
(23) Article 94 is amended as follows:
(a)in paragraph 1, point (g)(ii), the fifth indent is replaced by the following:
‘-the institution shall, without delay, inform the competent authority of the decisions taken by its shareholders or owners or members, including any approved higher maximum ratio pursuant to the first subparagraph of this point, and the competent authorities shall use the information received to benchmark the practices of institutions in that regard. The competent authorities shall provide EBA with the benchmarks and EBA shall publish them on an aggregate home Member State basis in a common reporting format. EBA may elaborate guidelines to facilitate the implementation of this indent and to ensure the consistency of the information collected;’;
(b)in paragraph 2, third subparagraph, point (a) is replaced by the following:
‘(a)managerial responsibility and internal control functions;’;
(c)in paragraph 3, point (a) is replaced by the following:
‘(a)an institution that is not a large institution and the value of the assets of which is on average and on an individual basis in accordance with this Directive and Regulation (EU) No 575/2013 equal to or less than EUR 5 billion over the four-year period immediately preceding the current financial year;’;
(24) in Article 98, the following paragraph 9 is added:
‘9. The review and evaluation performed by competent authorities shall include the assessment of institutions’ governance and risk management processes for dealing with environmental, social and governance risks, as well as of the institutions’ exposures to environmental, social and governance risks. In determining the adequacy of institutions’ processes and exposures, competent authorities shall take into account the business models of those institutions.’;
(25) in Article 100 the following paragraphs 3 and 4 are added:
‘3. Institutions and any third parties acting in a consulting capacity to institutions shall refrain from activities that can impair a stress test, such as benchmarking, exchange of information among themselves, agreements on common behaviour, or optimisation of their submissions in stress tests. Without prejudice to other relevant provisions laid down in this Directive and in Regulation (EU) No 575/2013, competent authorities shall have all information gathering and investigatory powers that are necessary to detect those actions.
4. EBA, EIOPA and ESMA shall, through the Joint Committee referred to in Article 54 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010, develop guidelines to ensure that consistency, long-term considerations and common standards for assessment methodologies are integrated into the stress testing of environmental, social and governance risks. Stress testing of environmental, social and governance risks by competent authorities should start with climate-related factors. EBA, EIOPA and ESMA shall, through the Joint Committee referred to in Article 54 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010, explore how social and governance related risks can be integrated into stress testing.’;
(26) Article 104 is amended as follows:
(a)paragraph 1 is amended as follows:
(i)the introductory sentence is replaced by the following:
‘For the purposes of Article 97, Article 98(4) and (5) and (9), Article 101(4) and Article 102 of this Directive and of the application of Regulation (EU) No 575/2013, competent authorities shall have at least the power to:’
(ii)the following point (m) is added:
‘(m)require institutions to reduce the risks arising from the institutions’ misalignment with relevant policy objectives of the Union and broader transition trends relating to environmental, social and governance factors over the short, medium and long term, including through adjustments to their business models, governance strategies and risk management.’;
(b)the following paragraph 3 is added:
‘3. EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, to specify how competent authorities may identify that the credit valuation adjustment (CVA) risks of institutions, referred to in Article 381 of Regulation (EU) No 575/2013, pose excessive risks to the soundness of those institutions.’;
(27) Article 104a is amended as follows:
(a)in paragraph 3, the second subparagraph is replaced by the following:
‘Where additional own funds are required to address the risk of excessive leverage not sufficiently covered by Article 92(1), point (d), of Regulation (EU) No 575/2013, competent authorities shall determine the level of the additional own funds required under paragraph 1, point (a), of this Article as the difference between the capital considered adequate pursuant to paragraph 2 of this Article, except for the fifth subparagraph thereof, and the relevant own funds requirements set out in Parts Three and Seven of Regulation (EU) No 575/2013.’;
(b)the following paragraphs 6 and 7 are added:
‘6. Where an institution becomes bound by the output floor, the following shall apply:
(a)the nominal amount of additional own funds required by the institution’s competent authority in accordance with Article 104(1), point (a), to address risks other than the risk of excessive leverage shall not increase as a result of the institutions’ becoming bound by the output floor;
(b)the institution’s competent authority shall, without undue delay, and no later than by the end date of the next review and evaluation process, review the additional own funds it required from the institution in accordance with Article 104(1), point (a), and remove any parts thereof that would double-count the risks that are already fully covered by the fact that the institution is bound by the output floor.
For the purposes of this Article and Articles 131 and 133 of this Directive, an institution shall be considered as bound by the output floor when the institution’s total risk exposure amount calculated in accordance with Article 92(3), point (a), of Regulation (EU) No 575/2013 exceeds its un-floored total risk exposure amount calculated in accordance with Article 92(4) of that Regulation.
7. For the purposes of paragraph 2, as long as an institution is bound by the output floor, the institution’s competent authority shall not impose an additional own funds requirement that would double-count the risks that are already fully covered by the fact that the institution is bound by the output floor.’;
(28) in Article 106, paragraph 1 is replaced by the following:
‘1. Member States shall empower the competent authorities to require institutions:
(a)to publish information referred to in Part Eight of Regulation (EU) No 575/2013 more than once per year, and to set deadlines for the submission of disclosure information by large and other institutions to EBA for its publication on a centralised EBA website;
(b)to use specific media and locations for publications other than the EBA website for centralised disclosures or the financial statements of institutions.’;
(29) Article 121 is replaced by the following:
‘Without prejudice to provisions applicable to financial holding company or mixed financial holding approved in accordance with Article 21a(1), Member States shall require that the members of the management body of a financial holding company or mixed financial holding, be of sufficiently good repute and possess sufficient knowledge, skills and experience as referred to in Article 91(1) to perform those duties, taking into account the specific role of a financial holding company or mixed financial holding company’.
(30) In Title VII, Chapter 3, the following Section 0 is inserted:
‘Section 0
Application of this Chapter to investment firm groups
Article 110 - a Scope of application to investment firm groups
This Chapter applies to investment firm groups, as defined in Article 4(1), point (25) of Regulation (EU) 2019/2033 of the European Parliament and of the Council*, where at least one investment firm in that group is subject to Regulation (EU) No 575/2013 pursuant to Article 1(2) of Regulation (EU) 2019/2033*14.This Chapter does not apply to investment firm groups where no investment firm in that group is subject to Regulation (EU) No 575/2013 pursuant to Article 1(2) of Regulation (EU) 2019/2033.’;
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*14 Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (OJ L 314, 5.12.2019, p. 1).’;
(31) Article 131 is amended as follows:
(a)in paragraph 5, the following subparagraph is added:
‘Where an O-SII becomes bound by the output floor, its competent or designated authority, as applicable, shall review the institutions O-SII buffer requirement to make sure that its calibration remains appropriate.’;
(b)in paragraph 5a, the second sub-paragraph is replaced by the following:
‘Within six weeks of receipt of the notification referred to in paragraph 7 of this Article, the ESRB shall provide the Commission with an opinion as to whether the O-SII buffer is deemed appropriate. EBA may also provide the Commission with its opinion on the buffer in accordance with Article 16a(1) of Regulation (EU) No 1093/2010.’;
(c)in paragraph 15, the first subparagraph is replaced by the following:
‘Where the sum of the systemic risk buffer rate as calculated for the purposes of paragraph 10, 11 or 12 of Article 133 and the O-SII buffer rate or the G-SII buffer rate to which the same institution is subject to would be higher than 5 %, the procedure set out in paragraph 5a of this Article shall apply. For the purposes of this paragraph, where the decision to set a systemic risk buffer, O-SII buffer or G-SII buffer results in a decrease or no change from any of the previously set rates, the procedure set out in paragraph 5a of this Article shall not apply.’;
(32) Article 133 is amended as follows:
(a)paragraph 1 is replaced by the following:
‘1. Each Member State shall ensure that it is possible to set a systemic risk buffer of Common Equity Tier 1 capital for the financial sector or one or more subsets of that sector on all or a subset of exposures as referred to in paragraph 5 of this Article, in order to prevent and mitigate macroprudential or systemic risks not covered by Regulation (EU) No 575/2013 and by Articles 130 and 131 of this Directive, in the meaning of a risk of disruption in the financial system with the potential to have serious negative consequences to the financial system and the real economy in a specific Member State.’;
(b)the following paragraph 2a is inserted:
‘2a. Where an institution is bound by the output floor, both of the following shall apply:
(a)the amount of CET1 capital it is required to have in accordance with the first subparagraph shall be capped by the following amount:
where:
ET = the un-floored total risk exposure amount of the institution calculated in accordance with Article 92(4) of Regulation (EU) No 575/2013’;
Ei = the un-floored risk exposure amount of the institution for the subset of exposures i calculated in accordance with Article 92(4) of Regulation (EU) No 575/2013;
rT, ri = rT and ri as defined in the first subparagraph.
(b)the competent or designated authority, as applicable, shall review without undue delay the calibration of the systemic risk buffer rate or rates, as applicable, to ensure they remain appropriate and do not double-count the risks that are already covered by the fact that the institution is bound by the output floor.
The calculation in point (a) shall apply until the designated authority has completed the revision set out in point (b) and has published a new decision on the calibration of the systemic risk buffer rate or rates in accordance with the procedure set out in this Article. As of that moment, the cap in point (a) shall no longer apply.’;
(c)in paragraph 8, point (c) is replaced by the following:
‘(c)the systemic risk buffer is not to be used to address any of the following:
(i)risks that are covered by Articles 130 and 131;
(ii)risks that are fully covered by the calculation set out in Article 92(3) of Regulation (EU) No 575/2013.’;
(d)in paragraph 9, the following point (g) is added:
‘(g)how the calculation set out in Article 92(3) of Regulation (EU) No 575/2013 affects the calibration of the systemic risk buffer rate or rates, as applicable, that the competent authority or the designated authority, as applicable, intends to impose.’;
(e)paragraphs 11 and 12 are replaced by the following:
‘11. Where the setting or resetting of a systemic risk buffer rate or rates on any set or subset of exposures referred to in paragraph 5 subject to one or more systemic risk buffers results in a combined systemic risk buffer rate at a level higher than 3 % and up to 5 % for any of those exposures, the competent authority or the designated authority of the Member State that sets that buffer shall request in the notification submitted in accordance with paragraph 9 the opinions of the Commission and the ESRB.
Within a month of receipt of the notification referred to in paragraph 9, the ESRB shall provide the Commission with an opinion as to whether the systemic risk buffer rate or rates is deemed appropriate. Within two months of receipt of the notification, the Commission, taking into account the assessment of the ESRB, shall provide its opinion as to whether it considers that the systemic risk buffer rate or rates do not entail disproportionate adverse effects on the whole or parts of the financial system of other Member States or of the Union as a whole forming or creating an obstacle to the proper functioning of the internal market.
Where the opinion of the Commission is negative, the competent authority or the designated authority, as applicable, of the Member State that sets that systemic risk buffer shall comply with that opinion or give reasons for not doing so.
Where one or more institutions to which one or more systemic risk buffer rates apply is a subsidiary the parent of which is established in another Member State, the ESRB and the Commission shall also consider in their opinions whether applying the systemic risk buffer rate or rates to those institutions is deemed appropriate.
Where the authorities of the subsidiary and of the parent disagree on the systemic risk buffer rate or rates applicable to that institution and in the case of a negative opinion of both the Commission and the ESRB, the competent authority or the designated authority, as applicable, may refer the matter to EBA and request its assistance in accordance with Article 19 of Regulation (EU) No 1093/2010. The decision to set the systemic risk buffer rate or rates for those exposures shall be suspended until EBA has taken a decision.
For the purposes of this paragraph, the recognition of a systemic risk buffer rate set by another Member State in accordance with Article 134 shall not count towards the thresholds referred to in the first subparagraph of this paragraph.
12. Where the setting or resetting of a systemic risk buffer rate or rates on any set or subset of exposures referred to in paragraph 5 subject to one or more systemic risk buffers results in a combined systemic risk buffer rate higher than 5 % for any of those exposures, the competent authority or the designated authority, as applicable, shall seek the authorisation of the Commission before implementing a systemic risk buffer.
Within six weeks of receipt of the notification referred to in paragraph 9 of this Article, the ESRB shall provide the Commission with an opinion as to whether the systemic risk buffer is deemed appropriate. EBA may also provide the Commission with its opinion on that systemic risk buffer in accordance with Article 16a(1) of Regulation (EU) No 1093/2010, within six weeks of receipt of the notification.
Within three months of receipt of the notification referred to in paragraph 9, the Commission, taking into account the assessment of the ESRB and EBA, where relevant, and where it is satisfied that the systemic risk buffer rate or rates do not entail disproportionate adverse effects on the whole or parts of the financial system of other Member States or of the Union as a whole forming or creating an obstacle to the proper functioning of the internal market, shall adopt an act authorising the competent authority or the designated authority, as applicable, to adopt the proposed measure.
For the purposes of this paragraph, the recognition of a systemic risk buffer rate set by another Member State in accordance with Article 134 shall not count towards the threshold referred to in the first subparagraph of this paragraph.’;
(33) Article 142 is amended as follows:
(a)in paragraph 2, point (c) is replaced by the following:
‘(c)a plan and timeframe for the increase of own funds with the objective of meeting fully the combined buffer requirement or, where applicable, the leverage ratio buffer requirement;’;
(b)paragraph 3 is replaced by the following:
‘3. The competent authority shall assess the capital conservation plan, and shall approve the plan only if it considers that the plan, if implemented, would be reasonably likely to conserve or raise sufficient capital to enable the institution to meet its combined buffer requirement or, where applicable, its leverage ratio buffer requirement within a period which the competent authority considers appropriate.’;
(c)in paragraph 4, point (b) is replaced by the following:
‘(b)exercise its powers under Article 102 to impose more stringent restrictions on distributions than those required by Articles 141 and 141b, as applicable.’;
(34) in Article 161, paragraph 3 is deleted.
Article 2 - Amendments to Directive 2014/59/EU
(1) in Article 27, the following paragraphs 6, 7 and 8 are added:
‘6. When new members of the management body or senior management are appointed under this Article and Article 28 of this Directive, Member States shall ensure that competent authorities carry out the assessment of the members of the management body as required by Article 91b(1) of Directive 2013/36/EU and of the key function holders as required by Article 91d(1) of that Directive only after they take up their position.
Article 91a(2) and Article 91c(2) of Directive 2013/36/EU shall not apply to the appointment of new members of the management body or senior management referred to in the first subparagraph.
7. Competent authorities shall ensure that they perform the assessments referred to in paragraph 6 without undue delay. They shall complete the assessments at the latest 20 working days from the date they receive the notification of appointment.
8. Competent authorities shall inform the resolution authority without undue delay about the outcome of the assessments referred to in paragraph 6.’;
(2) in Article 34, the following paragraphs 7, 8 and 9 are added:
‘7. When new members of the management body or senior management are appointed under this Article and Article 63 of this Directive, Member States shall ensure that competent authorities carry out the assessment of the members of the management body as required by Article 91b(1) of Directive 2013/36/EU and of the key function holders as required by Article 91d(1) of that Directive only after they take up their position.
Article 91a(2) and Article 91c(2) of Directive 2013/36/EU shall not apply to the appointment of new members of the management body or senior management referred to in the first subparagraph.
The first and second subparagraphs shall also apply to the assessment of the members of the management body of the bridge institution appointed under Article 41 immediately after taking resolution action.
8. Competent authorities shall ensure that they perform the assessments referred to in paragraph 7 without undue delay. They shall complete the assessments at the latest 20 working days from the date they receive the notification of appointment.
9. Competent authorities shall inform the resolution authority without undue delay about the outcome of the assessments referred to in paragraph 7.’;
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*15 Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173 12.6.2014, p. 190)
Article 3 - Transposition
They shall apply those provisions from [OP please insert the date = 1 day after the transposition date of this amending Directive].
However, the provisions necessary to comply with the amendments set out in Article 1, point (8), on the prudential supervision of third country branches shall apply from [OP please insert the date = 12 months from date of application of this amending Directive].
By derogation from the preceding subparagraph, Member States shall apply the provisions on reporting on third country branches in Title VI, Chapter 1, Section II, Sub-section 4 of Directive 2013/36/EU, as inserted by this Directive, from the date of application laid down in the second subparagraph of this Article.
When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.
2. 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.