Commission Delegated Regulation (EU) 2015/63 of 21 October 2014 supplementing Directive 2014/59/EU of the European Parliament and of the Council with regard to ex ante contributions to resolution financing arrangements

SECTION 1

GENERAL PROVISIONS

Article 1

Subject matter

This Regulation lays down rules specifying:

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

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

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

Article 2

Scope

Article 3

Definitions

For the purposes of this Regulation, the definitions contained in Directive 2014/49/EU of the European Parliament and of the Council (¹) and Directive 2014/59/EU shall apply. For the purpose of this Regulation, the following definitions shall also apply:

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

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

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

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

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

(6) ‘contribution period’ means a calendar year;

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

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

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

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

(11) ‘total liabilities’ means total liabilities as defined in Section 3 of Council Directive 86/635/EEC (³), or as defined in accordance with the International Financial Reporting Standards referred to in Regulation (EC) No 1606/2002 of the European Parliament and of the Council (⁴);

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

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

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

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

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

(17) ‘eligible liabilities’ means eligible liabilities as defined in Article 2(1), point (71a), of Directive 2014/59/EU;

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

(19) ‘Liquidity Coverage Ratio’ (LCR) means a liquidity coverage ratio as defined in Article 412 of Regulation (EU) No 575/2013 and further specified in Commission Delegated Regulation (EU) 2015/61 (⁵);

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

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

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

(23) ‘central securities depository’ (CSD) means a legal person as defined in point (1) of Article 2(1) and in Article 54 of Regulation (EU) No 909/2014 of the European Parliament and of the Council (⁶);

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

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

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

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

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

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

(30) ‘liabilities arising from derivative contracts’ means either individual liabilities arising from a derivative contract or, where applicable, liabilities arising from a netting set of derivative contracts as listed in Annex II to Regulation (EU) No 575/2013.

SECTION 2

METHODOLOGY

Article 4

Determination of the annual contributions

Article 5

Risk adjustment of the basic annual contribution

The contributions referred to in Article 103(2) of Directive 2014/59/EU shall be calculated by excluding the following liabilities:

(a) the intragroup liabilities arising from transactions entered into by an institution with an institution which is part of the same group, provided that all the following conditions are met: (i) each institution is established in the Union; (ii) each institution is included in the same consolidated supervision in accordance with Articles 6 to 17 of Regulation (EU) No 575/2013 on a full basis and is subject to an appropriate centralised risk evaluation, measurement and control procedures; and (iii) there is no current or foreseen material practical or legal impediment to the prompt repayment of the liability when due;

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

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

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

(e) in the case of investment firms, the liabilities that arise by virtue of holding client assets or client money including client assets or client money held on behalf of UCITS as defined in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the Council (⁷) or of AIFs as defined in point (a) of Article 4(1) of Directive 2011/61/EU of the European Parliament and of the Council (⁸), provided that such a client is protected under the applicable insolvency law;

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

However, the value assigned to liabilities arising from derivative contracts may not be less than 75 % of the value of the same liabilities resulting from the application of the accounting provisions applicable to the institution concerned for the purposes of financial reporting.

Where, under national accounting standards applying to an institution there is no accounting measure of exposure for certain derivative instruments because those derivative instruments are held off-balance sheet, the institution shall report to the resolution authority the sum of the fair values of those derivatives, where the sum is negative, as the replacement cost and add those derivatives to its on-balance sheet accounting values.

Article 5a

Exposure value of derivatives

When determining the exposure value, institutions may take into account the effects of contracts for novation and other netting agreements in accordance with Article 5d. Cross-product netting shall not apply. However, institutions may net within any single product category included in Annex II to Regulation (EU) No 575/2013 when they are subject to a contractual cross-product netting agreement.

For the purposes of paragraph 1, institutions may deduct from the current replacement cost portion of the exposure value the variation margin paid in cash to the counterparty in so far as under the applicable accounting framework the variation margin has not already been recognised as a reduction of the exposure value and provided that all of the following conditions are met:

(a) for trades not cleared through a qualifying central counterparty as defined in Article 4(1), point (88), of Regulation (EU) No 575/2013, the cash given to the recipient counterparty is not segregated;

(b) the variation margin is calculated and exchanged on a daily basis, based on a mark-to-market valuation of derivative positions;

(c) the variation margin given in cash is in the same currency as the currency of settlement of the derivative contract;

(d) the variation margin exchanged is the full amount that would be necessary to fully extinguish the mark-to-market exposure of the derivative subject to the threshold and minimum transfer amounts applicable to the institution;

(e) the derivative contract and the variation margin between the institution and the counterparty to that contract are covered by a single netting agreement that the institution may treat as risk-reducing in accordance with Article 5d.

For the purposes of point (c) of the first subparagraph, where the derivative contract is subject to a qualifying master netting agreement, the currency of settlement means any currency of settlement specified in the derivative contract or the governing qualifying master netting agreement.

Where under the applicable accounting framework an institution recognises the variation margin received in cash from the counterparty as a payable liability, it may exclude that liability from the exposure measure provided that the conditions set out in the first subparagraph, points (a) to (e), are met.

For the purposes of paragraph 3, the following shall apply:

(a) the deduction of variation margin paid shall be limited to the negative current replacement cost portion of the exposure value;

(b) an institution shall not use variation margin paid in cash to reduce the potential future credit exposure amount, including for the purposes of Article 5e(1), point (b)(ii).

Institutions that apply that Simplified Exposure Method shall not reduce the exposure measure by the amount of variation margin received in cash.

Article 5b

Mark-to-Market Method

In order to determine the potential future credit exposure, institutions shall multiply the notional amounts or underlying values, as applicable, by the percentages set out in Table 1 and in accordance with the following:

(a) derivative contracts which do not fall within one of the five categories set out in Table 1 shall be treated as contracts concerning commodities other than precious metals;

(b) for derivative contracts with multiple exchanges of principal, the percentages shall be multiplied by the number of remaining payments still to be made in accordance with the contract;

(c) for derivative contracts that are structured to settle outstanding exposure following specified payment dates and where the terms are reset so that the market value of the derivative contract is zero on those specified dates, the residual maturity shall be equal to the time until the next reset date; in the case of interest-rate contracts that meet those criteria and have a remaining maturity of over one year, the percentage shall be no lower than 0,5 %. Table 1 Residual maturity Interest-rate contracts Contracts concerning foreign-exchange rates and gold Contracts concerning equities Contracts concerning precious metals other than gold Contracts concerning commodities other than precious metals 1 year or less 0 % 1 % 6 % 7 % 10 % Over 1 year, not exceeding 5 years 0,5  % 5 % 8 % 7 % 12 % Over 5 years 1,5  % 7,5  % 10 % 8 % 15 %

Article 5c

Simplified Exposure Method

Under the Simplified Exposure Method, institutions shall determine the exposure value by multiplying the notional amount of each instrument by the percentages set out in Table 2.

Original maturity	Interest-rate contracts	Contracts concerning foreign-exchange rates and gold
1 year or less	0,5  %	2 %
Over 1 year, not exceeding 2 years	1 %	5 %
Additional allowance for each additional year	1 %	3 %

Article 5d

Recognition of contractual netting as risk-reducing

Institutions may treat as risk reducing in accordance with Article 5e only the following types of contractual netting agreements where such netting agreement has been recognised by competent authorities in accordance with Article 296 of Regulation (EU) No 575/2013 and where the institution meets the requirements set out in Article 297 of that Regulation:

(a) bilateral contracts for novation between an institution and its counterparty under which mutual claims and obligations are automatically amalgamated in such a way that the novation fixes one single net amount each time it applies so as to create a single new contract that is binding on the parties and replaces all former contracts and all obligations between parties pursuant to those contracts;

(b) other bilateral agreements between an institution and its counterparty.

Article 5e

Effects of recognition of netting as risk-reducing

Institutions shall treat contractual netting agreements as follows:

(a) in the case of contracts for novation, institutions may weigh the single net amounts fixed by such contracts rather than the gross amounts involved; In the application of Article 5b, institutions may take the contract for novation into account when determining: — the current replacement cost referred to in Article 5b(1); — the notional principal amounts or underlying values referred to in Article 5b(2). In the application of the Simplified Exposure Method, in determining the notional amount referred to in Article 5c(1), institutions may take into account the contract for novation for the purposes of calculating the notional principal amount. In such cases, institutions shall apply the percentages of Table 2.