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 (Text with EEA relevance)

• (c) for repurchase transactions and securities or commodities lending or borrowing transactions, RC is determined as the amount of cash lent or borrowed; cash lent by the investment firm is to be treated as a positive amount and cash borrowed by the investment firm is to be treated as a negative amount;

• (d) for securities financing transactions, where both legs of the transaction are securities, RC is determined by the CMV of the security lent by the investment firm; the CMV shall be increased using the corresponding volatility adjustment in Table 4 of Article 30;

• (e) for margin lending transactions and credits and loans referred to in point (g) of Article 25(1), RC is determined by the book value of the asset in accordance with the applicable accounting framework.

Article 29

Potential future exposure

• (a) the effective notional (EN) amount of the transaction set in accordance with paragraphs 2 to 6 of this Article; and

• (b) the supervisory factor (SF) set in accordance with paragraph 7 of this Article.

• (a) for foreign exchange derivative contracts, the notional amount is defined as the notional amount of the foreign currency leg of the contract, converted to the domestic currency; if both legs of a foreign exchange derivative are denominated in currencies other than the domestic currency, the notional amount of each leg is converted to the domestic currency and the leg with the larger domestic currency value is the notional amount;

• (b) for equity and commodity derivatives contracts and emission allowances and derivatives thereof, the notional amount is defined as the product of the market price of one unit of the instrument and the number of units referenced by the trade;

• (c) for transactions with multiple payoffs that are state contingent including digital options or target redemption forwards, an investment firm shall calculate the notional amount for each state and use the largest resulting calculation;

• (d) where the notional is a formula of market values, the investment firm shall enter the CMVs to determine the trade notional amount;

• (e) for variable notional swaps such as amortising and accreting swaps, investment firms shall use the average notional over the remaining life of the swap as the trade notional amount;

• (f) leveraged swaps shall be converted to the notional amount of the equivalent unleveraged swap so that where all rates in a swap are multiplied by a factor, the stated notional amount is multiplied by the factor on the interest rates to determine the notional amount;

• (g) for a derivative contract with multiple exchanges of principal, the notional amount shall be multiplied by the number of exchanges of principal in the derivative contract to determine the notional amount.

Duration = (1 – exp(–0,05 • time to maturity)) / 0,05

For derivative contracts other than interest rate contracts and credit derivative contracts the duration shall be 1.

If the derivative references the value of another interest rate or credit instrument, the time period shall be determined on the basis of the underlying instrument.

For options, the maturity shall be the latest contractual exercise date as specified by the contract.

For a derivative contract that is structured such that on specified dates any outstanding exposure is settled and the terms are reset so that the fair value of the contract is zero, the remaining maturity shall equal the time until the next reset date.

Table 3

Asset class	Supervisory factor
Interest rate	0,5 %
Foreign exchange	4 %
Credit	1 %
Equity single name	32 %
Equity index	20 %
Commodity and emission allowance	18 %
Other	32 %

• (a) 0,42, for netting sets of transactions with financial and non‐financial counterparties for which collateral is exchanged bilaterally with the counterparty, if required, in accordance with the conditions laid down in Article 11 of Regulation (EU) No 648/2012;

• (b) 1, for other netting sets.

Article 30

Collateral

Table 4

Asset class	Asset class	Volatility adjustment repurchase transactions	Volatility adjustment other transactions
Debt securities issued by central governments or central banks	≤ 1 year	0,707 %	1 %
Debt securities issued by central governments or central banks	> 1 year ≤ 5 years	2,121 %	3 %
Debt securities issued by central governments or central banks	> 5 years	4,243 %	6 %
Debt securities issued by other entities	≤ 1 year	1,414 %	2 %
Debt securities issued by other entities	> 1 year ≤ 5 years	4,243 %	6 %
Debt securities issued by other entities	> 5 years	8,485 %	12 %
Securitisation positions	≤ 1 year	2,828 %	4 %
Securitisation positions	> 1 year ≤ 5 years	8,485 %	12 %
Securitisation positions	> 5 years	16,970 %	24 %
Listed equities and convertibles	Listed equities and convertibles	14,143 %	20 %
Other securities and commodities	Other securities and commodities	17,678 %	25 %
Gold	Gold	10,607 %	15 %
Cash	Cash	0 %	0 %

For the purposes of Table 4, securitisation positions shall not include re‐securitisation positions.

Competent authorities may change the volatility adjustment for certain types of commodities for which there are different levels of volatility in prices. They shall notify EBA of such decisions together with the reasons for the changes.

• (a) for the purposes of points (a), (e) and (g) of Article 25(1), by the amount of collateral received by the investment firm from its counterparty decreased in accordance with Table 4;

• (b) for the transactions referred to in points (b), (c), (d) and (f) of Article 25(1), by the sum of the CMV of the security leg and the net amount of collateral posted or received by the investment firm.

For securities financing transactions, where both legs of the transaction are securities, collateral is determined by the CMV of the security borrowed by the investment firm.

Where the investment firm is purchasing or has lent the security, the CMV of the security shall be treated as a negative amount and shall be decreased to a larger negative amount, using the volatility adjustment in Table 4. Where the investment firm is selling or has borrowed the security, the CMV of the security shall be treated as a positive amount and be decreased using the volatility adjustment in Table 4.

Where different types of transactions are covered by a contractual netting agreement, subject to the conditions laid down in Article 31, the applicable volatility adjustments for ‘other transactions’ of Table 4 shall be applied to the respective amounts calculated under points (a) and (b) of the first subparagraph on an issuer basis within each asset class.

Article 31

Netting

For the purposes of this Section, an investment firm may, first, treat perfectly matching contracts included in a netting agreement as if they were a single contract with a notional principal equivalent to the net receipts, second, net other transactions subject to novation under which all obligations between the investment firm and its counterparty are automatically amalgamated in such a way that the novation legally substitutes one single net amount for the previous gross obligations, and third, net other transactions where the investment firm ensures that the following conditions have been met:

• (a) a netting contract with the counterparty or other agreement which creates a single legal obligation covers all included transactions, such that the investment firm would have either a claim to receive or obligation to pay only the net sum of the positive and negative mark‐to‐market values of included individual transactions in the event a counterparty fails to perform due to any of the following:
• (i) default;
• (ii) bankruptcy;
• (iii) liquidation; or
• (iv) similar circumstances;

• (b) the netting contract does not contain any clause which, in the event of default of a counterparty, permits a non‐defaulting counterparty to make limited payments only, or no payments at all, to the estate of the defaulting party, even if the defaulting party is a net creditor;

• (c) the investment firm has obtained an independent, written and reasoned legal opinion that, in the event of a legal challenge of the netting agreement, the investment firm’s claims and obligations would be equivalent to those referred to in point (a) under the following legal regime:
• (i) the law of the jurisdiction in which the counterparty is incorporated;
• (ii) if a foreign branch of a counterparty is involved, the law of jurisdiction in which the branch is located;
• (iii) the law that governs the individual transactions included in the netting agreement; or
• (iv) the law that governs any contract or agreement necessary to effect the netting.

Article 32

Credit valuation adjustment

For the purposes of this Section, CVA means an adjustment to the mid‐market valuation of the portfolio of transactions with a counterparty which reflects the CMV of the credit risk of the counterparty to the investment firm, but does not reflect the CMV of the credit risk of the investment firm to the counterparty.

CVA shall be 1,5 for all transactions other than the following transactions, for which CVA shall be 1:

• (a) transactions with non‐financial counterparties as defined in point (9) of Article 2 of Regulation (EU) No 648/2012, or with non‐financial counterparties established in a third country, where those transactions do not exceed the clearing threshold as specified in Article 10(3) and (4) of that Regulation;

• (b) intragroup transactions as provided for in Article 3 of Regulation (EU) No 648/2012;

• (c) long settlement transactions;

• (d) SFTs, including margin lending transactions, unless the competent authority determines that the investment firm’s CVA risk exposures arising from those transactions are material; and

• (e) credits and loans referred to in point (g) of Article 25(1).

Section 2 Daily trading flow

Article 33

Measuring DTF for the purpose of calculating K‐DTF

DTF shall be the arithmetic mean of the daily values from the remaining six months.

K‐DTF shall be calculated on the first business day of each month.

• (a) for cash trades, the value is the amount paid or received on each trade;

• (b) for derivatives, the value of the trade is the notional amount of the contract.

The notional amount of interest rate derivatives shall be adjusted for the time to maturity (in years) of those contracts. The notional amount shall be multiplied by the duration set out in the following formula:

Duration = time to maturity(in years) / 10

DTF shall include transactions executed by an investment firm in its own name either for itself or on behalf of a client.

CHAPTER 5 Environmental and social objectives

Article 34

Prudential treatment of assets exposed to activities associated with environmental or social objectives

• (a) methodological options for assessing the exposures of asset classes to activities substantially associated with environmental or social objectives;

• (b) specific risk profiles of assets exposed to activities associated substantially with environmental or social objectives;

• (c) risks related to the depreciation of assets due to regulatory changes such as climate change mitigation;

• (d) potential effects of dedicated prudential treatment of assets exposed to activities associated substantially with environmental or social objectives on financial stability.

PART FOUR

CONCENTRATION RISK

Article 35

Monitoring obligation

Article 36

Calculation of the exposure value

• (a) the positive excess of the investment firm’s long positions over its short positions in all the trading book financial instruments issued by the client in question, the net position for each instrument calculated in accordance with the provisions referred to in points (a), (b) and (c) of Article 22;

• (b) the exposure value of contracts and transactions referred to in Article 25(1) with the client in question, calculated in the manner laid down in Article 27.

For the purposes of point (a) of the first subparagraph, an investment firm that, for the purposes of the RtM K‐factor requirement, calculates own funds requirements for the trading book positions in accordance with the approach specified in Article 23 shall calculate the net position for the purposes of the concentration risk of those positions in accordance with the provisions referred to in point (a) of Article 22.

For the purposes of point (b) of the first subparagraph of this paragraph, an investment firm that, for the purposes of K‐TCD, calculates own funds requirements by applying the methods referred to in Article 25(4) of this Regulation shall calculate the exposure value of the contracts and transactions referred to in Article 25(1) of this Regulation by applying the methods set out in Section 3, 4 or 5 of Chapter 6 of Title II of Part Three of Regulation (EU) No 575/2013.

Article 37

Limits with regard to concentration risk and exposure value excess

Where that individual client is a credit institution or an investment firm, or where a group of connected clients includes one or more credit institutions or investment firms, the limit with regard to concentration risk shall be the higher of 25 % of the investment firm’s own funds or EUR 150 million provided that for the sum of exposure values with regard to all connected clients that are not credit institutions or investment firms, the limit with regard to concentration risk remains at 25 % of the investment firms’ own funds.

Where the amount of EUR 150 million is higher than 25 % of the investment firm’s own funds, the limit with regard to concentration risk shall not exceed 100 % of the investment firm’s own funds.

Investment firms shall calculate an exposure value excess with regard to an individual client or group of connected clients in accordance with the following formula:

exposure value excess = EV – L

where:

EV = exposure value calculated in the manner laid down in Article 36; and

L = limit with regard to concentration risk as determined in paragraph 1 of this Article.

• (a) 500 % of the investment firm’s own funds, where 10 days or less have elapsed since the excess occurred;

• (b) in aggregate, 600 % of the investment firm’s own funds, for any excesses that have persisted for more than 10 days.

Article 38

Obligation to notify

Article 39

Calculating K‐CON

• (a) 200 %, where the excess has not persisted for more than 10 days;

• (b) the corresponding factor in Column 2 of Table 6, after the period of 10 days calculated from the date on which the excess has occurred, by allocating each proportion of the excess to the appropriate line in Column 1 of Table 6.

Image omitted; see official source

where:

OFRE = own funds requirement for the excess;

OFR = own funds requirement of exposures to an individual client or groups of connected clients, calculated by adding together the own funds requirements of the exposures to the individual clients within the group, which shall be treated as a single exposure;

EV = exposure value calculated in the manner laid down in Article 36;

EVE = exposure value excess calculated in the manner laid down in Article 37(2).

For the purpose of calculating K‐CON, the own funds requirements of exposures arising from the positive excess of an investment firm’s long positions over its short positions in all the trading book financial instruments issued by the client in question, the net position of each instrument calculated in accordance with the provisions referred to in points (a), (b) and (c) of Article 22 shall only include specific‐risk requirements.

An investment firm that, for the purposes of the RtM K‐factor requirement, calculates own funds requirements for trading book positions in accordance with the approach specified in Article 23 shall calculate the own funds requirement of the exposure for the purposes of the concentration risk of those positions in accordance with the provisions referred to in point (a) of Article 22.

Table 6

Column 1: Exposure value excess as a percentage of own funds	Column 2: Factors
Up to 40 %	200 %
From 40 % to 60 %	300 %
From 60 % to 80 %	400 %
From 80 % to 100 %	500 %
From 100 % to 250 %	600 %
Over 250 %	900 %

Article 40

Procedures to prevent investment firms from avoiding the K‐CON own funds requirement

Article 41

Exclusions

• (a) exposures which are entirely deducted from an investment firm’s own funds;

• (b) exposures incurred in the ordinary course of the settlement of payment services, foreign currency transactions, securities transactions and the provision of money transmission;

• (c) exposures constituting claims against:
• (i) central governments, central banks, public sector entities, international organisations or multilateral development banks and exposures guaranteed by or attributable to such persons, where those exposures receive a 0 % risk weight under Articles 114 to 118 of Regulation (EU) No 575/2013;
• (ii) the regional governments and local authorities of countries that are members of the European Economic Area;
• (iii) central counterparties and default fund contributions to central counterparties.

• (a) covered bonds;

• (b) exposures incurred by an investment firm to its parent undertaking, to other subsidiaries of that parent undertaking or to its own subsidiaries, insofar as those undertakings are supervised on a consolidated basis in accordance with Article 7 of this Regulation or with Regulation (EU) No 575/2013, are supervised for compliance with the group capital test in accordance with Article 8 of this Regulation, or are supervised in accordance with equivalent standards in force in a third country, and provided that the following conditions are met:
• (i) there is no current or foreseen material practical or legal impediment to the prompt transfer of capital or repayment of liabilities by the parent undertaking; and
• (ii) the risk evaluation, measurement and control procedures of the parent undertaking include the financial sector entity.

Article 42

Exemption for commodity and emission allowance dealers

• (a) the other counterparty is a non‐financial counterparty;

• (b) both counterparties are subject to appropriate centralised risk evaluation, measurement and control procedures;

• (c) the transaction can be assessed as reducing risks directly relating to the commercial activity or treasury financing activity of the non‐financial counterparty or of that group.

PART FIVE

LIQUIDITY

Article 43

Liquidity requirement

By way of derogation from the first subparagraph of this paragraph, competent authorities may exempt investment firms that meet the conditions for qualifying as small and non‐interconnected investment firms set out in Article 12(1) from the application of the first subparagraph of this paragraph and shall duly inform EBA thereof.

For the purposes of the first subparagraph, liquid assets shall be any of the following, without limitation to their composition:

• (a) the assets referred to in Articles 10 to 13 of Delegated Regulation (EU) 2015/61, subject to the same conditions regarding eligibility criteria and the same applicable haircuts as those laid down in those Articles;

• (b) the assets referred to in Article 15 of Delegated Regulation (EU) 2015/61, up to an absolute amount of EUR 50 million or the equivalent amount in domestic currency, subject to the same conditions regarding eligibility criteria, with the exception of the EUR 500 million threshold amount referred to in Article 15(1) of that Regulation, and the same applicable haircuts as those laid down in in that Article;

• (c) financial instruments not covered by points (a) and (b) of this subparagraph, traded on a trading venue for which there is a liquid market as defined in point (17) of Article 2(1) of Regulation (EU) No 600/2014 and in Articles 1 to 5 of Commission Delegated Regulation (EU) 2017/567 ([^E0010]), subject to a haircut of 55 %;

• (d) unencumbered short‐term deposits at a credit institution.

• (a) they account for up to a maximum of one third of the minimum liquidity requirements as referred to in paragraph 1 of this Article;

• (b) they are not to be counted towards any additional liquidity requirements required by the competent authority for firm‐specific risks in accordance with point (k) of Article 39(2) of Directive (EU) 2019/2034;

• (c) they are subject to a haircut of 50 %.

Article 44

Temporary reduction of the liquidity requirement

Article 45

Client guarantees

Investment firms shall increase their liquid assets by 1,6 % of the total amount of guarantees provided to clients.

PART SIX

DISCLOSURE BY INVESTMENT FIRMS

Article 46

Scope

Article 46a

Accessibility of information on the European single access point

That information shall comply with the following requirements:

• (a) be submitted in a data extractable format as defined in Article 2, point (3), of Regulation (EU) 2023/2859 or, where required by Union law, in a machine-readable format, as defined in Article 2, point (4), of that Regulation;

• (b) be accompanied by the following metadata:
• (i) all the names of the investment firm to which the information relates;
• (ii) the legal entity identifier of the investment firm, as specified pursuant to Article 7(4), point (b), of Regulation (EU) 2023/2859;
• (iii) the size of the investment firm by category, as specified pursuant to Article 7(4), point (d), of that Regulation;
• (iv) the type of information, as classified pursuant to Article 7(4), point (c), of that Regulation;
• (v) an indication of whether the information contains personal data.

• (a) any other metadata to accompany the information;

• (b) the structuring of data in the information;

• (c) for which information a machine-readable format is required and, in such cases, which machine-readable format is to be used.

For the purposes of point (c), EBA, shall assess the advantages and disadvantages of different machine-readable formats and conduct appropriate field tests for that purpose.

EBA shall submit those draft implementing technical standards to the Commission.

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph of this paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

Article 47

Risk management objectives and policies

Investment firms shall disclose their risk management objectives and policies for each separate category of risk set out in Parts Three, Four and Five in accordance with Article 46, including a summary of the strategies and processes to manage those risks and a concise risk statement approved by the investment firm’s management body succinctly describing the investment firm’s overall risk profile associated with the business strategy.

Article 48

Governance

Investment firms shall disclose the following information regarding internal governance arrangements, in accordance with Article 46:

• (a) the number of directorships held by members of the management body;

• (b) the policy on diversity with regard to the selection of members of the management body, its objectives and any relevant targets set out in that policy, and the extent to which those objectives and targets have been achieved;

• (c) whether or not the investment firm has set up a separate risk committee and the number of times the risk committee has met annually.

Article 49

Own funds

• (a) a full reconciliation of Common Equity Tier 1 items, Additional Tier 1 items, Tier 2 items and applicable filters and deductions applied to own funds of the investment firm and the balance sheet in the audited financial statements of the investment firm;

• (b) a description of the main features of the Common Equity Tier 1 and Additional Tier 1 instruments and Tier 2 instruments issued by the investment firm;

• (c) a description of all restrictions applied to the calculation of own funds in accordance with this Regulation and the instruments and deductions to which those restrictions apply.

EBA shall submit those draft implementing technical standards to the Commission by 26 June 2021.

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 50

Own funds requirements

Investment firms shall disclose the following information regarding their compliance with the requirements laid down in Article 11(1) of this Regulation and in Article 24 of Directive (EU) 2019/2034, in accordance with Article 46 of this Regulation:

• (a) a summary of the investment firm’s approach to assessing the adequacy of its internal capital to support current and future activities;

• (b) upon a request from the competent authority, the result of the investment firm’s internal capital adequacy assessment process, including the composition of the additional own funds based on the supervisory review process as referred to in point (a) of Article 39(2) of Directive (EU) 2019/2034;

• (c) the K‐factor requirements calculated, in accordance with Article 15 of this Regulation, in aggregate form for RtM, RtF, and RtC, based on the sum of the applicable K‐factors; and

• (d) the fixed overheads requirement determined in accordance with Article 13 of this Regulation.

Article 51

Remuneration policy and practices

Investment firms shall disclose the following information regarding their remuneration policy and practices, including aspects related to gender neutrality and the gender pay gap, for those categories of staff whose professional activities have a material impact on investment firm’s risk profile, in accordance with Article 46;

• (a) the most important design characteristics of the remuneration system, including the level of variable remuneration and criteria for awarding variable remuneration, payout in instruments policy, deferral policy and vesting criteria;

• (b) the ratios between fixed and variable remuneration set in accordance with Article 30(2) of Directive (EU) 2019/2034;

• (c) aggregated quantitative information on remuneration, broken down by senior management and members of staff whose actions have a material impact on the risk profile of the investment firm, indicating the following:
• (i) the amounts of remuneration awarded in the financial year, split into fixed remuneration, including a description of the fixed components, and variable remuneration, and the number of beneficiaries;
• (ii) the amounts and forms of awarded variable remuneration, split into cash, shares, share‐linked instruments and other types separately for the part paid upfront and for the deferred part;
• (iii) the amounts of deferred remuneration awarded for previous performance periods, split into the amount due to vest in the financial year and the amount due to vest in subsequent years;
• (iv) the amount of deferred remuneration due to vest in the financial year that is paid out during the financial year, and that is reduced through performance adjustments;
• (v) the guaranteed variable remuneration awards during the financial year and the number of beneficiaries of those awards;
• (vi) the severance payments awarded in previous periods, that have been paid out during the financial year;
• (vii) the amounts of severance payments awarded during the financial year, split into paid upfront and deferred, the number of beneficiaries of those payments and the highest payment that has been awarded to a single person;

• (d) information on whether the investment firm benefits from a derogation laid down in Article 32(4) of Directive (EU) 2019/2034.

For the purposes of point (d) of the first subparagraph, investment firms that benefit from such a derogation shall indicate whether that derogation was granted on the basis of point (a) or point (b) of Article 32(4) of Directive (EU) 2019/2034, or both. They shall also indicate for which of the remuneration principles they apply the derogation(s), the number of staff members who benefit from the derogation(s) and their total remuneration, split into fixed and variable remuneration.

This Article shall be without prejudice to the provisions set out in Regulation (EU) 2016/679 of the European Parliament and of the Council ([^E0012]).

Article 52

Investment policy

• (a) the proportion of voting rights attached to the shares held directly or indirectly by the investment firm, broken down by Member State and sector;

• (b) a complete description of voting behaviour in the general meetings of companies the shares of which are held in accordance with paragraph 2, an explanation of the votes, and the ratio of proposals put forward by the administrative or management body of the company which the investment firm has approved; and

• (c) an explanation of the use of proxy advisor firms;

• (d) the voting guidelines regarding the companies the shares of which are held in accordance with paragraph 2.

The disclosure requirement referred to in point (b) of the first subparagraph shall not apply if the contractual arrangements of all shareholders represented by the investment firm at the shareholders’ meeting do not authorise the investment firm to vote on their behalf unless express voting orders are given by the shareholders after receiving the meeting’s agenda.

EBA shall submit those draft regulatory technical standards to the Commission by 26 June 2021.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Article 10 to 14 of Regulation (EU) No 1093/2010.

Article 53

Environmental, social and governance risks

From 26 December 2022, investment firms which do not meet the criteria referred to in Article 32(4) of Directive (EU) 2019/2034 shall disclose information on environmental, social and governance risks, including physical risks and transition risks, as defined in the report referred to in Article 35 of Directive (EU) 2019/2034.

The information referred to in the first paragraph shall be disclosed once in the first year and biannually thereafter.

PART SEVEN

REPORTING BY INVESTMENT FIRMS

Article 54

Reporting requirements

• (a) level and composition of own funds;

• (b) own funds requirements;

• (c) own funds requirement calculations;

• (d) the level of activity in respect of the conditions set out in Article 12(1), including the balance sheet and revenue breakdown by investment service and applicable K‐factor;

• (e) concentration risk;

• (f) liquidity requirements.

By way of derogation from the first subparagraph, investment firms that meet the conditions for qualifying as small and non‐interconnected investment firms set out in Article 12(1) shall submit such reports on an annual basis.

• (a) the level of concentration risk associated with the default of counterparties and with trading book positions, both on an individual counterparty and aggregate basis;

• (b) the level of concentration risk with respect to the credit institutions, investment firms and other entities where client money is held;

• (c) the level of concentration risk with respect to the credit institutions, investment firms and other entities where client securities are deposited;

• (d) the level of concentration risk with respect to the credit institutions where the investment firm’s own cash is deposited;

• (e) the level of concentration risk from earnings;

• (f) the level of concentration risk as described in points (a) to (e) calculated taking into account assets and off‐balance‐sheet items not recorded in the trading book in addition to exposures arising from trading book positions.

For the purposes of this paragraph, the terms ‘credit institution’ and ‘investment firm’ include private or public undertakings, including the branches of such undertakings, provided that those undertakings, if they were established in the Union, would be credit institutions or investment firms as defined in this Regulation, and provided that those undertakings have been authorised in a third country that applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union.

By way of derogation from paragraph 1 of this Article, an investment firm that meets the conditions for qualifying as a small and interconnected investment firm set out in Article 12(1) shall not be required to report the information specified in point (e) of paragraph 1 of this Article and, insofar as an exemption has been granted in accordance with the second subparagraph of Article 43(1), in point (f) of paragraph 1 of this Article.

• (a) the formats;

• (b) reporting dates and definitions and associated instructions which shall describe how to use those formats.

The draft implementing technical standards referred to in the first subparagraph shall be concise and proportionate to the nature, scope and complexity of the activities of the investment firms, taking into account the differences in the level of detail of information submitted by an investment firm that meets the conditions for qualifying as a small and non‐interconnected investment firm set out in Article 12(1).

EBA shall develop the draft implementing technical standards referred to in the first subparagraph by 26 December 2020.

Power is conferred on the Commission to adopt the implementing technical standards referred to in this paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

Article 55

Reporting requirements for certain investment firms, including for the purposes of the thresholds referred to in Article 1(2) of this Regulation and in point (1)(b) of Article 4(1) of Regulation (EU) No 575/2013

EBA shall submit those draft regulatory technical standards to the Commission by 26 December 2020.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in this paragraph, in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

PART EIGHT

DELEGATED ACTS

Article 56

Exercise of the delegation

PART NINE

TRANSITIONAL PROVISIONS, REPORTS, REVIEWS AND AMENDMENTS

TITLE I TRANSITIONAL PROVISIONS

Article 57

Transitional provisions

• (a) twice the relevant own funds requirement pursuant to Chapter 1 of Title I of Part Three of Regulation (EU) No 575/2013, subject to Article 93(1) of that Regulation, with reference to levels of initial capital set by Title IV of Directive 2013/36/EU, as amended by Directive (EU) 2019/878, that would have applied if the investment firm had continued to be subject to the own funds requirements of that Regulation as amended by Regulation (EU) 2019/630; or

• (b) twice the applicable fixed overhead requirement set out in Article 13 of this Regulation, where the investment firm was not in existence on or before 26 June 2021.

• (a) investment firms that were subject only to an initial capital requirement before 26 June 2021 may limit their own funds requirements to twice the applicable initial capital requirement set out in Title IV of Directive 2013/36/EU, as amended by Directive (EU) 2019/878, with the exception of points (b) and (c) of Article 31(1), and Article 31(2) respectively, of that Directive;

• (b) investment firms that were in existence before 26 June 2021 may limit their permanent minimum capital requirements to those provided for in Article 93(1) of Regulation (EU) No 575/2013, as amended by Regulation (EU) 2019/876, with reference to levels of initial capital set by Title IV of Directive 2013/36/EU, as amended by Directive (EU) 2019/878, that would have applied if the investment firm had continued to be subject to that Regulation, subject to an annual increase in the amount of those requirements of at least EUR 5 000 during the five‐year period;

• (c) investment firms that were in existence before 26 June 2021, that are not authorised to provide the ancillary services referred to in point (1) of Section B of Annex I to Directive 2014/65/EU, that only provide one or more of the investment services and activities listed in points 1, 2, 4 and 5 of Section A of Annex I to that Directive, that are not permitted to hold client money or securities belonging to their clients and that therefore may not at any time place themselves in debt with those clients, may limit their permanent minimum capital requirement to at least EUR 50 000 , subject to an annual increase of at least EUR 5 000 during the five‐year period.

Irrespective of whether an investment firm referred to in this paragraph makes use of the derogation referred to in the first subparagraph, point (a) of paragraph 4 shall not apply to such an investment firm.

Article 58

Derogation for undertakings referred to in point (1)(b) of Article 4(1) of Regulation (EU) No 575/2013

Investment firms which on 25 December 2019 meet the conditions of point (1)(b) of Article 4(1) of Regulation (EU) No 575/2013 and have not yet obtained authorisation as credit institutions in accordance with Article 8 of Directive 2013/36/EU shall continue to be subject to Regulation (EU) No 575/2013 and to Directive 2013/36/EU.

Article 59

Derogation for investment firms referred to in Article 1(2)

An investment firm which on 25 December 2019 meets the conditions set out in Article 1(2) of this Regulation shall continue to be subject to Regulation (EU) No 575/2013 and Directive 2013/36/EU.

TITLE II REPORTS AND REVIEWS

Article 60

Review clause

• (a) the conditions for investment firms to qualify as small and non‐interconnected investment firms in accordance with Article 12;

• (b) the methods for measuring the K‐factors in Title II of Part Three, including investment advice in the scope of AUM, and in Article 39;

• (c) the coefficients referred to in Article 15(2);

• (d) the method used to calculate K‐CMG, the level of own funds requirements deriving from K‐CMG as compared with K‐NPR, and the calibration of the multiplying factor set out in Article 23;

• (e) the provisions set out in Articles 43, 44 and 45 and in particular the eligibility for the liquidity requirement of liquid assets in points (a), (b) and (c) of Article 43(1);

• (f) the provisions set out in Section 1 of Chapter 4 of Title II of Part Three;

• (g) the application of Part Three to commodity and emission allowance dealers;

• (h) the modification of the definition of credit institution in Regulation (EU) No 575/2013 as a result of point (a) of Article 62(3) of this Regulation and potential unintended negative consequences;

• (i) the provisions set out in Articles 47 and 48 of Regulation (EU) No 600/2014 and their alignment with a consistent framework for equivalence in financial services;

• (j) the thresholds set out in Article 12(1);

• (k) the application of the standards of Chapters 1a and 1b of Title IV of Part Three of Regulation (EU) No 575/2013 to investment firms;

• (l) the method of measuring the value of a derivative in point (b) of Article 20(2) and point (b) of Article 33(2), and the appropriateness of introducing an alternative metric and/or calibration;

• (m) the provisions set out in Part Two, in particular concerning the permission for further instruments or funds to qualify as own funds pursuant to Article 9(4), and the possibility of granting such permission to investment firms that fulfil the conditions for qualifying as small and non‐interconnected investment firms set out in Article 12(1);

• (n) the conditions for investment firms to apply the requirements of Regulation (EU) No 575/2013 in accordance with Article 1(2) of this Regulation;

• (o) the provision set out in Article 1(5);

• (p) the relevance of the application of the disclosure requirements set out in Article 52 of this Regulation for other sectors, including investment firms referred to in Article 1(2) and (5) of this Regulation and credit institutions as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013.

TITLE III AMENDMENTS TO OTHER REGULATIONS

Article 61

Amendment to Regulation (EU) No 1093/2010

In point (2) of Article 4 of Regulation (EU) No 1093/2010, the following point is added:

• ‘(viii) with regard to Regulation (EU) 2019/2033 of the European Parliament and of the Council ([^E0013]) and Directive (EU) 2019/2034of the European Parliament and of the Council ([^E0014]), competent authorities as defined in point (5) of Article 3(1) of that Directive.

Article 62

Amendments to Regulation (EU) No 575/2013

Regulation (EU) No 575/2013 is amended as follows:

• (1) the title is replaced by the following: ‘Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and amending Regulation (EU) No 648/2012’;

• (2) in Article 2, the following paragraph is added: ‘5. When applying the provisions laid down in Article 1(2) and 1(5) of Regulation (EU) 2019/2033 of the European Parliament and of the Council ([^E0015]) with regard to investment firms referred to in those paragraphs, the competent authorities as defined in point (5) of Article 3(1) of Directive (EU) 2019/2034 of the European Parliament and of the Council ([^E0016]) shall treat those investment firms as if they were ‘institutions’ under this Regulation.

• (3) Article 4(1) is amended as follows:
• (a) point (1) is replaced by the following:
• ‘(1) “credit institution” means an undertaking the business of which consists of any of the following:
• (a) to take deposits or other repayable funds from the public and to grant credits for its own account;
• (b) to carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU of the European Parliament and of the Council ([^E0017]), where one of the following applies, but the undertaking is not a commodity and emission allowance dealer, a collective investment undertaking or an insurance undertaking:
• (i) the total value of the consolidated assets of the undertaking is equal to or exceeds EUR 30 billion;
• (ii) the total value of the assets of the undertaking is less than EUR 30 billion, and the undertaking is part of a group in which the total value of the consolidated assets of all undertakings in that group that individually have total assets of less than EUR 30 billion and that carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU is equal to or exceeds EUR 30 billion; or
• (iii) the total value of the assets of the undertaking is less than EUR 30 billion, and the undertaking is part of a group in which the total value of the consolidated assets of all undertakings in the group that carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU is equal to or exceeds EUR 30 billion, where the consolidating supervisor, in consultation with the supervisory college, so decides in order to address potential risks of circumvention and potential risks for the financial stability of the Union; for the purposes of points (b)(ii) and (b)(iii), where the undertaking is part of a third‐country group, the total assets of each branch of the third‐country group authorised in the Union shall be included in the combined total value of the assets of all undertakings in the group;
• (b) point (2) is replaced by the following:
• ‘(2) “investment firm” means an investment firm as defined in point (1) of Article 4(1) of Directive 2014/65/EU which is authorised under that Directive but excludes credit institutions;’;
• (c) point (3) is replaced by the following:
• ‘(3) “institution” means a credit institution authorised under Article 8 of Directive 2013/36/EU or an undertaking as referred to in Article 8a(3) thereof;’;
• (d) point (4) is deleted;
• (e) point (26) is replaced by the following:
• ‘(26) “financial institution” means an undertaking other than an institution and other than a pure industrial holding company, the principal activity of which is to acquire holdings or to pursue one or more of the activities listed in points 2 to 12 and point 15 of Annex I to Directive 2013/36/EU, including an investment firm, a financial holding company, a mixed financial holding company, an investment holding company, a payment institution within the meaning of Directive (EU) 2015/2366 of the European Parliament and of the Council ([^E0018]), and an asset management company, but excluding insurance holding companies and mixed‐activity insurance holding companies as defined in points (f) and (g) of Article 212(1) of Directive 2009/138/EC;
• (f) point (29a) is replaced by the following:
• ‘(29a) “parent investment firm in a Member State” means a parent undertaking in a Member State that is an investment firm;’;
• (g) point (29b) is replaced by the following:
• ‘(29b) “EU parent investment firm” means an EU parent undertaking that is an investment firm;’;
• (h) point (51) is replaced by the following:
• ‘(51) “initial capital” means the amounts and types of own funds specified in Article 12 of Directive 2013/36/EU;’;
• (i) point (60) is replaced by the following:
• ‘(60) “cash assimilated instrument” means a certificate of deposit, a bond, including a covered bond, or any other non‐subordinated instrument, which has been issued by an institution or an investment firm, for which the institution or investment firm has already received full payment and which is to be unconditionally reimbursed by the institution or investment firm at its nominal value;’;
• (j) in point (72), point (a) is replaced by the following:
• ‘(a) it is a regulated market or a third‐country market that is considered to be equivalent to a regulated market in accordance with the procedure set out in point (a) of Article 25(4) of Directive 2014/65/EU;’;
• (k) the following point is added:
• ‘(150) “commodity and emission allowance dealer” means an undertaking the main business of which consists exclusively of the provision of investment services or activities in relation to commodity derivatives or commodity derivative contracts referred to in points (5), (6), (7), (9) and (10), derivatives of emission allowances referred to in point (4), or emission allowances referred to in point (11) of Section C of Annex I to Directive 2014/65/EU;’;

• (4) Article 6 is amended as follows:
• (a) paragraph 4 is replaced by the following: ‘4. Institutions shall comply with the obligations laid down in Part Six and in point (d) of Article 430(1) of this Regulation on an individual basis. The following institutions shall not be required to comply with Article 413(1) and the associated liquidity reporting requirements laid down in Part Seven A of this Regulation: (a) institutions which are also authorised in accordance with Article 14 of Regulation (EU) No 648/2012; (b) institutions which are also authorised in accordance with Article 16 and point (a) of Article 54(2) of Regulation (EU) No 909/2014 of the European Parliament and of the Council ([^E0019]), provided that they do not perform any significant maturity transformations; and (c) institutions which are designated in accordance with point (b) of Article 54(2) of Regulation (EU) No 909/2014, provided that: (i) their activities are limited to offering banking‐type services, as referred to in Section C of the Annex to that Regulation, to central securities depositories authorised in accordance with Article 16 of that Regulation; and (ii) they do not perform any significant maturity transformations.
• (b) paragraph 5 is replaced by the following: ‘5. Institutions for which competent authorities have exercised the derogation specified in Article 7(1) or (3) of this Regulation, and institutions which are also authorised in accordance with Article 14 of Regulation (EU) No 648/2012, shall not be required to comply with the obligations laid down in Part Seven and the associated leverage ratio reporting requirements laid down in Part Seven A of this Regulation on an individual basis.’;

• (5) the following article is inserted in Section 1 of Chapter 2 of Title II of Part One: ‘Article 10a Application of prudential requirements on a consolidated basis where investment firms are parent undertakings For the purposes of the application of this Chapter, investment firms shall be considered to be parent financial holding companies in a Member State or Union parent financial holding companies where such investment firms are parent undertakings of an institution or of an investment firm subject to this Regulation that is referred to in Article 1(2) or (5) of Regulation (EU) 2019/2033.’;

• (6) in Article 11, paragraph 4 is replaced by the following: ‘4. EU parent institutions shall comply with Part Six and point (d) of Article 430(1) of this Regulation on the basis of their consolidated situation where the group comprises one or more credit institutions or investment firms that are authorised to provide the investment services and activities listed in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU. Where a waiver has been granted under Article 8(1) to (5), the institutions and, where applicable, the financial holding companies or mixed financial holding companies that are part of a liquidity sub‐group shall comply with Part Six and point (d) of Article 430(1) of this Regulation on a consolidated basis or on the sub‐consolidated basis of the liquidity sub‐group.’;

• (7) Articles 15, 16 and 17 are deleted;