Commission Delegated Regulation (EU) 2023/662 of 20 January 2023 amending Delegated Regulation (EU) 2015/63 as regards the methodology for the calculation of liabilities arising from derivatives

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to 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 (1), and in particular Article 103(7) thereof,

Whereas:

(1) Under Article 5(3) of Commission Delegated Regulation (EU) 2015/63 (2), liabilities arising from derivative contracts are one of the components of the calculation of the annual contributions to be paid by institutions to resolution financing arrangements. In particular, the yearly average amount, calculated on a quarterly basis, of the liabilities referred to in paragraph 1 of that Article, arising from derivative contracts, is to be valued in accordance with Articles 429, 429a and 429b of Regulation (EU) No 575/2013 of the European Parliament and of the Council (3).

(2) Prior to the entry into force of Regulation (EU) 2019/876 of the European Parliament and of the Council (4), Article 429, 429a and 429b of Regulation (EU) No 575/2013, obliged institutions to calculate the exposure value of their derivatives using a mark-to-market method – the Current Exposure Method (‘CEM’) – by virtue of a reference to Article 274 of that Regulation, related to the calculation of the Leverage Ratio Exposure.

(3) Regulation (EU) 2019/876 amended Regulation (EU) No 575/2013. In particular, Articles 429, 429a and 429b were replaced by the new Articles 429 to 429g. That amendment included, inter alia, the introduction in Article 429c of Regulation (EU) No 575/2013 of the obligation for institutions to calculate the exposure value of derivative contracts in accordance with the mark-to-market method known as the Standardised Approach – Counterparty Credit Risk (SA-CCR), which replaced the Current Exposure Method or ‘CEM’ with effects on the ex-ante contribution periods as of 2023.

(4) The Standardised Approach – Counterparty Credit Risk method is impossible to apply for the valuation of liabilities arising from derivative contracts when such valuation needs to be applied for the purposes of Delegated Regulation (EU) 2015/63. The application of that method would, in fact, distort the calculation of liabilities arising from derivative contracts, which would affect some institutions more than others. That is due, first, to the presence of a zero floor in certain formulas to be applied, which would affect institutions differently depending on whether they use IFRS (International Financial Reporting Standards), and, second, to technical difficulties and uncertainties in the application of formulas calculating the Potential Future Exposure. It is therefore necessary to enable institutions to use the Current Exposure Method for the valuation of liabilities arising from derivative contracts and to introduce that method, previously laid down in Regulation (EU) No 575/2013, in Delegated Regulation (EU) 2015/63.

(5) Delegated Regulation (EU) 2015/63 should therefore be amended accordingly.

(6) It is necessary to provide resolution authorities with more time to adopt and notify their decisions on contributions to resolution financing arrangements in line with the amended requirements. It is therefore necessary to provide for a transitional arrangement for the year 2023 extending the deadlines for such notification.

(7) Since the resolution authorities need to apply the amended requirements in order to calculate and raise the contributions for year 2023 as soon as possible, it is necessary to provide for the entry into force of this Regulation the day following its publication.

(8) Under Article 14(4) of Delegated Regulation (EU) 2015/63, institutions are to provide resolution authorities with the information that is relevant for the calculation of the contributions by 31 January each year. It is necessary to give institutions one more month to provide that information in 2023, by means of a transitional arrangement.

(9) It is also necessary to enable resolution authorities to issue instructions to institutions for the provision of that information, consistently with the introduced amendments, well in advance of the established deadline for 2023, to avoid the creation of legal uncertainty about the method to be applied in 2023 for the valuation of liabilities arising from derivative contracts. To ensure continuity of the calculation method throughout contribution periods and to enable resolution authorities to issue, from 1 October 2022, instructions on the provision of such information in conformity with this Regulation, this Regulation should apply retroactively from that date,

HAS ADOPTED THIS REGULATION:

Article 1

Delegated Regulation (EU) 2015/63 is amended as follows:

(2) in Article 5, paragraph 3 is replaced by the following: ‘3.   For the purpose of this Section, the yearly average amount, calculated on a quarterly basis, of the liabilities referred to in paragraph 1, arising from derivative contracts as listed in Annex II to Regulation (EU) No 575/2013, including those that are off-balance sheet, shall be valued in accordance with Articles 5a to 5e of this Regulation. 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.’

(4) in Article 20 the following paragraphs 6 and 7 are added: ‘6.   By way of derogation from Article 13(1), in the 2023 contribution period the resolution authorities shall notify each institution referred to in Article 2 of their decisions determining the annual contribution due by each institution by 31 May 2023.

Article 2

Entry into force and application

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

It shall apply from 1 October 2022.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 20 January 2023.

For the Commission The President Ursula VON DER LEYEN

(1) OJ L 173, 12.6.2014, p. 190.

(2) 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 (OJ L 11, 17.1.2015, p. 44).

(3) 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 (OJ L 176, 27.6.2013, p. 1).

(4) Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements, and Regulation (EU) No 648/2012 (OJ L 150, 7.6.2019, p. 1).