Index 
Texts adopted
Tuesday, 16 April 2019 - Strasbourg 
Community statistics on migration and international protection ***I
 EU Accession to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications ***
 Action of the Union following its accession to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications ***I
 EU-Philippines Agreement on certain aspects of air services ***
 International Agreement on olive oil and table olives ***
 Nomination of a member of the Court of Auditors – Viorel Ştefan
 Nomination of a member of the Court of Auditors – Ivana Maletić
 Protection of persons reporting on breaches of Union law ***I
 Cross-border distribution of collective investment undertakings (Directive) ***I
 Cross-border distribution of collective investment undertakings (Regulation) ***I
 Capital Requirements (Regulation) ***I
 Capital Requirements (Directive) ***I
 Loss-absorbing and recapitalisation capacity of credit institutions and investment firms (Regulation)***I
 Loss-absorbing and recapitalisation capacity of credit institutions and investment firms (Directive) ***I
 Sovereign bond-backed securities ***I
 European Supervisory Authorities and financial markets ***I
 European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board ***I
 Markets in financial instruments and taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) ***I
 Prudential supervision of investment firms (Directive) ***I
 Prudential requirements of investment firms (Regulation) ***I
 Transparent and predictable working conditions in the European Union ***I
 European Labour Authority ***I
 Conservation of fishery resources and protection of marine ecosystems through technical measures ***I
 Regulation on European business statistics ***I
 OLAF investigations and cooperation with the European Public Prosecutor's Office ***I
 Establishing the instrument for financial support for customs control equipment ***I
 Establishing the 'Customs' programme for cooperation in the field of customs ***I
 Marketing and use of explosives precursors ***I
 Common framework for European statistics relating to persons and households ***I
 Interoperability between EU information systems in the field of borders and visa ***I
 Interoperability between EU information systems in the field of police and judicial cooperation, asylum and migration ***I
 European network of immigration liaison officers ***I
 Type-approval requirements for motor vehicles as regards general safety ***I

Community statistics on migration and international protection ***I
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European Parliament legislative resolution of 16 April 2019 on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) No 862/2007 of the European Parliament and of the Council on Community statistics on migration and international protection (COM(2018)0307 – C8-0182/2018 – 2018/0154(COD))
P8_TA-PROV(2019)0359A8-0395/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0307),

–  having regard to Article 294(2) and Article 338(1) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0182/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Civil Liberties, Justice and Home Affairs and the position in the form of amendments of the Committee on Women's Rights and Gender Equality (A8-0395/2018),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Text proposed by the Commission   Amendment
Amendment 1
Proposal for a regulation
Recital 2
(2)  To respond to new needs within the Union for statistics on asylum and managed migration, and whereas the characteristics of migration are subject to rapid change, there is a need for a framework allowing quick response to changing needs as regards statistics on asylum and managed migration.
(2)  To respond to new needs within the Union for statistics on migration and international protection, and whereas the characteristics of migratory movements are subject to rapid change, there is a need for a framework allowing quick response to changing needs as regards statistics on migration and international protection.
Amendment 2
Proposal for a regulation
Recital 2 a (new)
(2a)  Due to the constant changing and diverse nature of current migratory flows, comprehensive and comparable gender-disaggregated statistical data on the migrant population are needed to understand the reality of the situation, identify vulnerabilities and inequalities, and provide policy makers with reliable data and information for the development of future public policies.
Amendment 3
Proposal for a regulation
Recital 3
(3)  To support the Union in responding effectively to the challenges posed by migration, there is a need for sub-annual frequency data on asylum and managed migration.
(3)  To support the Union in responding effectively to the challenges posed by migration and in developing gender-responsive and human-rights based policies, there is a need for sub-annual frequency data on asylum and managed migration.
Amendment 4
Proposal for a regulation
Recital 4
(4)  Asylum and managed migration statistics are fundamental for the study, definition and evaluation of a wide range of policies, particularly as regards responses to the arrival of persons seeking protection in Europe.
(4)  Asylum and managed migration statistics are fundamental for the study, definition and evaluation of a wide range of policies, particularly as regards responses to the arrival of persons seeking protection in Europe, with the aim of achieving the best solutions.
Amendment 5
Proposal for a regulation
Recital 4 a (new)
(4a)  Statistics on migration and international protection are essential for having an overview of migratory movements within the Union and for Member States to be able to apply Union law properly in accordance with fundamental rights as laid down in the Charter of Fundamental Rights of the European Union and the Convention for the Protection of Human Rights and Fundamental Freedoms.
Amendment 6
Proposal for a regulation
Recital 4 b (new)
(4b)  Persecution on the ground of gender constitutes a ground for seeking and being granted international protection. The national and Union statistical authorities should collect the statistics on applications for international protection based on the grounds of gender, including gender-based violence.
Amendment 7
Proposal for a regulation
Recital 9 a (new)
(9a)  In order to achieve the objectives of Regulation (EC) No 862/2007, sufficient financial resources should be allocated for the collection, analysis and dissemination of high quality national and Union statistics on migration and international protection, in particular by supporting actions in that regard in accordance with the Regulation (EU) No 516/2014 of the European Parliament and of the Council1a.
______________
1a Regulation (EU) No 516/2014 of the European Parliament and of the Council of 16 April 2014 establishing the Asylum, Migration and Integration Fund, amending Council Decision 2008/381/EC and repealing Decisions No 573/2007/EC and No 575/2007/EC of the European Parliament and of the Council and Council Decision 2007/435/EC (OJ L 150, 20.5.2014, p. 168).
Amendment 8
Proposal for a regulation
Recital 10
(10)  This Regulation guarantees the right to respect for private and family life and to the protection of personal data, as set out in Articles 7 and 8 of the Charter of Fundamental Rights of the European Union.
(10)  This Regulation guarantees the right to respect for private and family life, to the protection of personal data, non-discrimination and gender equality as set out in Articles 7, 8, 21 and 23 of the Charter of Fundamental Rights of the European Union and in accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council1a.
______________
1a Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1).
Amendment 9
Proposal for a regulation
Recital 10 a (new)
(10a)  The collection of gender-disaggregated data should allow for the identification and analysis of specific vulnerabilities and capacities of women and men, revealing gaps and inequalities. Gender-responsive data on migration have the potential to promote greater equality and offer opportunities for disadvantaged groups. Migration statistics should also take account of variables such as gender identity and sexual orientation to collect data on LGBTQI+ persons’ experiences and inequalities in migration and asylum processes.
Amendment 10
Proposal for a regulation
Recital 11
(11)  To ensure uniform conditions for the implementation of this regulation, implementing powers should be conferred on the Commission in respect of specifying disaggregations. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council(25 ).
(11)  In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission in respect of laying down the rules on the appropriate formats for the transmission of data. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council.
__________________
__________________
25 Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).
25 Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).
Amendment 11
Proposal for a regulation
Recital 11 a (new)
(11a)  In order to adapt Regulation (EC) No 862/2007 to technological and economic developments, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of amending Regulation (EC) No 862/2007 to update certain definitions and of supplementing it to determine the groupings of data and additional disaggregations and to lay down rules on accuracy and quality standards. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making1a. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.
________________
1a OJ L 123, 12.5.2016, p. 1.
Amendment 12
Proposal for a regulation
Recital 11 b (new)
(11b)  The effective monitoring of the application of Regulation (EC) No 862/2007 requires that it be evaluated at regular intervals. The Commission should thoroughly assess the statistics compiled pursuant to Regulation (EC) No 862/2007, as well as their quality and timely provision, for the purpose of submitting reports to the European Parliament and to the Council. Close consultation should be held with all actors involved in asylum data collection, including United Nations agencies and other relevant international and non-governmental organisations.
Amendment 13
Proposal for a regulation
Article 1 – paragraph 1 – point -1 (new)
Regulation (EC) No 862/2007
Article 1 – paragraph 1 – point c
(-1)  in Article 1, point (c) is replaced by the following:
(c)  administrative and judicial procedures and processes in the Member States relating to immigration, granting of permission to reside, citizenship, asylum and other forms of international protection and the prevention of illegal immigration.
"(c) administrative and judicial procedures and processes in the Member States relating to immigration, granting of permission to reside, citizenship, asylum and other forms of international protection, irregular entry and stay and returns."
(https://eur-lex.europa.eu/legal-content/FR/TXT/?uri=celex%3A32013L0033)
Amendment 14
Proposal for a regulation
Article 1 – paragraph 1 – point -1 a (new) – point a (new)
Regulation (EC) No 862/2007
Article 2 – paragraph 1 – point j
(-1a)  Article 2 is amended as follows:
(a)  in paragraph 1, point (j) is replaced by the following:
(j)‘application for international protection’ means application for international protection as defined in Article 2(g) of Council Directive 2004/83/EC of 29 April 2004 on minimum standards for the qualification and status of third-country nationals or stateless persons as refugees or as persons who otherwise need international protection and the content of the protection granted (2);
"(j) ‘application for international protection’ means application for international protection as defined in Article 2(h) of Directive 2011/95/EU of the European Parliament and of the Council2;
_______________
_______________
2 OJ L 304, 30.9.2004, p. 12.
2 Directive 2011/95/EU of the European Parliament and of the Council of 13 December 2011 on standards for the qualification of third-country nationals or stateless persons as beneficiaries of international protection, for a uniform status for refugees or for persons eligible for subsidiary protection, and for the content of the protection granted (OJ L 337, 20.12.2011, p. 9).”
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 15
Proposal for a regulation
Article 1 – paragraph 1 – point -1 a (new) – point b (new)
Regulation (EC) No 862/2007
Article 2 – paragraph 1 – point k
(b)  in paragraph 1, point (k) is replaced by the following:
(k)‘refugee status’ means refugee status as defined in Article 2(d) of Directive 2004/83/EC;
"(k) ‘refugee status’ means refugee status as defined in Article 2(e) of Directive 2011/95/EU; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 16
Proposal for a regulation
Article 1 – paragraph 1 – point -1 a (new) – point c (new)
Regulation (EC) No 862/2007
Article 2 – paragraph 1 – point l
(c)  in paragraph 1, point (l) is replaced by the following:
(l)‘subsidiary protection status’ means subsidiary protection status as defined in Article 2(f) of Directive 2004/83/EC;
"(l) ‘subsidiary protection status’ means subsidiary protection status as defined in Article 2(g) of Directive 2011/95/EU; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 17
Proposal for a regulation
Article 1 – paragraph 1 – point -1 a (new) – point d (new)
Regulation (EC) No 862/2007
Article 2 – paragraph 1 – point m
(d)  in paragraph 1, point (m) is replaced by the following:
(m)‘family members’ means family members as defined in Article 2(i) of Council Regulation (EC) No 343/2003 of 18 February 2003 establishing the criteria and mechanisms for determining the Member State responsible for examining an asylum application lodged in one of the Member States by a third-country national (3);
"(m) ‘family members’ means family members as defined in Article 2(g) of Regulation (EU) No 604/2013 of the European Parliament and of the Council3;
_______________
_______________
3 OJ L 50, 25.2.2003, p. 1.
3 Regulation (EU) No 604/2013 of the European Parliament and of the Council of 26 June 2013 establishing the criteria and mechanisms for determining the Member State responsible for examining an application for international protection lodged in one of the Member States by a third-country national or a stateless person (OJ L 180, 29.6.2013, p. 31).”
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 18
Proposal for a regulation
Article 1 – paragraph 1 – point -1 a (new) – point e (new)
Regulation (EC) No 862/2007
Article 2 – paragraph 1 – point o
(d)  in paragraph 1, point (o) is replaced by the following:
(o)‘unaccompanied minor’ means an unaccompanied minor as defined in Article 2(i) of Directive 2004/83/EC;
"(o) ‘unaccompanied minor’ means an unaccompanied minor as defined in Article 2(l) of Directive 2011/95/EU; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 19
Proposal for a regulation
Article 1 – paragraph 1 – point -1 a (new) – point f (new)
Regulation (EC) No 862/2007
Article 2 – paragraph 1 – point p
(f)  in paragraph 1, point (p) is replaced by the following:
(p)‘external borders’ means external borders as defined in Article 2(2) of Regulation (EC) No 562/2006 of the European Parliament and of the Council of 15 March 2006 establishing a Community Code on the rules governing the movement of persons across borders (Schengen Borders Code) (12);
"(p) ‘external borders’ means external borders as defined in Article 2(2) of Regulation (EU) 2016/399 of the European Parliament and of the Council5;
________________
________________
5 OJ L 105, 13.4.2006, p. 1.
5 Regulation (EU) 2016/399 of the European Parliament and of the Council of 9 March 2016 on a Union Code on the rules governing the movement of persons across borders (Schengen Borders Code) (OJ L 77, 23.3.2016, p. 1).”
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 20
Proposal for a regulation
Article 1 – paragraph 1 – point -1 a (new) – point g (new)
Regulation (EC) No 862/2007
Article 2 – paragraph 1 – point q
(g)  in paragraph 1, point (q) is replaced by the following:
(q)‘third-country nationals refused entry’ means third-country nationals who are refused entry at the external border because they do not fulfil all the entry conditions laid down in Article 5(1) of Regulation (EC) No 562/2006 and do not belong to the categories of persons referred to in Article 5(4) of that Regulation;
"(q) ‘third-country nationals refused entry’ means third-country nationals who are refused entry at the external border because they do not fulfil all the entry conditions laid down in Article 5(1) of Regulation (EU) 2016/399 and do not belong to the categories of persons referred to in Article 5(2) of that Regulation; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 21
Proposal for a regulation
Article 1 – paragraph 1 – point -1 a (new) – point h (new)
Regulation (EC) No 862/2007
Article 2 – paragraph 1 – point s a (new)
(h)  in paragraph 1 the following point is added:
“(sa) ‘removal’ means removal as defined in Article 3(5) of Directive 2008/115/EC of the European Parliament and of the Council*;
________________
* Directive 2008/115/EC of the European Parliament and of the Council of 16 December 2008 on common standards and procedures in Member States for returning illegally staying third-country nationals (OJ L 348, 24.12.2008, p. 98).”
Amendment 22
Proposal for a regulation
Article 1 – paragraph 1 – point -1 a (new) – point i (new)
Regulation (EC) No 862/2007
Article 2 – paragraph 1 – point s b (new)
(i)  in paragraph 1 the following point is added:
“(sb) ‘voluntary departure’ means voluntary departure as defined in Article 3(8) of Directive 2008/115/EC;”
Amendment 23
Proposal for a regulation
Article 1 – paragraph 1 – point -1 a (new) – point j (new)
Regulation (EC) No 862/2007
Article 2 – paragraph 1 – point s c (new)
(j)  in paragraph 1 the following point is added:
“(sc) ‘assisted voluntary return’ means voluntary departure as defined in Article 3(8) of Directive 2008/115/EC supported by logistical, financial or other material assistance.”
Amendment 24
Proposal for a regulation
Article 1 – paragraph 1 – point -1 a (new) – point k (new)
Regulation (EC) No 862/2007
Article 2 – paragraph 3
(k)  Paragraph 3 is deleted.
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 25
Proposal for a regulation
Article 1 – paragraph 1 – point -1 b (new)
Regulation (EC) No 862/2007
Article 3
(-1b)  Article 3 is replaced by the following:
Article 3
"Article 3
Statistics on international migration, usually resident population and acquisition of citizenship
Statistics on international migration, usually resident population and acquisition of citizenship
1.  Member States shall supply to the Commission (Eurostat) statistics on the numbers of:
1.  Member States shall supply to the Commission (Eurostat) statistics on the numbers of:
(a)  immigrants moving to the territory of the Member State, disaggregated as follows:
(a)  immigrants moving to the territory of the Member State, disaggregated as follows:
(i)  groups of citizenship by age and sex;
(i)  groups of citizenship by age and gender;
(ii)  groups of country of birth by age and sex;
(ii)  groups of country of birth by age and gender;
(iii)  groups of country of previous usual residence by age and sex;
(iii)  groups of country of previous usual residence by age and gender;
(b)  emigrants moving from the territory of the Member State disaggregated as follows:
(b)  emigrants moving from the territory of the Member State disaggregated as follows:
(i)  groups of citizenships;
(i)  groups of citizenships;
(ii)  age;
(ii)  age;
(iii)  sex;
(iii)  gender;
(iv)  groups of countries of next usual residence;
(iv)  groups of countries of next usual residence;
(c)  persons having their usual residence in the Member State at the end of the reference period, disaggregated as follows:
(c)  persons having their usual residence in the Member State at the end of the reference period, disaggregated as follows:
(i)  groups of citizenship by age and sex;
(i)  groups of citizenship by age and gender;
(ii)  groups of country of birth by age and sex;
(ii)  groups of country of birth by age and gender;
(d)  persons having their usual residence in the territory of the Member State and having acquired during the reference year the citizenship of the Member State and having formerly held the citizenship of another Member State or a third country or having formerly been stateless, disaggregated by age and sex, and by the former citizenship of the persons concerned and by whether the person was formerly stateless.
(d)  persons having their usual residence in the territory of the Member State and having acquired during the reference year the citizenship of the Member State and having formerly held the citizenship of another Member State or a third country or having formerly been stateless, disaggregated by age and gender, and by the former citizenship of the persons concerned and by whether the person was formerly stateless. "
(da)  persons having their usual residence in the territory of the Member State and having acquired during the reference year a long-term residence permit, disaggregated by age and gender.
2.  The statistics referred to in paragraph 1 shall relate to reference periods of one calendar year and shall be supplied to the Commission (Eurostat) within 12 months of the end of the reference year. The first reference year shall be 2008.
2.  The statistics referred to in paragraph 1 shall relate to reference periods of one calendar year and shall be supplied to the Commission (Eurostat) within 12 months of the end of the reference year. The first reference year shall be 2020."
(https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1538559664710&uri=CELEX:32007R0862)
Amendment 26
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point -a (new)
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point c
(-a)  In paragraph 1, point (c) is replaced by the following:
(c)  applications for international protection having been withdrawn during the reference period.
"(c) applications for international protection having been withdrawn during the reference period, disaggregated by type of withdrawal;"
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 27
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d a (new)
(da)  persons having submitted an application for international protection or having been included in such an application as a family member and having had their applications processed under the accelerated procedure referred to in Article 31(8) of Directive 2013/32/EU of the European Parliament and of the Council*;
__________________
* Directive 2013/32/EU of the European Parliament and of the Council of 26 June 2013 on common procedures for granting and withdrawing international protection (OJ L 180, 29.6.2013, p. 60).
Amendment 28
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d b (new)
(db)  persons having submitted an application for international protection or having been included in such an application as a family member and having had their applications processed under the border procedures referred to in Article 43 of Directive 2013/32/EU during the reference period;
Amendment 29
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d c (new)
(dc)  persons having submitted an application for international protection or having been included in such an application as a family member during the reference period and who are exempted from the accelerated procedure or the border procedure in accordance with Articles 24(3) and 25(6) of Directive 2013/32/EU;
Amendment 30
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d d (new)
(dd)  persons having submitted an application for international protection without having been registered in Eurodac as referred to in Article 14 of Regulation (EU) No 603/2003 of the European Parliament and of the Council*;
__________________
* Regulation (EU) No 603/2013 of the European Parliament and of the Council of 26 June 2013 on the establishment of 'Eurodac' for the comparison of fingerprints for the effective application of Regulation (EU) No 604/2013 establishing the criteria and mechanisms for determining the Member State responsible for examining an application for international protection lodged in one of the Member States by a third-country national or a stateless person and on requests for the comparison with Eurodac data by Member States' law enforcement authorities and Europol for law enforcement purposes, and amending Regulation (EU) No 1077/2011 establishing a European Agency for the operational management of large-scale IT systems in the area of freedom, security and justice (OJ L 180, 29.6.2013, p. 1).
Amendment 31
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d e (new)
(de)  persons having submitted an application for international protection or having been included in such an application as a family member during the reference period who are able to present documentary evidence which can aid in the establishment of their identity;
Amendment 32
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d f (new)
(df)  persons having submitted a subsequent application for international protection as referred to in Article 40 of Directive 2013/32/EU or having been included in such an application as a family member during the reference period;
Amendment 33
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d g (new)
(dg)  persons having submitted an application for international protection or having been included in such an application as a family member during the reference period and who were in detention in accordance with Directive 2013/33/EU of the European Parliament and of the Council* at the end of the reference period, disaggregated by the month those persons were placed in detention and the grounds for the detention;
____________________
* Directive 2013/33/EU of the European Parliament and of the Council of 26 June 2013 laying down standards for the reception of applicants for international protection (OJ L 180, 29.6.2013, p. 96).
Amendment 34
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d h (new)
(dh)  persons having submitted an application for international protection or having been included in such an application as a family member and who were subject to an administrative or judicial decision or act ordering their detention in accordance with Directive 2013/33/EU during the reference period;
Amendment 35
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d i (new)
(di)  persons having submitted an application for international protection or having been included in such an application as a family member and who were subject to an administrative or judicial decision or act ordering an alternative to detention in accordance with Directive 2013/33/EU during the reference period, disaggregated by type of alternative as follows:
(i)  reporting;
(ii)  deposit of a financial guarantee;
(iii)  obligation to stay at an assigned place;
(iv)  other type of alternative to detention;
Amendment 36
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d j (new)
(dj)  persons having submitted an application for international protection or having been included in such an application as a family member during the reference period and who were subject to an administrative or judicial decision or act ordering an alternative to detention in accordance with Directive 2013/33/EU at the end of the reference period, disaggregated by the month, the administrative or judicial decision or act was issued against those persons, and further disaggregated by type of alternatives as follows:
(i)  reporting;
(ii)  deposit of a financial guarantee;
(iii)  obligation to stay at an assigned place;
(iv)  other type of alternative to detention;
Amendment 37
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d k (new)
(dk)  persons having submitted an application for international protection and who have undergone an age assessment during the reference period;
Amendment 38
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d l (new)
(dl)  decisions on age assessments of applicants, disaggregated as follows:
(i)  assessments concluding that the applicant is a minor;
(ii)  assessments concluding that the applicant is an adult;
(iii)  inconclusive or abandoned assessments;
Amendment 39
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d m (new)
(dm)  persons having submitted an application for international protection or having been included in such an application as a family member and having been identified as being in need of special procedural guarantees in accordance with Article 24 of Directive 2013/32/EU or as applicants with special reception needs within the meaning of point (k) of Article 2 of Directive 2013/33/EU during the reference period;
Amendment 40
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d n (new)
(dn)  persons having submitted an application for international protection or having been included in such an application as a family member and having benefited from free legal assistance under Article 20 of Directive 2013/32/EU during the reference period, disaggregated by procedures at first and second instance;
Amendment 41
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d o (new)
(do)  persons having submitted an application for international protection or having been included in such an application as a family member and having benefited from material reception conditions providing an adequate standard of living for applicants, in accordance with Article 17 of Directive 2013/33/EU, at the end of the reference period;
Amendment 42
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d p (new)
(dp)  persons having submitted an application for international protection as unaccompanied minors and to whom a representative has been appointed in accordance with Article 25 of Directive 2013/32/EU during the reference period;
Amendment 43
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d q (new)
(dq)  persons having submitted an application for international protection having been recognised as unaccompanied minors and having been granted access to the education system in accordance with Article 14 of Directive 2013/33/EU during the reference period;
Amendment 44
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d r (new)
(dr)  persons having submitted an application for international protection, having been recognised as unaccompanied minors and having been placed in accordance with Article 31(3) of Directive 2011/95/EU during the reference period, disaggregated by the grounds for placement;
Amendment 45
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point a
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – point d s (new)
(ds)  the average number of unaccompanied minors per guardian during the reference period;
Amendment 46
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point b
Regulation (EC) No 862/2007
Article 4 – paragraph 1 – last subparagraph
These statistics shall be disaggregated by age and sex and by the citizenship of the persons concerned, and by unaccompanied minors. They shall relate to reference periods of one calendar month and shall be supplied to the Commission (Eurostat) within two months of the end of the reference month. The first reference month shall be January 2020.
These statistics shall be disaggregated by age and gender and by the citizenship of the persons concerned, and by unaccompanied minors. They shall relate to reference periods of one calendar month and shall be supplied to the Commission (Eurostat) within two months of the end of the reference month. The first reference month shall be January 2020.
Amendment 47
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point b a (new)
Regulation (EC) No 862/2007
Article 4 – paragraph 2 – point a
(ba)  In paragraph 2, point (a) is replaced by the following:
(a)  persons covered by first instance decisions rejecting applications for international protection, such as decisions considering applications as inadmissible or as unfounded and decisions under priority and accelerated procedures, taken by administrative or judicial bodies during the reference period;
"(a) persons covered by first instance decisions rejecting applications for international protection taken by administrative or judicial bodies during the reference period, disaggregated as follows:
(i)  decisions considering applications to be inadmissible, further disaggregated by ground for inadmissibility;
(ii)  decisions rejecting applications as unfounded;
(iii)  decisions rejecting applications as manifestly unfounded under the regular procedure, further disaggregated by ground for rejection;
(iv)  decisions rejecting applications as manifestly unfounded under the accelerated procedure, further disaggregated by ground for acceleration and ground for rejection;
(v)  decisions rejecting applications on the ground that the applicant is eligible for protection within his or her country of origin in accordance with Article 8 of Directive 2011/95/EU; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 48
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point b b (new)
Regulation (EC) No 862/2007
Article 4 – paragraph 2 – point b
(bb)  In paragraph 2, point (b) is replaced by the following:
(b)  persons covered by first instance decisions granting or withdrawing refugee status, taken by administrative or judicial bodies during the reference period;
"(b) persons covered by first instance decisions, taken by administrative or judicial bodies during the reference period, granting, revoking, ending or refusing to renew refugee status based on cessation, exclusion or other grounds; decisions taken on cessation or exclusion shall be further disaggregated by the specific ground on which cessation or exclusion is based; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 49
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point b c (new)
Regulation (EC) No 862/2007
Article 4 – paragraph 2 – point c
(bc)  In paragraph 2, point (c) is replaced by the following:
(c)  persons covered by first instance decisions granting or withdrawing subsidiary protection status, taken by administrative or judicial bodies during the reference period;
"(c) persons covered by first instance decisions, taken by administrative or judicial bodies during the reference period, granting, revoking, ending or refusing to renew subsidiary protection status based on cessation, exclusion or other grounds; decisions taken on cessation or exclusion shall be further disaggregated by the specific ground on which cessation or exclusion is based; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 50
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point b d (new)
Regulation (EC) No 862/2007
Article 4 – paragraph 2 – point e a (new)
(bd)  In paragraph 2, the following point is added:
“(ea) persons covered by first instance decisions reducing or withdrawing material reception conditions, taken by administrative or judicial bodies during the reference period, disaggregated by type of decision, duration of reduction or withdrawal and by ground.”
Amendment 51
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point c
Regulation (EC) No 862/2007
Article 4 – paragraph 2 – last subparagraph
These statistics shall be disaggregated by age and sex and by the citizenship of the persons concerned, and by unaccompanied minors. They shall relate to reference periods of three calendar months and shall be supplied to the Commission (Eurostat) within two months of the end of the reference period. The first reference period shall be January-March 2020.
These statistics shall be disaggregated by age and gender, and by the citizenship of the persons concerned, and by unaccompanied minors. They shall relate to reference periods of three calendar months and shall be supplied to the Commission (Eurostat) within two months of the end of the reference period. The first reference period shall be January-March 2020.
These statistics shall be further disaggregated by decisions taken following a personal interview and decisions taken without a personal interview. Statistics on decisions taken following a personal interview shall be further disaggregated by personal interviews where the applicant received the services of an interpreter and personal interviews where the applicant did not receive the services of an interpreter.
Amendment 52
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point d a (new)
Regulation (EC) No 862/2007
Article 4 – paragraph 3 – point b
(da)  In paragraph 3, point (b) is replaced by the following:
(b)  persons covered by final decisions rejecting applications for international protection, such as decisions considering applications as inadmissible or as unfounded and decisions under priority and accelerated procedures, taken by administrative or judicial bodies in appeal or review during the reference period;
"(b) persons covered by final decisions rejecting applications for international protection taken by administrative or judicial bodies in appeal or review during the reference period, disaggregated as follows:
(i)  decisions considering applications to be inadmissible, further disaggregated by ground for inadmissibility;
(ii)  decisions rejecting applications as unfounded;
(iii)  decisions rejecting applications as manifestly unfounded under the regular procedure, further disaggregated by ground for rejection;
(iv)  decisions rejecting applications as manifestly unfounded under the accelerated procedure, further disaggregated by ground for acceleration and ground for rejection;
(v)  decisions rejecting applications on the ground that the applicant is eligible for protection within his or her country of origin in accordance with Article 8 of Directive 2011/95/EU; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 53
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point d b (new)
Regulation (EC) No 862/2007
Article 4 – paragraph 3 – point c
(db)  In paragraph 3, point (c) is replaced by the following:
(c)  persons covered by final decisions granting or withdrawing refugee status taken by administrative or judicial bodies in appeal or review during the reference period;
"(c) persons covered by final decisions, taken by administrative or judicial bodies during the reference period, granting, revoking, ending or refusing to renew refugee status based on cessation, exclusion or other grounds; decisions taken on cessation or exclusion shall be further disaggregated by the specific ground on which cessation or exclusion is based; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 54
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point d c (new)
Regulation (EC) No 862/2007
Article 4 – paragraph 3 – point d
(dc)  In paragraph 3, point (d) is replaced by the following:
(d)  persons covered by final decisions granting or withdrawing subsidiary protection status taken by administrative or judicial bodies in appeal or review during the reference period;
"(d) persons covered by final decisions, taken by administrative or judicial bodies during the reference period, granting, revoking, ending or refusing to renew subsidiary protection status based on cessation, exclusion or other grounds; decisions taken on cessation or exclusion shall be further disaggregated by the specific ground on which cessation or exclusion is based; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 55
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point d d (new)
Regulation (EC) No 862/2007
Article 4 – paragraph 3 – point g a (new)
(dd)  In paragraph 3, the following point is added:
“(ga) persons covered by final decisions reducing or withdrawing material reception conditions, taken by administrative or judicial bodies during the reference period, disaggregated by type of decision, duration of reduction or withdrawal and by ground.”
Amendment 56
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point e
Regulation (EC) No 862/2007
Article 4 – paragraph 3 – last subparagraph
Statistics under points (b), (c), (d), (e), (f) and (g) shall be disaggregated by age and sex and by the citizenship of the persons concerned, and by unaccompanied minors. In addition, for point (g), statistics shall be disaggregated by the country of residence and by the type of asylum decision. They shall relate to reference periods of one calendar year and shall be supplied to the Commission (Eurostat) within three months of the end of the reference year. The first reference year shall be 2020.
Statistics under points (b), (c), (d), (e), (f) and (g) shall be disaggregated by age and gender and by the citizenship of the persons concerned, and by unaccompanied minors. In addition, for point (g), statistics shall be disaggregated by the country of residence and by the type of asylum decision. They shall relate to reference periods of one calendar year and shall be supplied to the Commission (Eurostat) within three months of the end of the reference year. The first reference year shall be 2020.
Amendment 57
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point e a (new)
Regulation (EC) No 862/2007
Article 4 – paragraph 3 a (new)
(ea)  The following paragraph is inserted:
“3a. Member States shall supply to the Commission (Eurostat) statistics on the duration of appeals, in calendar days, from the time that the appeal is lodged until the time that there is a first instance decision on the appeal.”
Amendment 58
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point e
Regulation (EC) No 862/2007
Article 4 – paragraph 4 – last subparagraph
These statistics shall relate to reference periods of one calendar year and shall be supplied to the Commission (Eurostat) within three months of the end of the reference year. The first reference year shall be 2020.
These statistics shall be disaggregated by age and gender, and by the citizenship of the persons concerned, and by unaccompanied minors. These statistics shall relate to reference periods of one calendar month and shall be supplied to the Commission (Eurostat) within three months of the end of the reference year. The first reference period shall be January 2020.
Amendment 59
Proposal for a regulation
Article 1 – paragraph 1 – point 1 – point h a (new)
Regulation (EC) No 862/2007
Article 4 – paragraph 4 (new)
(ha)  The following paragraph is added:
“4a. The statistics referred to in paragraphs 1 to 4 shall be disaggregated by month of submission of the application.”
Amendment 60
Proposal for a regulation
Article 1 – paragraph 1 – point 1 a (new) – point a (new)
Regulation (EC) No 862/2007
Article 5 – title
(1 a)  Article 5 is amended as follows:
(a)  The title is replaced by the following:
Statistics on the prevention of illegal entry and stay
"Statistics on the prevention of irregular entry and stay"
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 61
Proposal for a regulation
Article 1 – paragraph 1 – point 1 a (new) – point b (new)
Regulation (EC) No 862/2007
Article 5 – paragraph 1 – point a
(b)  In paragraph 1, point (a) is replaced by the following:
(a)  third-country nationals refused entry to the Member State’s territory at the external border;
“(a) third-country nationals refused entry to the Member State's territory at the external border, disaggregated by age, gender and citizenship; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 62
Proposal for a regulation
Article 1 – paragraph 1 – point 1 a (new) – point c (new)
Regulation (EC) No 862/2007
Article 5 – paragraph 1 – point b
(c)  In paragraph 1, point (b) is replaced by the following:
(b)  third-country nationals found to be illegally present in the Member State's territory under national laws relating to immigration.
(b) third-country nationals found to be irregularly present in the Member State's territory under national laws relating to immigration.
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 63
Proposal for a regulation
Article 1 – paragraph 1 – point 1 a (new) – point d (new)
Regulation (EC) No 862/2007
Article 5 – paragraph 1 – subparagraph 3
(b)  The third subparagraph of paragraph 1 is replaced by the following:
The statistics under point (b) shall be disaggregated by age and sex, and by citizenship of the persons concerned.
“The statistics under point (b) shall be disaggregated by age and gender, citizenship of the persons concerned, grounds for their apprehension and place of apprehension.”
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 64
Proposal for a regulation
Article 1 – paragraph 1 – point 2 – point a
Regulation (EC) No 862/2007
Article 6 – paragraph 1 – point -a (new)
(-a)  the number of applications for first-time residence permits made by third-country nationals, disaggregated by citizenship, by the reason for the permit being requested, by age and by gender;
Amendment 65
Proposal for a regulation
Article 1 – paragraph 1 – point 2 – point a
Regulation (EC) No 862/2007
Article 6 – paragraph 1 – point -a a (new)
(-aa)  the number of rejected applications for first-time residence permits made by third-country nationals, disaggregated by citizenship, by the reason for which the permit was requested, by age and by gender;
Amendment 66
Proposal for a regulation
Article 1 – paragraph 1 – point 2 – point a
Regulation (EC) No 862/2007
Article 6 – paragraph 1 – point -a b (new)
(-ab)  the number of applications for a residence permit changing immigration status or reason for stay refused during the reference period, disaggregated by citizenship, by the reason for the permit being refused, by age and by gender;
Amendment 67
Proposal for a regulation
Article 1 – paragraph 1 – point 2 – point a
Regulation (EC) No 862/2007
Article 6 – paragraph 1 – point a – point i
(i)  permits issued during the reference period whereby the person is being granted permission to reside for the first time, disaggregated by citizenship, by the reason for the permit being issued, by the length of validity of the permit, by age and by sex;
(i)  permits issued during the reference period whereby the person is being granted permission to reside for the first time, disaggregated by citizenship, by the reason for the permit being issued, by the length of validity of the permit, by age and by gender;
Amendment 68
Proposal for a regulation
Article 1 – paragraph 1 – point 2 – point a
Regulation (EC) No 862/2007
Article 6 – paragraph 1 – point a – point ii
(ii)  permits issued during the reference period and granted on the occasion of a person changing immigration status or reason for stay, disaggregated by citizenship, by the reason for the permit being issued, by the length of validity of the permit, by age and by sex;
(ii)  permits issued during the reference period and granted on the occasion of a person changing immigration status or reason for stay, disaggregated by citizenship, by the reason for the permit being issued, by the length of validity of the permit, by age and by gender;
Amendment 69
Proposal for a regulation
Article 1 – paragraph 1 – point 2 – point a
Regulation (EC) No 862/2007
Article 6 – paragraph 1 – point a – point iii
(iii)  valid permits at the end of the reference period (number of permits issued, not withdrawn and not expired), disaggregated by citizenship, by the reason for the issue of the permit, by the length of validity of the permit, by age and by sex;
(iii)  valid permits at the end of the reference period (number of permits issued, not withdrawn and not expired), disaggregated by citizenship, by the reason for the issue of the permit, by the length of validity of the permit, by age and by gender;
Amendment 70
Proposal for a regulation
Article 1 – paragraph 1 – point 2 – point a
Regulation (EC) No 862/2007
Article 6 – paragraph 1 – point b
(b)  the number of long-term residents at the end of the reference period, disaggregated by citizenship, by type of long-term status, by age and by sex.
(b)  the number of long-term residents at the end of the reference period, disaggregated by citizenship, by type of long-term status, by age and by gender.
Amendment 71
Proposal for a regulation
Article 1 – paragraph 1 – point 2 – point a
Regulation (EC) No 862/2007
Article 6 – paragraph 1 – subparagraph 1 a (new)
For statistics under points (-a), (-aa) and (a), permits issued for family reasons shall be further disaggregated by reason and by status of the sponsor of the third-country national.
Amendment 72
Proposal for a regulation
Article 1 – paragraph 1 – point 3 – point -a (new)
Regulation (EC) No 862/2007
Article 7 – paragraph 1 – point a
(-a)  In paragraph 1, point (a) is replaced by the following:
(a)  the number of third-country nationals found to be illegally present in the territory of the Member State who are subject to an administrative or judicial decision or act stating or declaring that their stay is illegal and imposing an obligation to leave the territory of the Member State, disaggregated by citizenship of the persons concerned;
"(a) the number of third-country nationals found to be in an irregular situation in the territory of the Member State who are subject to an administrative or judicial decision or act stating or declaring that their stay is irregular and imposing an obligation to leave the territory of the Member State, disaggregated by citizenship of the persons concerned and the reasons for the decision; "
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 73
Proposal for a regulation
Article 1 – paragraph 1 – point 3 – point -a a (new)
Regulation (EC) No 862/2007
Article 7 – paragraph 1 – point a a (new)
(-aa)  In paragraph 1, the following is inserted:
“(aa) the number of third-country nationals referred to in point (a) of this paragraph who were subject to an administrative or judicial entry-ban decision or act as referred to in Article 11 of Directive 2008/115/EC at the end of the reference period, disaggregated by citizenship of the persons concerned;”
Amendment 74
Proposal for a regulation
Article 1 – paragraph 1 – point 3 – point -a b (new)
Regulation (EC) No 862/2007
Article 7 – paragraph 1 – point a b (new)
(-ab)  In paragraph 1, the following point is inserted:
“(ab) the number of third-country nationals who were subject to an administrative or judicial decision or act ordering their detention in accordance with Directive 2008/115/EC of the European Parliament and of the Council*, during the reference period;”
Amendment 75
Proposal for a regulation
Article 1 – paragraph 1 – point 3 – point -a c (new)
Regulation (EC) No 862/2007
Article 7 – paragraph 1 – point a c (new)
(-ac)  In paragraph 1, the following point is inserted:
“(ac) the number of third-country nationals who were subject to an administrative or judicial decision or act ordering their detention in accordance with Directive 2008/115/EC at the end of the reference period, disaggregated by the month those third-country nationals were placed in detention;”
Amendment 76
Proposal for a regulation
Article 1 – paragraph 1 – point 3 – point -a d (new)
Regulation (EC) No 862/2007
Article 7 – paragraph 1 – point a d (new)
(-ad)  In paragraph 1 the following point is inserted:
“(ad) the number of third-country nationals who were subject to an administrative or judicial decision or act ordering an alternative to detention in accordance with Directive 2008/115/EC during the reference period, disaggregated by type of alternative as follows:
(i)  reporting;
(ii)  deposit of a financial guarantee;
(iii)  obligation to stay at an assigned place;
(iv)  other type of alternative to detention;”
Amendment 77
Proposal for a regulation
Article 1 – paragraph 1 – point 3 – point -a e (new)
Regulation (EC) No 862/2007
Article 7 – paragraph 1 – point a e (new)
(-ae)  In paragraph 1, the following point is inserted:
“(ae) the number of third-country nationals who were subject to an administrative or judicial decision or act ordering an alternative to detention in accordance with Directive 2008/115/EC at the end of the reference period, disaggregated by the month the administrative or judicial decision or act was issued against those persons, and further disaggregated by type of alternative as follows:
(i)  reporting;
(ii)  deposit of a financial guarantee;
(iii)  obligation to stay at an assigned place;
(iv)  other type of alternative to detention;”
Amendment 78
Proposal for a regulation
Article 1 – paragraph 1 – point 3 – point -a f (new)
Regulation (EC) No 862/2007
Article 7 – paragraph 1 – point a f (new)
(-af)  In paragraph 1, the following point is inserted:
“(af) the number of third-country nationals having been subject to a postponement of removal in accordance with Article 9 of Directive 2008/115/EC during the reference period, disaggregated by ground for postponement and citizenship of the persons concerned;”
Amendment 79
Proposal for a regulation
Article 1 – paragraph 1 – point 3 – point -a g (new)
Regulation (EC) No 862/2007
Article 7 – paragraph 1 – point a g (new)
(-ag)  In paragraph 1, the following is inserted:
“(ag) the number of third-country nationals having been subject to an administrative or judicial decision or act ordering their detention and having taken judicial review proceedings as referred to in Article 15(2) of Directive 2008/115/EC during the reference period;”
Amendment 80
Proposal for a regulation
Article 1 – paragraph 1 – point 3 – point a
Regulation (EC) No 862/2007
Article 7 – paragraph 1 – point b
(b)  the number of third-country nationals who have in fact left the territory of the Member State, following an administrative or judicial decision or act, as referred to in point (a), disaggregated by the citizenship of the persons returned, by the type of return and assistance received, and by the destination country.
(b)  the number of third-country nationals who have in fact left the territory of the Member State, following an administrative or judicial decision or act, as referred to in point (a), disaggregated by the citizenship of the persons returned, by the type of return and assistance received, and by the destination country further disaggregated by returns to the country of origin of the third-country national;.
Amendment 81
Proposal for a regulation
Article 1 – paragraph 1 – point 3 – point a a (new)
Regulation (EC) No 862/2007
Article 7 – paragraph 1 – point b a (new)
(aa)  In paragraph 1, the following point is added:
“(ba) the number of third-country nationals who have left the territory of the Member State following an administrative or judicial decision or act, disaggregated by the type of decision or act as follows:
(i)  in accordance with a formal Union readmission agreement;
(ii)  in accordance with an informal Union readmission arrangement;
(iii)  in accordance with a national readmission agreement;
These statistics shall be further disaggregated by country of destination and the nationality of the person concerned.”
Amendment 82
Proposal for a regulation
Article 1 – paragraph 1 – point 3 – point b
Regulation (EC) No 862/2007
Article 7 – paragraph 2
2.  The statistics referred to in paragraph 1 shall relate to reference periods of three calendar months and shall be supplied to the Commission (Eurostat) within two months of the end of the reference period. The first reference period shall be January to March 2020.
2.  The statistics referred to in paragraph 1 shall be disaggregated by age and gender of the person concerned, and by unaccompanied minors. They shall relate to reference periods of one calendar month and shall be supplied to the Commission (Eurostat) within two weeks of the end of the reference period. The first reference period shall be January 2020.
Amendment 83
Proposal for a regulation
Article 1 – paragraph 1 – point 4 a (new)
Regulation (EC) No 862/2007
Article 9 – paragraph 2
(4a)  In Article 9, paragraph 2 is replaced by the following:
2.  Member States shall report to the Commission (Eurostat) on the data sources used, the reasons for the selection of these sources and the effects of the selected data sources on the quality of the statistics, and on the estimation methods used, and shall keep the Commission (Eurostat) informed of changes thereto.
"2. Member States shall report to the Commission (Eurostat) on the data sources used, the reasons for the selection of these sources and the effects of the selected data sources on the quality of the statistics, the mechanisms used to ensure protection of personal data and on the estimation methods used, and shall keep the Commission (Eurostat) informed of changes thereto."
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 84
Proposal for a regulation
Article 1 – paragraph 1 – point 4 b (new)
Regulation (EC) No 862/2007
Article 9 a (new)
(4b)  The following article is inserted:
“Article 9a
Delegated acts
The Commission is empowered to adopt delegated acts in accordance with Article 10a amending the definitions set out in Article 2(1).
The Commission is empowered to adopt delegated acts in accordance with Article 10a amending this Regulation by:
(a)  defining the categories of groups of country of birth, groups of country of previous and next usual residence and groups of citizenship as provided for in Article 3(1);
(b)  defining the categories of the reasons for the issuance of residence permits as provided for in Article 6(1)(a);
(c)  defining additional disaggregations;
(d)  laying down the rules on accuracy and quality standards.”
Amendment 85
Proposal for a regulation
Article 1 – paragraph 1 – point 5 – point a
Regulation (EC) No 862/2007
Article 10 – paragraph 1
The Commission shall be empowered to adopt implementing acts for the purpose of specifying disaggregations in line with Articles 4, 5, 6 and 7 and laying down the rules on the appropriate formats for the transmission of data as provided for in Article 9.
The Commission shall adopt implementing acts laying down the rules on the appropriate formats for the transmission of data as provided for in Article 9. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 11(2).
Amendment 86
Proposal for a regulation
Article 1 – paragraph 1 – point 5 – point b
Regulation (EC) No 862/2007
Article 10 – paragraph 2 – point d
(b)  In paragraph 2, point (d) is deleted.
(b)   Paragraph 2 is deleted.
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 87
Proposal for a regulation
Article 1 – paragraph 1 – point 5 a (new)
Regulation (EC) No 862/2007
Article 10 a (new)
(5a)  The following article is inserted:
“Article 10a
Exercise of the delegation
1.  The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.
2.  The power to adopt delegated acts referred to in Article 9a shall be conferred on the Commission for an indeterminate period of time from ... [date of entry into force of this amending Regulation].
3.  The delegation of power referred to in Article 9a may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.
4.  Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making.
5.  As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.
6.  A delegated act adopted pursuant to Article 9a shall enter into force only if no objection has been expressed either by the European Parliament or by the Council within a period of two months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council.”
Amendment 88
Proposal for a regulation
Article 1 – paragraph 1 – point 5 b (new) – point a (new)
Regulation (EC) No 862/2007
Article 11 – title
(5b)  Article 11 is amended as follows:
(a)  The title is replaced by the following:
Committee
“Committee procedure”
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 89
Proposal for a regulation
Article 1 – paragraph 1 – point 5 b (new) – point b (new)
Regulation (EC) No 862/2007
Article 11 – paragraph 1
(b)  paragraph 1 is replaced by the following:
1.  In adopting the implementing measures, the Commission shall be assisted by the Statistical Programme Committee, established by Decision 89/382/EEC, Euratom.
“1. The Commission shall be assisted by the European Statistical System Committee, established by Regulation (EC) No 223/2009. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.”
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 90
Proposal for a regulation
Article 1 – paragraph 1 – point 5 b (new) – point c (new)
Regulation (EC) No 862/2007
Article 11 – paragraph 2
(c)  paragraph 2 is replaced by the following:
2.  Where reference is made to this paragraph, Article 5 and Article 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof.
“2. Where reference is made to this paragraph, Article 5 and Article 10 of Regulation (EU) No 182/2011 shall apply, having regard to the provisions of Article 11 thereof.”
The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months.
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)
Amendment 91
Proposal for a regulation
Article 1 – paragraph 1 – point 5 b – point d (new)
Regulation (EC) No 862/2007
Article 11 – paragraph 3
(d)  paragraph 3 is deleted.
(https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32007R0862&from=EN)

EU Accession to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications ***
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European Parliament legislative resolution of 16 April 2019 on the draft Council decision on the accession of the European Union to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications (06929/2019 – C8-0133/2019 – 2018/0214(NLE))
P8_TA-PROV(2019)0360A8-0187/2019

(Consent)

The European Parliament,

–  having regard to the draft Council decision (06929/2019),

–  having regard to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications signed in Geneva on 20 May 2015 (11510/2018),

–  having regard to the request for consent submitted by the Council in accordance with Article 207 and Article 218(6), second subparagraph, point (a), of the Treaty on the Functioning of the European Union (C8‑0133/2019),

–  having regard to Rule 99(1) and (4) and Rule 108(7) of its Rules of Procedure,

–  having regard to the recommendation of the Committee on Legal Affairs and the opinions of the Committee on International Trade and the Committee on the Environment, Public Health and Food Safety (A8-0187/2019),

1.  Gives its consent to the accession of the European Union to the Act;

2.  Instructs its President to forward its position to the Council, the Commission and the governments and parliaments of the Member States.


Action of the Union following its accession to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications ***I
PDF 223kWORD 64k
Resolution
Consolidated text
European Parliament legislative resolution of 16 April 2019 on the proposal for a regulation of the European Parliament and of the Council on the action of the Union following its accession to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications (COM(2018)0365 – C8-0383/2018 – 2018/0189(COD))
P8_TA-PROV(2019)0361A8-0036/2019

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0365),

–  having regard to Article 294(2) and Article 207 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0383/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 12 December 2018(1),

–  having regard to the provisional agreement approved by the committee responsible under Rule 69f(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 20 March 2019 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Legal Affairs and the opinions of the Committee on International Trade, the Committee on the Environment, Public Health and Food Safety and the Committee on Agriculture and Rural Development (A8-0036/2019),

1.  Adopts its position at first reading hereinafter set out;

2.  Takes note of the three statements by the Commission annexed to this resolution, the first and second of which will be published in the L series of the Official Journal of the European Union together with the final legislative act;

3.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

4.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 16 April 2019 with a view to the adoption of Regulation (EU) 2019/… of the European Parliament and of the Council on the action of the Union following its accession to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications*

P8_TC1-COD(2018)0189


THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 207 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee(2),

Acting in accordance with the ordinary legislative procedure(3),

Whereas:

(1)  In order for the Union to be fully able to exercise its exclusive competence in relation to its common commercial policy, and in full compliance with its commitments under the Agreement on the Trade-Related Aspects of Intellectual Property Rights (TRIPS) of the World Trade Organization, it will become a contracting party to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications ('the Geneva Act')(4) pursuant to Council Decision (EU) …/…(5) , whilst authorising Member States to also ratify or accede in the interest of the Union. The contracting parties to the Geneva Act are members of a Special Union created by the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration(6) ('Special Union'). In accordance with Article 4 of Decision (EU)…/…, the Union and those Member States having ratified or acceded are to be represented by the Commission in the Special Union as regards the Geneva Act.

(2)  It is appropriate to establish rules allowing the Union to ▌exercise the rights and to fulfil the obligations under the Geneva Act of the Union and those Member States which ratify or accede.

(3)  The Geneva Act protects appellations of origin, including “designations of origin” , and geographical indications, as defined by Regulations (EC) No 110/2008(7), (EU) No 1151/2012(8), (EU) No 1308/2013(9) and (EU) No 251/2014(10) of the European Parliament and of the Council ▌, which are henceforth both referred to as 'geographical indications'.

(4)  Following the accession of the Union to the Geneva Act and subsequently, on a regular basis, the Commission should ▌file with the International Bureau of the World Intellectual Property Organization ('the International Bureau') applications for the international registration of ▌geographical indications originating and protected in the territory of the Union in its register (‘the International Register’). These applications should be based on notifications from Member States acting on their own initiative or on request by a natural person or legal entity as referred to in point (ii) of Article 5(2) of the Geneva Act or by a beneficiary as defined in point (xvii) of Article 1 of the Geneva Act. When establishing these notifications, Member States should consider the economic interest in international protection of the geographical indications concerned and take into account in particular the production value and export value, protection under other agreements as well as current or potential misuse in the third countries concerned.

(5)  The addition of geographical indications to the International Register should serve the purposes of providing quality products, fair competition and consumer protection. While having a significant cultural and economic value, the addition of geographical indications should be assessed with respect to the value created for local communities, with a view to supporting rural development and promoting new job opportunities in production, processing and other related services.

(6)  The Commission should use existing regular mechanisms to consult Member States, trade associations and Union producers in order to establish an ongoing dialogue with relevant stakeholders.

(7)  Appropriate procedures should be established in order for the Commission to assess geographical indications originating in the contracting parties to the Geneva Act which are not Member States ('third Contracting Parties') and registered in the International Register, in order to provide for a procedure to decide on protection in the Union and to invalidate such protection, where relevant.

(8)  Enforcement by the Union of the protection of geographical indications originating in third Contracting Parties and registered in the International Register should be done in accordance with Chapter III of the Geneva Act, in particular with Article 14 of the Geneva Act, which requires each Contracting Party to make available effective legal remedies for the protection of registered geographical indications and provide that legal proceedings for ensuring their protection may be brought by a public authority or by any interested party, whether a natural person or a legal entity and whether public or private, depending on its legal system and practice. With a view to ensuring the protection of national, regional and Union trade marks alongside geographical indications, having regard to the safeguard in respect of prior trade mark rights as set out in Article 13(1) of the Geneva Act, coexistence of prior trade marks and geographical indications registered in the International Register which are granted protection or used in the Union should be safeguarded.

(9)  Given the exclusive competence of the Union, Member States which are not already contracting parties to the Lisbon Agreement of 1958 as revised at Stockholm on July 14, 1967 and amended on September 28, 1979 (“the Lisbon Agreement”), should not ratify or accede to that Agreement.

(10)  Member States which already are contracting parties to the Lisbon Agreement may remain as such, in particular to ensure the continuity of rights granted and the fulfilment of obligations under that Agreement. However, they should act solely in the interest of the Union and in full respect of the exclusive competence of the Union. Those Member States should therefore exercise their rights and obligations under the Lisbon Agreement in full compliance with the authorisation granted by the Union pursuant to the rules provided for in this Regulation. In order to respect the uniform protection system for geographical indications established in the Union as regards agricultural products and in order to further enhance the harmonisation within the Single Market, they should not register under the Lisbon Agreement any new appellations of origin for products falling within the scope of Regulation (EC) No 110/2008, Regulation (EU) No 1151/2012, Regulation (EU) No 1308/2013 or Regulation (EU) No 251/2014.

(11)  Those Member States have registered appellations of origin under the Lisbon Agreement. Transitional arrangements should be provided for continued protection subject to the requirements of that Agreement, the Geneva Act and the Union acquis.

(12)  Those Member States accepted the protection of appellations of origin of third contracting parties. In order to provide for them the means to fulfil their international obligations assumed before the accession of the Union to the Geneva Act, a transitional arrangement should be provided which should produce effects at national level only, and have no effect on intra-Union or international trade.

(13)  It appears equitable that the fees to be paid under the Geneva Act and the Common Regulations under the Lisbon Agreement and the Geneva Act for filing an application with the International Bureau for the international registration of a geographical indication as well as the fees to be paid in respect of other entries in the International Register and for the supply of extracts, attestations, or other information concerning the contents of that international registration should be borne by the Member State in which the geographical indication originates, by a natural person or legal entity as referred to in point (ii) of Article 5(2) of the Geneva Act or by a beneficiary as defined in point (xvii) of Article 1 of the Geneva Act. Member States should have the option to require that natural person, legal entity or beneficiary to pay some or all of the fees.

(14)  In order to defray any shortfall in relation to the operating budget of the Special Union, the Union should be able to provide, within the means available for this purpose in the annual budget of the Union, for a special contribution as decided by the Assembly of the Special Union pursuant to Article 24(4) of the Geneva Act, given the economic and cultural value of geographical indications protection.

(15)  In order to ensure uniform conditions for the implementation of the Union membership in the Special Union, implementing powers should be conferred on the Commission to establish a list of geographical indications for the filing of an application for their international registration with the International Bureau upon accession to the Geneva Act, for the subsequent filing of an application for international registration of a geographical indication with the International Bureau, for rejecting an opposition, for a decision on whether or not to grant protection of a geographical indication registered in the International Register, for the withdrawal of refusal of the effects of an international registration, for requesting the cancellation of an international registration, for notifying the invalidation of the protection in the Union of a geographical indication registered in the International Register, and for authorising the Member State to provide for any necessary modifications and notify the International Bureau in respect of the appellation of origin for a product which is protected under one of the Regulations referred to in Article 1 of this Regulation. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council(11).

(16)  It is important to ensure that the Commission monitors and evaluates the participation of the Union in that Act over time. In order to conduct such an evaluation, the Commission should, inter alia, take into account: the number of geographical indications protected and registered under Union law for which applications for international registration have been submitted, and cases where protection has been rejected by third contracting parties, the evolution of the number of third countries participating in the Geneva Act, the action taken by the Commission to increase that number, as well as the impact of the current state of the EU acquis as regards geographical indications on the attractiveness of the Geneva Act to third countries, and the number and type of geographical indications originating from contracting Parties of third countries and which have been rejected by the Union,

HAVE ADOPTED THIS REGULATION:

Article 1

Subject matter

This Regulation establishes rules and procedures concerning actions of the Union following its accession to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications (‘the Geneva Act’).

For the purpose of this Regulation, appellations of origin, including “designations of origin”, and “geographical indications”, as defined in Regulation (EC) No 110/2008, Regulation (EU) No 1151/2012, Regulation (EU) No 1308/2013 and Regulation (EU) No 251/2014, are henceforth both referred to as 'geographical indications'.

Article 2

International registration of geographical indications ▌

1.  Following the accession of the Union to the Geneva Act and subsequently, on a regular basis, the Commission as Competent Authority shall file with the International Bureau of the World Intellectual Property Organization ('the International Bureau') applications for the international registration of geographical indications protected and registered under Union law and pertaining to products originating in the Union pursuant to Article 5(1) and (2) of the Geneva Act.

2.  To this end, Member States may request the Commission to register geographical indications originating in their territory, protected and registered under Union law, in the International Register. Such request may be based on:

(a)  a request by a natural person or legal entity as referred to in point (ii) of Article 5(2) of the Geneva Act or by a beneficiary as defined in point (xvii) of Article 1 of the Geneva Act, or

(b)  their own initiative.

3.  On the basis of these requests, the Commission shall adopt implementing acts listing the ▌ geographical indications referred to in ▌ paragraph 1 of this Article, in accordance with the examination procedure referred to in Article 15(2).

Article 3

Cancellation of a geographical indication originating in a Member State of the Union registered in the International Register

1.  The Commission shall adopt an implementing act requesting the cancellation of a registration in the International Register of a geographical indication originating in a Member State of the Union:

(a)  if that geographical indication is no longer protected in the Union or

(b)  at the request of the Member State in which the geographical indication originates, which may be based on:

(i)  a request by a natural person or legal entity as referred to in point(ii) of Article 5(2) of the Geneva Act or by a beneficiary as defined in point (xvii) of Article 1 of the Geneva Act, or

(ii)  its own initiative.

2.  The implementing act referred to in paragraph 1 of this Article shall be adopted in accordance with the examination procedure referred to in Article 15(2).

3.  The Commission shall notify the International Bureau without delay of the request for cancellation.

Article 4

Publication of third country geographical indications registered in the International Register

1.  The Commission shall publish any international registration notified by the International Bureau pursuant to Article 6(4) of the Geneva Act concerning the geographical indications registered in the International Register and in respect of which the Contracting Party of Origin, as defined under point (xv) of Article 1of the Geneva Act, is not a Member State, provided that the publication relates to a product in respect of which protection at Union level of geographical indications is provided.

2.  The publication of the international registration shall be made in the Official Journal of the European Union, C series, and shall include the product type and country of origin.

Article 5

Assessment of third country geographical indications registered in the International Register

1.   The Commission shall publish any international registration notified by the International Bureau pursuant to Article 6(4) of the Geneva Act concerning the geographical indications registered in the International Register and in respect of which the Contracting Party of Origin, as defined under point (xv) of Article 1 ▌ of the Geneva Act, is not a Member State, in order to determine whether it contains the mandatory elements laid down in Rule 5(2) of the Common Regulations under the Lisbon Agreement and the Geneva Act (the 'Common Regulations')(12), and the particulars concerning the quality, reputation or characteristics as laid down in Rule 5(3) of the Common Regulations, as well as to assess whether the publication relates to a product in respect of which protection at Union level of geographical indications is ▌provided.

2.  The period for carrying out such assessment shall not exceed four months from the date of the registration of the geographical indication in the International Register and shall not include assessment of other specific Union provisions relating to the placing of products on the market and, in particular, to sanitary and phytosanitary standards, the marketing standards, and to food labelling.

Article 6

Opposition procedure for third country geographical indications registered in the International Register

1.   Within four months from the date of publication of the name of the geographical indication in the Official Journal of the European Union in accordance with Article 4, the authorities of a Member State or of a third country other than the Contracting Party of Origin, or a natural or legal person having a legitimate interest and established in the Union or in a third country other than the Contracting Party of Origin may lodge an opposition with the Commission, in one of the official languages of the Union.

2.   Such opposition, relating to a geographical indication published in the Official Journal of the European Union in accordance with Article 4, shall be admissible only if it is lodged within the time limit set out in paragraph 1 of this Article and if it contains one or more of the following grounds:

(a)  that the geographical indication registered in the International Register conflicts with a name of a plant variety or an animal breed and is likely to mislead the consumer as to the true origin of the product;

(b)  that the geographical indication registered in the International Register is wholly or partially homonymous with a geographical indication already protected in the Union and that there is no sufficient distinction in practice between the conditions of local and traditional usage and presentation of the geographical indication proposed for protection and the geographical indication already protected in the Union, taking into account the need to ensure equitable treatment of the producers concerned and not to mislead consumers;

(c)  that the protection in the Union of the geographical indication registered in the International Register would infringe a prior trade mark right at national, regional, or Union level;

(d)  that the protection in the Union of the geographical indication proposed would jeopardise the use of an entirely or partly identical name or the exclusive nature of a trade mark at national, regional, or Union level or the existence of products which have been legally placed on the market for at least five years preceding the date of the publication of the name of the geographical indication in the Official Journal of the European Union in accordance with Article 4;

(e)  that the geographical indication registered in the International Register relates to a product in respect of which protection at Union level of geographical indications is ▌ not provided;

(f)  that the name for which registration is requested is a generic term in the territory of the Union;

(g)  that the conditions referred to in points (i) and (ii) of Article 2(1) of the Geneva Act are not complied with;

(h)  that the geographical indication registered in the International Register is a homonymous name which misleads the consumer into believing that products come from another territory, even if the name is accurate as far as the actual territory, region or place of origin of the products in question is concerned.

3.   The grounds for opposition as set out in paragraph 2 shall be assessed by the Commission in relation to the territory of the Union or part thereof.

Article 7

Decision on protection in the Union of third country geographical indications registered in the International Register

1.  Where, based on the assessment carried out pursuant to Article 5(1), the conditions laid down in that paragraph are fulfilled and no opposition or oppositions which are inadmissible have been received, the Commission shall, as appropriate, reject the inadmissible oppositions received and take a decision to grant protection of the geographical indication by means of an implementing act adopted in accordance with the examination procedure referred to in Article 15(2).

2.  Where, based on the assessment carried out pursuant to Article 5(1), the conditions laid down in that paragraph are not fulfilled or an admissible opposition as set out in Article 6(2) has been received, the Commission shall take a decision on whether or not to grant protection of a geographical indication registered in the International Register by means of an implementing act which shall be adopted in accordance with the examination procedure referred to in Article 15(2). In respect of geographical indications covering products not falling within the competence of the Committees provided in Article 15(1) the decision will be adopted by the Commission ▌.

3.   The decision to grant protection of a geographical indication in accordance with paragraph 1 or 2 of this Article shall set out the scope of protection granted and may include conditions which are compatible with the Geneva Act, and in particular grant a defined transitional period as specified in Article 17 of the Geneva Act and Rule 14 of the Common Regulations.

4.   In accordance with Article 15(1) of the Geneva Act, the Commission shall notify the International Bureau of the refusal of the effects of the international registration concerned in the territory of the Union, within one year from the receipt of the notification of international registration in accordance with Article 6(4) of the Geneva Act, or within two years in cases referred to in the first paragraph of Article 5 of Council Decision (EU) .…/…(13)(14).

5.  The Commission may, on its own initiative or following a duly substantiated request by a Member State, a third country or a natural or legal person having a legitimate interest, adopt in accordance with the examination procedure referred to in Article 15(2) an implementing act withdrawing, in whole or in part, a refusal previously notified to the International Bureau. The Commission shall notify the International Bureau of such withdrawal without delay.

Article 8

Use of geographical indications

1.   The implementing acts adopted by the Commission on the basis of Article 7 shall apply without prejudice to other specific Union provisions relating to the placing of products on the market and, in particular, to the common organisation of the agricultural markets, sanitary and phytosanitary standards, and to food labelling. ▌

2.   Subject to paragraph 1 geographical indications protected under this Regulation may be used by any operator marketing a product in accordance with the international registration.

Article 9

Invalidation of effects in the Union of a third country geographical indication registered in the International Register

1.  The Commission may, on its own initiative or following a duly substantiated request by a Member State, a third country or a natural or legal person having a legitimate interest, adopt implementing acts invalidating, in whole or in part, the effects of protection in the Union of a geographical indication registered in the International Register in one or more of the following circumstances:

(a)  the geographical indication, is no longer protected in the Contracting Party of Origin;

(b)  the geographical indication is no longer registered in the International Register;

(c)  where compliance with the mandatory elements laid down in Rule 5(2) of the Common Regulations or with the particulars concerning the quality, reputation or characteristics as laid down in Rule 5(3) of the Common Regulations are no longer ensured.

2.  The implementing acts referred to in ▌paragraph 1 of this Article shall be adopted in accordance with the examination procedure referred to in Article 15(2), and only after the natural persons or legal entities referred to in point (ii) of Article 5(2) of the Geneva Act or the beneficiaries, as defined in point (xvii) of Article 1 of the Geneva Act have been given an opportunity to defend their rights.

3.  Provided the invalidation is no longer subject to appeal, the Commission shall notify the International Bureau without delay of the invalidation of the effects in the territory of the Union of the international registration of the geographical indication ▌in accordance with point (a) or (c) of paragraph 1.

Article 10

Relation to trade marks

1.   The protection of a geographical indication shall not prejudice the validity of a prior trade mark at national, regional, or Union level applied for or registered in good faith, or acquired through use in good faith in the territory of a Member State, regional union of Member States or the Union.

2.   A geographical indication registered in the International Register shall not be protected in the territory of the Union where in the light of a trade mark's reputation and renown and the length of time it has been used, protection of the said geographical indication in the territory of the Union would be liable to mislead the consumer as to the true identity of the product.

3.   Without prejudice to paragraph 2, a ▌trade mark which has been applied for, registered or established by use, if that possibility is provided for by the legislation concerned, in good faith within the territory of a Member State, regional union of Member States, or the Union, before the date on which the International Bureau has notified the Commission of the publication of the International Registration of the geographical indication, the use of which would contravene the protection of the geographical indication, may continue to be used and renewed for the product concerned notwithstanding the protection of the geographical indication, provided that no grounds for invalidity or revocation exist under Regulation (EU) 2017/1001 of the European Parliament and of the Council(15) or under Directive (EU) 2015/2436 of the European Parliament and the Council(16). In such cases the use of the geographical indication shall be permitted as well as use of the trade mark concerned.

Article 11

Transitional provisions for appellations of origin originating in EU Member States already registered under the Lisbon Agreement

1.  In respect of each appellation of origin for a product, which is protected under one of the Regulations referred to in Article 1 of this Regulation, originating in a Member State, which is a contracting party to the Lisbon Agreement the Member State concerned shall choose to:

(a)  request the international registration of that appellation of origin under the Geneva Act, if the Member State concerned has ratified or acceded to the Geneva Act pursuant to the authorisation in Article 3 of Decision (EU) .…/…. (17), or

(b)  request the cancellation of the registration of that appellation of origin in the International Register.

The Member States concerned shall choose on the basis of:

(a)  a request by a natural person or legal entity referred to in point (ii) of Article 5(2) of the Geneva Act or a beneficiary as defined in point (xvii) of Article 1 of the Geneva Act, or

(b)  their own initiative.

The Member States concerned shall notify the Commission of the choice referred to in the first subparagraph within three years from the date of the entry into force of this Regulation.

In cases referred to in point (a) of the first sub-paragraph, the Member State concerned in coordination with the Commission, shall verify with the International Bureau any modifications to be made under Rule 7 (4) of the Common Regulations for the purpose of registration under the Geneva Act.

The Commission shall authorise the Member State to provide for the necessary modifications and notify the International Bureau by means of an implementing act in accordance with the examination procedure referred to in Article 15(2).

2.  In respect of each appellation of origin for a product, falling within the scope of one of the Regulations referred to in Article 1 of this Regulation, but not being protected under any of those Regulations, originating in a Member State, which is a contracting party to the Lisbon Agreement the Member State concerned shall:

(a)  request registration under the Regulation concerned, or

(b)  request the cancellation of the registration of that appellation of origin in the International Register.

The Member States concerned shall choose on the basis of:

(a)  request by a natural person or legal entity referred to in point (ii) of Article 5(2) of the Geneva Act or a beneficiary as defined in point (xvii) of Article 1 of the Geneva Act, or

(b)  their own initiative.

The Member States concerned shall notify the Commission of the choice referred to in the first subparagraph, and make the respective request, within three years from the date of the entry into force of this Regulation.

In cases referred to in point (a) of the first sub-paragraph, the Member State concerned shall request the international registration of that appellation of origin under the Geneva Act, if the Member State concerned has ratified or acceded to the Geneva Act pursuant to the authorisation in Article 3 of Decision (EU) .…/…. (18), within one year from the date of registration of the geographical indication under the Regulation concerned. The fourth and fifth sub-paragraph of paragraph 1 shall apply.

If the request for registration under the Regulation concerned is refused and related administrative and judicial remedies have been exhausted, or if the request for registration under the Geneva Act has not been made pursuant to the fourth sub-paragraph of this paragraph, the Member State concerned shall, without delay, request the cancellation of the registration of that geographical indication in the International Register.

3.  In respect of appellations of origin for products not falling within the scope of one of the Regulations referred to in Article 1 of this Regulation, in respect of which protection at Union level of geographical indications is not provided, a Member State which already is a contracting party to the Lisbon Agreement may maintain any existing registration in the International Register.

Such a Member State may also submit further applications for registration in the International Register under the Lisbon Agreement of such appellations of origin originating in its territory if the following conditions are met:

(a)  the Member State concerned notified the draft application for registration of such appellations of origin to the Commission. Such notification shall include evidence that the application satisfies the requirements for registration under the Lisbon Agreement; and

(b)  the Commission has not issued a negative opinion within two months of such notification. A negative opinion may only be issued after consultation with the Member State concerned, and in the exceptional and duly justified cases when the evidence required under point (a) does not sufficiently substantiate that the requirements for registration under the Lisbon Agreement are met, or if the registration would have an adverse impact on the Union trade policy.

In the case of a request for further information from the Commission on the notification made under point (a), the deadline for the Commission to act shall be one month from the receipt of the information requested.

The Commission shall immediately inform the other Member States about any notification made under point (a).

Article 12

Transitional protection for appellations of origin originating in a third country registered under the Lisbon Agreement

1.   Those Member States which were contracting parties of the Lisbon Agreement before the accession of the Union to the Geneva Act may continue to protect appellations of origin originating in a third country which is a contracting party to the Lisbon Agreement ▌ by means of a national protection system, with effect from the date on which the Union becomes a contracting party to the Geneva Act, as regards appellations of origin registered as at that date under the Lisbon Agreement.

2.  Such protection under a national protection system shall:

(a)  be superseded by protection under the EU protection system for a particular appellation of origin if protection is provided pursuant to a decision under Article 7 of this Regulation subsequent to the accession of the third country concerned to the Geneva Act, provided that the protection provided pursuant to a decision under Article 7 of this Regulation preserves the continuity of protection of the respective appellation of origin in the respective Member State;

(b)  cease for a particular appellation of origin when the effect of international registration ends.

3.   Where an appellation of origin originating in a third country ▌is not registered under this Regulation, or the national protection is not superseded in accordance with point (a) of paragraph 2, the consequences of such ▌national protection ▌ shall be the sole responsibility of the Member State concerned.

4.   The measures taken by Member States under paragraph 1 shall have effects at national level only, and they shall have no effect on intra-Union or international trade.

5.  The Member States referred to in paragraph 1 shall transmit to the Commission any notification made by the International Bureau under the Lisbon Agreement, which the Commission shall then transmit to all other Member States.

6.  Member States referred to in paragraph 1 of this Article shall declare to the International Bureau that they cannot ensure national protection of an appellation of origin for a product, which falls within the scope of one of the Regulations referred to in Article 1 of this Regulation, registered and notified to them under the Lisbon Agreement from the date on which the Union becomes a contracting party to the Geneva Act.

Article 13

Fees

Fees to be paid under Article 7 of the Geneva Act, as specified in the Common Regulations, ▌shall be borne by the Member State in which the geographical indication originates, or by a natural person or legal entity as referred to in point (ii) of Article 5(2) of the Geneva Act or by a beneficiary as defined in point (xvii) of Article 1 of the Geneva Act. Member States may require that natural person or legal entity or a beneficiary to pay some or all of the fees.

Article 14

Special financial contribution

If the income from the Special Union is derived in accordance with point (v) of Article 24(2) ▌ of the Geneva Act, the Union may make a special contribution within the means available for that purpose from the annual budget of the Union.

Article 15

Committees procedure

1.   The Commission shall be assisted by the following Committees within the meaning of Regulation (EU) No 182/2011, in respect of the following products:

(a)  for wine-sector products falling within the scope of Article 92(1) of Regulation (EU) No 1308/2013 by the Committee for the Common Organisation of the Agricultural Markets established by Article 229 of that Regulation;

(b)  for aromatised wine products as defined in Article 3 of Regulation (EU) No 251/2014 ▌by the Committee on aromatised wine products established by Article 34 of that Regulation;

(c)  for spirit drinks as defined in Article 2 of Regulation (EC) No 110/2008 ▌ by the Committee for Spirit Drinks established by Article 25 of that Regulation;

(d)  for agricultural products and foodstuffs falling within the scope of the first subparagraph of Article 2(1) of Regulation (EU) No 1151/2012 by the Agricultural Product Quality Policy Committee established by Article 57 of that Regulation;

2.   Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

Article 16

Monitoring and review

By … [two years from the date of the entry into force of this Regulation], the Commission shall assess the participation of the Union in the Geneva Act and submit a report on the main findings to the European Parliament and to the Council. The assessment shall be based, inter alia, on the following aspects:

(a)  the number of geographical indications protected and registered under Union law for which applications for international registration have been submitted, and cases where the protection has been rejected by third contracting parties;

(b)  the evolution of the number of third countries participating in the Geneva Act and the action taken by the Commission to increase the number as well as the impact of the current state of the Union acquis as regards geographical indications on the attractiveness of the Geneva Act to third countries; and

(c)  the number and type of geographical indications originating from third countries which have been rejected by the Union.

Article 17

Entry into force

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

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

Done at

For the European Parliament For the Council

The President The President

______________

ANNEX TO THE LEGISLATIVE RESOLUTION

Commission statement on the possible extension of EU geographical indication protection to non-agricultural products

The Commission takes note of the European Parliament resolution of 6 October 2015 on the possible extension of EU geographical indication protection to non-agricultural products.

The Commission launched a study in November 2018 to get further economic and legal evidence on the protection of non-agricultural GIs within the Single Market, as a complement to a study of 2013, and to obtain further data on issues such as competitiveness, unfair competition, counterfeiting, consumer perceptions, costs/benefits as well as on the effectiveness of non-agricultural GI protection models in light of the proportionality principle.

In accordance with the principles of Better Regulation and to the commitments laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making, the Commission will examine the study as well as the report on the participation of the Union in the Geneva Act as referred to in the Article on monitoring and review of the Regulation on the action of the Union following its accession to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications and consider any possible next steps.

Commission statement on the procedure set out in Article 9a(3) of the Regulation

The Commission notes that whilst the procedure set out in Article 9a(3) of the Regulation is a legal necessity given the exclusive competence of the Union it can nevertheless state that in the context of the current EU acquis any such intervention of the Commission would be exceptional and duly justified. During consultations with a Member State, the Commission will make every effort in order to resolve together with the Member State any concerns in order to avoid the issuing of a negative opinion. The Commission notes that any negative opinion would be notified in writing to the Member State concerned and pursuant to Article 296 TFEU would state the reasons on which it was based. The Commission would further note that a negative opinion would not preclude the submission of a further application concerning the same appellation of origin, if the reasons for the negative opinion have been duly addressed thereafter or are no longer applicable.

Commission statement concerning the proposal for a Council Decision on the accession of the European Union to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications

The Commission notes that the Union has exclusive external competence on geographical indications and is acceding to the Geneva Act of the Lisbon Agreement as a Party on its own right. This follows from the ruling of the European Court of Justice of 25/10/2017 (case C-389/15- Commission v. Council). Given the EU’s exclusive external competence, Member States are prevented from becoming Parties to the Geneva Act in their own right and should no longer themselves protect geographical indications newly registered by third country members of the Lisbon system. The Commission, mindful of the exceptional circumstances given that seven Member States have been Parties to the Lisbon Agreement for a long time, that they have extensive intellectual property registered under it and that a smooth transition is needed, would exceptionally have been ready to agree that, in this particular case, Bulgaria, Czechia, Slovakia, France, Hungary, Italy, Portugal could have been authorised to accede to the Geneva Act in the interest of the EU.

The Commission strongly objects to the Council’s continued insistence on the possibility for all EU Member States which wish to do so to be authorized to ratify or accede to the Geneva Act alongside the Union, while giving as a reason the regularisation of the Union’s voting rights in view of point (b)(ii) of Article 22(4) of the Geneva Act rather than the aforesaid exceptional circumstances.

Further, the Commission would like to recall that, given that the Union has exercised its internal competence for agricultural geographical indications, the EU Member States cannot have national agricultural GI protection systems of their own.

Therefore the Commission reserves its rights including the right to avail itself of legal remedies against the Council's decision and, in any event, considers that this case cannot constitute a precedent for any other existing or future international/WIPO agreements, in particular but not only where the EU has already ratified international agreements by itself on the basis of its exclusive competence.

(1) OJ C 110, 22.3.2019,  p.55.
(2)* TEXT HAS NOT YET UNDERGONE LEGAL-LINGUISTIC FINALISATION. OJ C 110, 22.3.2019,  p.55.
(3)Position of the European Parliament of 16 April 2019.
(4)http://www.wipo.int/edocs/lexdocs/treaties/en/lisbon/trt_lisbon_009en.pdf.
(5)OJ L […], […], p. […].
(6)http://www.wipo.int/export/sites/www/lisbon/en/legal_texts/lisbon_agreement.pdf.
(7)Regulation (EC) No 110/2008 of the European Parliament and of the Council of 15 January 2008 on the definition, description, presentation, labelling and the protection of geographical indications of spirit drinks and repealing Council Regulation (EEC) No 1576/89 (OJ L 39, 13.2.2008, p. 16).
(8)Regulation (EU) No 1151/2012 of the European Parliament and of the Council of 21 November 2012 on quality schemes for agricultural products and foodstuffs (OJ L 343, 14.12.2012, p. 1).
(9)Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007 (OJ L 347, 20.12.2013, p. 671).
(10)Regulation (EU) No 251/2014 of the European Parliament and of the Council of 26 February 2014 on the definition, description, presentation, labelling and the protection of geographical indications of aromatized wine products and repealing Council Regulation (EEC) No 1601/91 (OJ L 84, 20.3.2014, p. 14).
(11)Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).
(12)Common Regulations under the Lisbon Agreement and the Geneva Act of the Lisbon Agreement as adopted by the Assembly of the Lisbon Union on 11 October 2017, http://www.wipo.int/meetings/en/doc_details.jsp?doc_id=376416, Doc. WIPO A/57/11 of 11 October 2017.
(13)Council Decision (EU) .…/…. on the accession of the European Union to the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications (OJ L …, …, p. …).
(14)+OJ: Please insert in the text the number of the Decision contained in document ST 6929/18 and insert the number, date, title and OJ reference of that Decision in the footnote.
(15)Regulation (EU) 2017/1001 of the European Parliament and of the Council of 14 June 2017 on the European Union trade mark (OJ L 154, 16.07.2017, p. 1).
(16)Directive (EU) 2015/2436 of the European Parliament and the Council of 16 December 2015 to approximate the laws of the Member States relating to trade marks (OJ L336, 23.12.2015, p. 1).
(17)+OJ: Please insert in the text the number of the Decision contained in document ST 6929/18.
(18)+OJ: Please insert in the text the number of the Decision contained in document ST 6929/18.


EU-Philippines Agreement on certain aspects of air services ***
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European Parliament legislative resolution of 16 April 2019 on the draft Council decision on the conclusion on behalf of the Union of the Agreement between the European Union and the Government of the Republic of the Philippines on certain aspects of air services (15056/2018 – C8-0051/2019 – 2016/0156(NLE))
P8_TA-PROV(2019)0362A8-0191/2019

(Consent)

The European Parliament,

–  having regard to the draft Council decision (15056/2018),

–  having regard to draft agreement between the European Union and the Government of the Republic of the Philippines on certain aspects of air services(1),

–  having regard to the request for consent submitted by the Council in accordance with Article 100(2) and Article 218(6), second subparagraph, point (a) of the Treaty on the Functioning of the European Union (C8‑0051/2019),

–  having regard to Rule 99(1) and (4), and Rule 108(7) of its Rules of Procedure,

–  having regard to the recommendation of the Committee on Transport and Tourism (A8-0191/2019),

1.  Gives its consent to the conclusion of the agreement;

2.  Instructs its President to forward its position to the Council, the Commission and the governments and parliaments of the Member States and of the Republic of the Philippines.

(1) OJ L 322, 18.12.2018, p. 3.


International Agreement on olive oil and table olives ***
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European Parliament legislative resolution of 16 April 2019 on the draft Council decision on the conclusion on behalf of the European Union of the International Agreement on Olive Oil and Table Olives, 2015 (06781/2019 – C8-0134/2019 –2017/0107(NLE))
P8_TA-PROV(2019)0363A8-0186/2019

(Consent)

The European Parliament,

–  having regard to the draft Council decision (06781/2019),

–  having regard to the draft International Agreement on Olive Oil and Table Olives, 2015 (11178/2016),

–  having regard to the request for consent submitted by the Council in accordance with Article 207(4) and Article 218(6), second subparagraph, point (a)(v), and Article 218(7) of the Treaty on the Functioning of the European Union (C8-0134/2019),

–  having regard to Rule 99(1) and (4) and Rule 108(7) of its Rules of Procedure,

–  having regard to the recommendation of the Committee on International Trade and the opinion of the Committee on Agriculture and Rural Development (A8-0186/2019),

1.  Gives its consent to conclusion of the Agreement;

2.  Instructs its President to forward its position to the Council, the Commission and the governments and parliaments of the Member States.


Nomination of a member of the Court of Auditors – Viorel Ştefan
PDF 122kWORD 42k
European Parliament decision of 16 April 2019 on the nomination of Viorel Ştefan as a Member of the Court of Auditors (C8-0049/2019 – 2019/0802(NLE))
P8_TA-PROV(2019)0364A8-0194/2019

(Consultation)

The European Parliament,

–  having regard to Article 286(2) of the Treaty on the Functioning of the European Union, pursuant to which the Council consulted Parliament (C8-0049/2019),

–  having regard to Rule 121 of its Rules of Procedure,

–  having regard to the report of the Committee on Budgetary Control (A8-0194/2019),

A.  whereas, by letter of 14 February 2019, the Council consulted Parliament on the nomination of Viorel Ştefan as a Member of the Court of Auditors;

B.  whereas Parliament’s Committee on Budgetary Control proceeded to evaluate the credentials of the nominee, in particular in view of the requirements laid down in Article 286(1) of the Treaty on the Functioning of the European Union;

C.  whereas at its meeting of 8 April 2019 the Committee on Budgetary Control heard the Council’s nominee for membership of the Court of Auditors;

1.  Delivers an unfavourable opinion on the Council’s nomination of Viorel Ştefan as a Member of the Court of Auditors;

2.  Instructs its President to forward this decision to the Council and, for information, to the Court of Auditors, the other institutions of the European Union and the audit institutions of the Member States.


Nomination of a member of the Court of Auditors – Ivana Maletić
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European Parliament decision of 16 April 2019 on the nomination of Ivana Maletić as a Member of the Court of Auditors (C8-0116/2019 – 2019/0803(NLE))
P8_TA-PROV(2019)0365A8-0195/2019

(Consultation)

The European Parliament,

–  having regard to Article 286(2) of the Treaty on the Functioning of the European Union, pursuant to which the Council consulted Parliament (C8-0116/2019),

–  having regard to Rule 121 of its Rules of Procedure,

–  having regard to the report of the Committee on Budgetary Control (A8-0195/2019),

A.  whereas, by letter of 5 March 2019, the Council consulted Parliament on the nomination of Ivana Maletić as a Member of the Court of Auditors;

B.  whereas Parliament’s Committee on Budgetary Control proceeded to evaluate the credentials of the nominee, in particular in view of the requirements laid down in Article 286(1) of the Treaty on the Functioning of the European Union;

C.  whereas at its meeting of 8 April 2019 the Committee on Budgetary Control heard the Council’s nominee for membership of the Court of Auditors;

1.  Delivers a favourable opinion on the Council’s nomination of Ivana Maletić as a Member of the Court of Auditors;

2.  Instructs its President to forward this decision to the Council and, for information, to the Court of Auditors, the other institutions of the European Union and the audit institutions of the Member States.


Protection of persons reporting on breaches of Union law ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 16 April 2019 on the proposal for a directive of the European Parliament and of the Council on the protection of persons reporting on breaches of Union law (COM(2018)0218 – C8-0159/2018 – 2018/0106(COD))
P8_TA-PROV(2019)0366A8-0398/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0218),

–  having regard to Article 294(2) and Articles 16, 33, 43, 50, 53(1), 62, 91, 100, 103, 109, 114, 168, 169, 192, 207 and 325(4) of the Treaty on the Functioning of the European Union and Article 31 of the Treaty establishing the European Atomic Energy Community, pursuant to which the Commission submitted the proposal to Parliament (C8‑0159/2018),

–  having regard to the opinions of the Committee on Legal Affairs on the proposed legal basis,

–  having regard to Article 294(3) and Articles 16, 43(2), 50, 53(1), 91, 100, 114, 168(4), 169, 192(1) and 325(4) of the Treaty on the Functioning of the European Union and Article 31 of the Treaty establishing the European Atomic Energy Community,

–  having regard to the reasoned opinion submitted, within the framework of Protocol No 2 on the application of the principles of subsidiarity and proportionality, by the Swedish Parliament, asserting that the draft legislative act does not comply with the principle of subsidiarity,

–  having regard to the opinion of the Court of Auditors of 26 September 2018(1),

–  having regard to the opinion of the European Economic and Social Committee of 18 October 2018(2),

–  After consulting the Committee of the Regions,

–  having regard to the provisional agreement approved by the committee responsible under Rule 69f(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 15 March 2019 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

–  having regard to Rules 59 and 39 of its Rules of Procedure,

–  having regard to the report of the Committee on Legal Affairs and the opinions of the Committee on Economic and Monetary Affairs, the Committee on Civil Liberties, Justice and Home Affairs, the Committee on Budgetary Control, the Committee on Employment and Social Affairs, the Committee on the Environment, Public Health and Food Safety, the Committee on Culture and Education, and the Committee on Constitutional Affairs (A8-0398/2018),

1.  Adopts its position at first reading hereinafter set out;

2.  Takes note of the Commission statement annexed to this resolution;

3.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

4.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 16 April 2019 with a view to the adoption of Directive (EU) 2019/… of the European Parliament and of the Council on the protection of persons reporting on breaches of Union law(3)

P8_TC1-COD(2018)0106


THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 16, ▌43(2), 50, 53(1), ▌91, 100, ▌114, 168(4), 169, 192(1) ▌and 325(4) thereof and to the Treaty establishing the European Atomic Energy Community, and in particular Article 31 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee(4),

Having regard to the opinion of the Committee of the Regions(5),

Having regard to the opinion of the Court of Auditors(6),

Having regard to the opinion of a group of persons appointed by the Scientific and Technical Committee from among scientific experts in the Member States, in accordance with Article 31 of the Treaty establishing the European Atomic Energy Community,

Acting in accordance with the ordinary legislative procedure(7),

Whereas:

(1)  Persons who work for a public or private organisation or are in contact with it in the context of their work-related activities are often the first to know about threats or harm to the public interest which arise in this context. By ‘blowing the whistle’ they play a key role in exposing and preventing breaches of the law that are harmful to the public interest and in safeguarding the welfare of society. However, potential whistleblowers are often discouraged from reporting their concerns or suspicions for fear of retaliation. In this context, the importance of providing balanced and effective whistleblower protection is increasingly acknowledged both at European and international level.

(2)  At Union level, reports and public disclosures by whistleblowers are one upstream component of enforcement of Union law and policies: they feed national and Union enforcement systems with information, leading to effective detection, investigation and prosecution of breaches of Union law, thus enhancing transparency and accountability.

(3)  In certain policy areas, breaches of Union law – regardless their qualification under national law as administrative, criminal or other types of breaches - may cause serious harm to the public interest, in the sense of creating significant risks for the welfare of society. Where weaknesses of enforcement have been identified in those areas, and whistleblowers are usually in a privileged position to disclose breaches, it is necessary to enhance enforcement by introducing effective, confidential and secure reporting channels and by ensuring effective protection of whistleblowers from retaliation ▌.

(4)  Whistleblower protection currently provided in the European Union is fragmented across Member States and uneven across policy areas. The consequences of breaches of Union law with cross-border dimension uncovered by whistleblowers illustrate how insufficient protection in one Member State not only negatively impacts on the functioning of EU policies in that Member State but can also spill over into other Member States and into the Union as a whole.

(5)  Accordingly, common minimum standards ensuring effective whistleblower protection should apply in those acts and policy areas where;

(i)  there is a need to strengthen enforcement,

(ii)  under-reporting by whistleblowers is a key factor affecting enforcement, and

(iii)  breaches of Union law cause serious harm to the public interest.

Member States may extend the application of the national provisions to other areas with a view to ensuring a comprehensive and coherent framework at national level.

(6)  Whistleblower protection is necessary to enhance the enforcement of Union law on public procurement. In addition to the need of preventing and detecting fraud and corruption in the context of the implementation of the EU budget, including procurement, it is necessary to tackle insufficient enforcement of rules on public procurement by national public authorities and certain public utility operators when purchasing goods, works and services. Breaches of such rules create distortions of competition, increase costs for doing business, violate the interests of investors and shareholders and, overall, lower attractiveness for investment and create an uneven level playing field for all businesses across Europe, thus affecting the proper functioning of the internal market.

(7)  In the area of financial services, the added value of whistleblower protection was already acknowledged by the Union legislator. In the aftermath of the financial crisis, which exposed serious shortcomings in the enforcement of the relevant rules, measures for the protection of whistleblowers, including internal and external reporting channels as well as an explicit prohibition of retaliation, were introduced in a significant number of legislative instruments in this area(8). In particular, in the context of the prudential framework applicable to credit institutions and investment firms, Directive 2013/36/EU provides for protection of whistleblowers, which extends also to Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms.

(8)  As regards the safety of products placed into the internal market, the primary source of evidence gathering are businesses involved in the manufacturing and distribution chain, so that reporting by whistleblowers has a high added value, since they are much closer to the source of possible unfair and illicit manufacturing, import or distribution practices of unsafe products. This warrants the introduction of whistleblower protection in relation to the safety requirements applicable both to ‘harmonised products’(9) and to ‘non-harmonised products’(10). Whistleblower protection is also instrumental in avoiding diversion of firearms, their parts and components and ammunition, as well as defence-related products, by encouraging the reporting of breaches, such as document fraud, altered markingand fraudulent intra-communitarian acquisition of firearms where violations often imply a diversion from the legal to the illegal market. Whistleblower protection will also help prevent the illicit manufacture of homemade explosives by contributing to the correct application of restrictions and controls regarding explosives precursors.

(9)  The importance of whistleblower protection in terms of preventing and deterring breaches of Union rules on transport safety which can endanger human lives has been already acknowledged in sectorial Union instruments on aviation safety(11) and maritime transport safety(12), which provide for tailored measures of protection to whistleblowers as well as specific reporting channels. These instruments also include the protection from retaliation of the workers reporting on their own honest mistakes (so called ‘just culture’). It is necessary to complement and expand upon the existing elements of whistleblower protection in these two sectors as well as to provide such protection to enhance the enforcement of safety standards for other transport modes, namely inland waterway, road and railway transport.

(10)  Evidence-gathering, preventing, detecting and addressing environmental crimes and unlawful conduct or omissions as well as potential breaches concerning the protection of the environment remain a challenge and need to be reinforced as acknowledged in the Commission Communication "EU actions to improve environmental compliance and governance" of 18 January 2018(13). Whilst whistleblower protection rules exist at present only in one sectorial instrument on environmental protection(14), the introduction of such protection is necessary to ensure effective enforcement of the Union environmental acquis, whose breaches can cause ▌harm to the public interest with possible spill-over impacts across national borders. This is also relevant in cases where unsafe products can cause environmental harm.

(11)  Enhancing the protection of whistleblowers would also contribute to preventing and deterring breaches of Euratom rules on nuclear safety, radiation protection and responsible and safe management of spent fuel and radioactive waste. It would also strengthen the enforcement of existing provisions of the revised Nuclear Safety Directive (15) on the effective nuclear safety culture and, in particular, Article 8b(2)(a), which requires, inter alia, that the competent regulatory authority establishes management systems which give due priority to nuclear safety and promote, at all levels of staff and management, the ability to question the effective delivery of relevant safety principles and practices and to report in a timely manner on safety issues.

(12)  Similar considerations warrant the introduction of whistleblower protection to build upon existing provisions and prevent breaches of EU rules in the area of food chain and in particular on food and feed safety as well as on animal health, protection and welfare. The different Union rules developed in these areas are closely interlinked. Regulation (EC) No 178/2002(16) sets out the general principles and requirements which underpin all Union and national measures relating to food and feed, with a particular focus on food safety, in order to ensure a high level of protection of human health and consumers’ interests in relation to food as well as the effective functioning of the internal market. This Regulation provides, amongst others, that food and feed business operators are prevented from discouraging their employees and others from cooperating with competent authorities where this may prevent, reduce or eliminate a risk arising from food. The Union legislator has taken a similar approach in the area of ‘Animal Health Law’ through Regulation (EU) 2016/429 establishing the rules for the prevention and control of animal diseases which are transmissible to animals or to humans(17). Council Directive 98/58/EC and Directive 2010/63/EU of the European Parliament and of the Council, as well as Council Regulation (EC) No 1/2005 and Council Regulation (EC) No 1099/2009 lay down rules on the protection and welfare of animals kept for farming purposes, during transport, at the time of killing.

(13)  In the same vein, whistleblowers’ reports can be key to detecting and preventing, reducing or eliminating risks to public health and to consumer protection resulting from breaches of Union rules which might otherwise remain hidden. In particular, consumer protection is also strongly linked to cases where unsafe products can cause considerable harm to consumers.▌

(14)  The protection of privacy and personal data, enshrined in Articles 7 and 8 of the Charter of Fundamental Rights, is another area where whistleblowers can help to disclose breaches of Union law which can ▌ harm the public interest. Similar considerations apply for breaches of the Directive on the security of network and information systems(18), which introduces notification of incidents (including those that do not compromise personal data) and security requirements for entities providing essential services across many sectors (e.g. energy, health, transport, banking, etc.) for providers of key digital services (e.g. cloud computing services) and for suppliers of basic utilities, such as water, electricity and gas. Whistleblowers' reporting in this area is particularly valuable in order to prevent security incidents that would affect key economic and social activities and widely used digital services, as well as to prevent any infringement of Union data protection legislation. It helps ensuring the continuity of services which are essential for the functioning of the internal market and the wellbeing of society.

(15)  Furthermore, the protection of the financial interests of the Union, which relates to the fight against fraud, corruption and any other illegal activity affecting the use of Union expenditures, the collection of Union revenues and funds or Union assets, is a core area in which enforcement of Union law needs to be strengthened. The strengthening of the protection of the financial interests of the Union also encompasses implementation of the Union budget related to expenditures made on the basis of the Treaty establishing the European Atomic Energy Community. Lack of effective enforcement in the area of the financial interests of the Union, including fraud and corruption at national level, causes a decrease of the Union revenues and a misuse of EU funds, which can distort public investments and growth and undermine citizens’ trust in EU action. Article 325 TFEU requires the Union and the Member States to counter such activities. Relevant Union measures in this respect include, in particular, Council Regulation (EC, Euratom) No 2988/95 , which is complemented, for the most serious types of fraud-related conduct, by Directive (EU) 2017/1371 and by the Convention drawn up on the basis of Article K.3 of the Treaty on European Union, on the protection of the European Communities’ financial interests of 26 July 1995, including the Protocols thereto of 27 September 1996,(19) of 29 November 1996(20) and of 19 June 1997 (Convention and Protocols which remain in force for the Member States not bound by Directive (EU) 2017/1372), as well as Regulation (EU, Euratom) No 883/2013 (OLAF).

(16)  Common minimum standards for the protection of whistleblowers should also be laid down for breaches relating to the internal market as referred to in Article 26(2) TFEU. In addition, in accordance with the case law of the Court of Justice, Union measures aimed at establishing or ensuring the functioning of the internal market are intended to contribute to the elimination of existing or emerging obstacles to the free movement of goods or to the freedom to provide services, or to the removal of distortions of competition.

(17)  Specifically, the protection of whistleblowers to enhance the enforcement of Union competition law, including State aid would serve to safeguard the efficient functioning of markets in the Union, allow a level playing field for business and deliver benefits to consumers. As regards competition rules applying to undertakings, the importance of insider reporting in detecting competition law infringements has already been recognised in the EU leniency policy as well as with the recent introduction of an anonymous whistleblower tool by the European Commission. Breaches relating to competition and State aid concern Articles 101, 102, 106, 107 and 108 TFEU and rules of secondary law adopted for their application.

(18)  Acts which breach the rules of corporate tax and arrangements whose purpose is to obtain a tax advantage and to evade legal obligations, defeating the object or purpose of the applicable corporate tax law, negatively affect the proper functioning of the internal market. They can give rise to unfair tax competition and extensive tax evasion, distorting the level-playing field for companies and resulting in loss of tax revenues for Member States and for the Union budget as a whole. This Directive provides for protection against retaliation for those who report on evasive and/or abusive arrangements that could otherwise go undetected, with a view to strengthening the ability of competent authorities to safeguard the proper functioning of the internal market and remove distortions and barriers to trade that affect the competitiveness of the companies in the internal market, directly linked to the free movement rules and also relevant for the application of the State aid rules. Whistleblower protection adds to recent Commission initiatives aimed at improving transparency and the exchange of information in the field of taxation and creating a fairer corporate tax environment within the Union , with a view to increasing Member States’ effectiveness in identifying evasive and/or abusive arrangements that could otherwise go undetected and will help deter such arrangements even though this Directive does not harmonise provisions relating to taxes, whether substantive or procedural.

(19)  Article 1(1)(a) defines the material scope of this Directive by reference to a list of Union acts set out in the Annex (Parts I and II). This entails that where these Union acts, in turn, define their material scope by reference to Union acts listed in their annexes, these acts too form part of the material scope of the present Directive. In addition, the reference to the acts in the Annex should be understood as including all national and Union implementing or delegated measures adopted pursuant to those acts. Moreover, the reference to the Union acts in the Annex to this Directive is to be understood as a dynamic reference, i.e. if the Union act in the Annex has been or will be amended, the reference relates to the act as amended; if the Union act in the Annex has been or will be replaced, the reference relates to the new act.

(20)  Certain Union acts, in particular in the area of financial services, such as Regulation (EU) No 596/2014 on market abuse(21), and Commission Implementing Directive 2015/2392, adopted on the basis of that Regulation(22), already contain detailed rules on whistleblower protection. Such existing Union legislation, including the list of Part II of the Annex, should maintain any specificities they provide for, tailored to the relevant sectors. This is of particular importance to ascertain which legal entities in the area of financial services, the prevention of money laundering and terrorist financing are currently obliged to establish internal reporting channels. At the same time, in order to ensure consistency and legal certainty across Member States, this Directive should be applicable in all those matters not regulated under the sector-specific instruments, which should be complemented by the present Directive, insofar as matters are not regulated in them, so that they are fully aligned with minimum standards. In particular, this Directive should further specify the design of the internal and external channels, the obligations of competent authorities, and the specific forms of protection to be provided at national level against retaliation. In this regard, Article 28(4) of Regulation (EU) No 1286/2014 establishes the possibility for Member States to provide for an internal reporting channel in the area covered by that Regulation. For reasons of consistency with the minimum standards laid down by this Directive, the obligation to establish internal reporting channels provided for in Article 4(1) of this Directive should also apply in respect of Regulation (EU) No 1286/2014.

(21)  This Directive should be without prejudice to the protection afforded to employees when reporting on breaches of Union employment law. In particular, in the area of occupational safety and health, Article 11 of Framework Directive 89/391/EEC already requires Member States to ensure that workers or workers' representatives shall not be placed at a disadvantage because of their requests or proposals to employers to take appropriate measures to mitigate hazards for workers and/or to remove sources of danger. Workers and their representatives are entitled to raise issues with the competent national authorities if they consider that the measures taken and the means employed by the employer are inadequate for the purposes of ensuring safety and health.

(22)  Member States may provide that reports concerning interpersonal grievances exclusively affecting the reporting person, i.e. grievances about interpersonal conflicts between the reporting person and another employee, may be channelled to other available procedures.

(23)  This Directive is without prejudice to the protection afforded by the procedures for reporting possible illegal activities, including fraud or corruption, detrimental to the interests of the Union, or of conduct relating to the discharge of professional duties which may constitute a serious failure to comply with the obligations of officials and other servants of the European Union established under Articles 22a, 22b and 22c of the the Staff Regulations of Officials of the European Union and the Conditions of Employment of Other Servants of the Union, laid down in Council Regulation (EEC, Euratom, ECSC) No 259/69(23). The Directive applies where EU officials report in a work-related context outside their employment relationship with the EU institutions.

(24)  National security remains the sole responsibility of each Member State. This Directive should not apply to reports on breaches related to procurement involving defence or security aspects if those are covered by Article 346 TFEU, in accordance with the case law of the Court of Justice of the European Union. If Member States decide to extend the protection provided by the Directive to further areas or acts, which are not within the scope, those Member States may adopt specific provisions to protect essential interests of national security in that regard.

(25)  This Directive should also be without prejudice to the protection of classified information which Union law or the laws, regulations or administrative provisions in force in the Member State concerned require, for security reasons, to be protected from unauthorised access. ▌Moreover, the provisions of this Directive should not affect the obligations arising from Commission Decision (EU, Euratom) 2015/444 of 13 March 2015 on the security rules for protecting EU classified information, or Council Decision of 23 September 2013 on the security rules for protecting EU classified information.

(26)  This Directive should not affect the protection of confidentiality of communications between lawyers and their clients (‘legal professional privilege’) as provided for under national and, where applicable, Union law, in accordance with the case law of the Court of Justice of the European Union. Moreover, the Directive should not affect the obligation of maintaining confidentiality of communications of health care providers, including therapists, with their patients and of patient records (‘medical privacy’) as provided for under national and Union law.

(27)  Members of other professions may qualify for protection under this Directive when they report information protected by the applicable professional rules, provided that reporting that information is necessary for revealing a breach within the scope of this Directive.

(28)  While this Directive provides under certain conditions for a limited exemption from liability, including criminal liability, in case of breach of confidentiality, it does not affect national rules on criminal procedure, particularly those aiming at safeguarding the integrity of the investigations and proceedings or the rights of defence of concerned persons. This is without prejudice to the introduction of measures of protection into other types of national procedural law, in particular, the reversal of the burden of proof in national administrative, civil or labour proceedings.

(29)  This Directive should not affect national rules on the exercise of the rights of workers' representatives to information, consultation, and participation in collective bargaining and their defence of workers’ employment rights. This should be without prejudice to the level of protection granted by the Directive.

(30)  This Directive should not apply to cases in which persons who, based on their informed consent, have been identified as informants or registered as such in databases managed by appointed authorities at the national level, such as customs authorities, report breaches to enforcement authorities, against reward or compensation. Such reports are made pursuant to specific procedures that aim at guaranteeing their anonymity in order to protect their physical integrity, and which are distinct from the reporting channels provided for under this Directive.

(31)  Persons who report information about threats or harm to the public interest obtained in the context of their work-related activities make use of their right to freedom of expression. The right to freedom of expression and information, enshrined in Article 11 of the Charter of Fundamental Rights of the European Union (‘the Charter’) and in Article 10 of the European Convention on Human Rights (ECHR), encompasses the right to receive and impart information as well as media freedom and pluralism.

(32)  Accordingly, this Directive draws upon the case law of the European Court of Human Rights on the right to freedom of expression, and the principles developed on this basis by the Council of Europe in its 2014 Recommendation on Protection of Whistleblowers(24).

(33)  To enjoy protection, the reporting persons should reasonably believe, in light of the circumstances and the information available to them at the time of the reporting, that the matters reported by them are true. This is an essential safeguard against malicious and frivolous or abusive reports, ensuring that those who, at the time of the reporting, deliberately and knowingly reported wrong or misleading information do not enjoy protection. At the same time, it ensures that protection is not lost where the reporting person made an inaccurate report in honest error. In a similar vein, reporting persons should be entitled to protection under this Directive if they have reasonable grounds to believe that the information reported falls within its scope. The motives of the reporting person in making the report should be irrelevant as to whether or not they should receive protection.

(34)  Reporting persons normally feel more at ease to report internally, unless they have reasons to report externally. Empirical studies show that the majority of whistleblowers tend to report internally, within their organisation with which they work. Internal reporting is also the best way to get information to the persons who can contribute to the early and effective resolution of risks to the public interest. At the same time, the reporting person should be able to choose the most appropriate reporting channel depending on the individual circumstances of the case. Moreover, it is necessary to protect public disclosures taking into account democratic principles such as transparency and accountability, and fundamental rights such as freedom of expression and media freedom, whilst balancing the interest of employers to manage their organisations and to protect their interests with the interest of the public to be protected from harm, in line with the criteria developed in the case-law of the European Court of Human Rights.

(35)  Without prejudice to existing obligations to provide for anonymous reporting by virtue of Union law, Member States may decide whether private and public entities and competent authorities accept and follow-up on anonymous reports of breaches falling within the scope of this Directive. However, persons who anonymously reported or made public disclosures falling within the scope of this Directive and meet its conditions should enjoy protection under this Directive if they are subsequently identified and suffer retaliation.

(36)  Protection is to be granted in cases where persons report pursuant to Union legislation to institutions, bodies, offices or agencies of the Union, for example in the context of fraud against the Union budget.

(37)  Persons need specific legal protection where they acquire the information they report through their work-related activities and therefore run the risk of work-related retaliation (for instance, for breaching the duty of confidentiality or loyalty). The underlying reason for providing them with protection is their position of economic vulnerability vis-à-vis the person on whom they de facto depend for work. When there is no such work related power imbalance (for instance in the case of ordinary complainants or citizen bystanders) there is no need for protection against retaliation.

(38)  Effective enforcement of Union law requires that protection is granted to the broadest possible range of categories of persons, who, irrespective of whether they are EU citizens or third-country nationals, by virtue of their work-related activities (irrespective of the nature of these activities, whether they are paid or not), have privileged access to information about breaches that would be in the public’s interest to report and who may suffer retaliation if they report them. Member States should ensure that the need for protection is determined by reference to all the relevant circumstances and not merely by reference to the nature of the relationship, so as to cover the whole range of persons connected in a broad sense to the organisation where the breach has occurred.

(39)  Protection should, firstly, apply to persons having the status of 'workers', within the meaning of Article 45(1) TFEU, as interpreted by the Court of Justice of the European Union, i.e. persons who, for a certain period of time, perform services for and under the direction of another person, in return of which they receive remuneration. This notion also includes civil servants. Protection should thus also be granted to workers in non-standard employment relationships, including part-time workers and fixed-term contract workers, as well as persons with a contract of employment or employment relationship with a temporary agency, precarious types of relationships where standard protections against unfair treatment are often difficult to apply.

(40)  Protection should also extend to further categories of natural ▌persons, who, whilst not being 'workers' within the meaning of Article 45(1) TFEU, can play a key role in exposing breaches of the law and may find themselves in a position of economic vulnerability in the context of their work-related activities. For instance, in areas such as product safety, suppliers are much closer to the source of possible unfair and illicit manufacturing, import or distribution practices of unsafe products; in the implementation of Union funds, consultants providing their services are in a privileged position to draw attention to breaches they witness. Such categories of persons, including self-employed persons providing services, freelance, contractors, subcontractors and suppliers, are typically subject to retaliation, which may take the form, for instance, of early termination or cancellation of contract of services, licence or permit, loss of business, loss of income, coercion, intimidation or harassment, blacklisting/business boycotting or damage to their reputation. Shareholders and persons in managerial bodies, may also suffer retaliation, for instance in financial terms or in the form of intimidation or harassment, blacklisting or damage to their reputation. Protection should also be granted to persons whose work-based relationship ended and to candidates for employment or for providing services to an organisation who acquired the information on breaches of law during the recruitment process or other pre-contractual negotiation stage, and may suffer retaliation for instance in the form of negative employment references or blacklisting/business boycotting.

(41)  Effective whistleblower protection implies protecting also further categories of persons who, whilst not relying on their work-related activities economically, may nevertheless suffer retaliation for exposing breaches. Retaliation against volunteers and paid or unpaid trainees may take the form of no longer making use of their services, or of giving a negative reference for future employment or otherwise damaging their reputation or career prospects.

(42)  Effective detection and prevention of serious harm to the public interest requires that the notion of breach also includes abusive practices, as determined by the case law of the European Court of Justice, namely acts or omissions which do not appear to be unlawful in formal terms but defeat the object or the purpose of the law.

(43)  Effective prevention of breaches of Union law requires that protection is ▌granted to persons who provide information necessary to reveal breaches which have already taken place, breaches which have not yet materialised, but are very likely to be committed, acts or omissions which the reporting person has reasonable grounds to consider as breaches of Union law as well as attempts to conceal breaches. For the same reasons, protection is warranted also for persons who do not provide positive evidence but raise reasonable concerns or suspicions. At the same time, protection should not apply to the reporting of information which is already fully available in the public domain or of unsubstantiated rumours and hearsay.

(44)  Retaliation expresses the close (cause and effect) relationship that must exist between the report and the adverse treatment suffered, directly or indirectly, by the reporting person, so that this person can enjoy legal protection. Effective protection of reporting persons as a means of enhancing the enforcement of Union law requires a broad definition of retaliation, encompassing any act or omission occurring in the work-related context which causes them detriment. This Directive does not prevent employers from taking employment-related decisions which are not prompted by the reporting or public disclosure.

(45)  Protection from retaliation as a means of safeguarding freedom of expression and media freedom should be provided both to persons who report information about acts or omissions within an organisation (internal reporting) or to an outside authority (external reporting) and to persons who disclose such information to the public domain (for instance, directly to the public via web platforms or social media, or to the media, elected officials, civil society organisations, trade unions or professional/business organisations).

(46)  Whistleblowers are, in particular, important sources for investigative journalists. Providing effective protection to whistleblowers from retaliation increases the legal certainty of (potential) whistleblowers and thereby encourages and facilitates whistleblowing also to the media. In this respect, protection of whistleblowers as journalistic sources is crucial for safeguarding the ‘watchdog’ role of investigative journalism in democratic societies.

(47)  For the effective detection and prevention of breaches of Union law it is vital that the relevant information reaches swiftly those closest to the source of the problem, most able to investigate and with powers to remedy it, where possible. As a principle, therefore, reporting persons should be encouraged to first use the internal channels and report to their employer, if such channels are available to them and can reasonably be expected to work. This is the case, in particular, where the reporting persons believe that the breach can be effectively addressed within the relevant organisation, and that there is no risk of retaliation. This also warrants that legal entities in the private and the public sector establish appropriate internal procedures for receiving and following-up on reports. This encouragement concerns also cases where these channels were established without it being required by Union or national law. This principle should help foster a culture of good communication and corporate social responsibility in organisations, whereby reporting persons are considered as significantly contributing to self-correction and excellence.

(48)  For legal entities in the private sector, the obligation to establish internal channels is commensurate with their size and the level of risk their activities pose to the public interest. It should apply to all companies with 50 or more employees irrespective of the nature of their activities, based on their obligation to collect VAT. Following an appropriate risk assessment, Member States may require also other undertakings to establish internal reporting channels in specific cases (e.g. due to the significant risks that may result from their activities).

(49)  This Directive is without prejudice to the possibility for Member States to encourage private entities with less than 50 employees to establish internal channels for reporting and follow-up, including by laying down less prescriptive requirements for those channels than those laid down under Article 5, provided that those requirements guarantee confidentiality and diligent follow-up of the report.

(50)  The exemption of small and micro undertakings from the obligation to establish internal reporting channels should not apply to private undertakings which are currently obliged to establish internal reporting channels by virtue of Union acts referred to in Part I.B and Part II of the Annex.

(51)  It should be clear that, in the case of private legal entities which do not provide for internal reporting channels, reporting persons should be able to report directly externally to the competent authorities and such persons should enjoy the protection against retaliation provided by this Directive.

(52)  To ensure in particular, the respect of the public procurement rules in the public sector, the obligation to put in place internal reporting channels should apply to all public legal entities, at local, regional and national level, whilst being commensurate with their size.

(53)  Provided the confidentiality of the identity of the reporting person is ensured, it is up to each individual private and public legal entity to define the kind of reporting channels to set up. More specifically, they should allow for written reports that may be submitted by post, by physical complaint box(es), or through an online platform (intranet or internet) and/or for oral reports that may be submitted by telephone hotline or other voice messaging system. Upon request by the reporting person, such channels should also allow for physical meetings, within a reasonable time frame.

(54)  Third parties may also be authorised to receive reports on behalf of private and public entities, provided they offer appropriate guarantees of respect for independence, confidentiality, data protection and secrecy. These can be external reporting platform providers, external counsel, auditors, trade union representatives or workers’ representatives.

(55)  Without prejudice to the protection that trade union representatives or workers’ representatives enjoy in their capacity as such under other Union and national rules, they should enjoy the protection provided for under this Directive both where they report in their capacity as workers and where they have provided advice and support to the reporting person.

(56)  Internal reporting procedures should enable private legal entities to receive and investigate in full confidentiality reports by the employees of the entity and of its subsidiaries or affiliates (the group), but also, to any extent possible, by any of the group’s agents and suppliers and by any person who acquires information through his or her work-related activities with the entity and the group.

(57)  The most appropriate persons or departments within a private legal entity to be designated as competent to receive and follow up on reports depend on the structure of the entity, but, in any case, their function should ensure independence and absence of conflict of interest. In smaller entities, this function could be a dual function held by a company officer well placed to report directly to the organisational head, such as a chief compliance or human resources officer, an integrity officer, a legal or privacy officer, a chief financial officer, a chief audit executive or a member of the board.

(58)  In the context of internal reporting, informing, as far as legally possible and in the most comprehensive way possible, the reporting person about the follow up to the report is crucial to build trust in the effectiveness of the overall system of whistleblower protection and reduces the likelihood of further unnecessary reports or public disclosures. The reporting person should be informed within a reasonable timeframe about the action envisaged or taken as follow-up to the report and the grounds for this follow-up (for instance, referral to other channels or procedures in cases of reports exclusively affecting individual rights of the reporting person, closure based on lack of sufficient evidence or other grounds, launch of an internal enquiry, and possibly its findings and/or measures taken to address the issue raised, referral to a competent authority for further investigation) in as far as such information would not prejudice the enquiry or investigation or affect the rights of the concerned person. In all cases, the reporting person should be informed of the investigation’s progress and outcome. He or she may be asked to provide further information, during the course of the investigation, albeit with no obligation to do so.

(59)  Such reasonable timeframe should not exceed in total three months. Where the appropriate follow-up is still being determined, the reporting person should be informed about this and about any further feedback he or she should expect.

(60)  Persons who are considering reporting breaches of Union law should be able to make an informed decision on whether, how and when to report. Private and public entities having in place internal reporting procedures shall provide information on these procedures as well as on procedures to report externally to relevant competent authorities. Such information must be easily understandable and easily accessible, including, to any extent possible, also to other persons, beyond employees, who come in contact with the entity through their work-related activities, such as service-providers, distributors, suppliers and business partners. For instance, such information may be posted at a visible location accessible to all these persons and on the web of the entity and may also be included in courses and trainings on ethics and integrity.

(61)  Effective detection and prevention of breaches of Union law requires ensuring that potential whistleblowers can easily and in full confidentiality bring the information they possess to the attention of the relevant competent authorities which are able to investigate and to remedy the problem, where possible.

(62)  It may be the case that internal channels do not exist or that they were used but did not function properly (for instance the report was not dealt with diligently or within a reasonable timeframe, or no appropriate action was taken to address the breach of law despite the positive results of the enquiry).

(63)  In other cases, the use of internal channels could not reasonably be expected to function properly. This is most notably the case where the reporting persons have valid reasons to believe i) that they would suffer retaliation in connection with the reporting, including as a result of a breach of their confidentiality, and ii) that the competent authorities would be better placed to take effective action to address the breach because, for example, the ultimate responsibility holder within the work-related context is involved in the breach, or there is a risk that the breach or related evidence may be concealed or destroyed, or, more in general, because the effectiveness of investigative actions by competent authorities might otherwise be jeopardised (examples may be reports on cartel arrangements and other breaches of competition rules), or because the breach requires urgent action for instance to safeguard the life, health and safety of persons or to protect the environment. In all cases, persons reporting externally to the competent authorities and, where relevant, to institutions, bodies, offices or agencies of the Union shall be protected. This Directive also grants protection where Union or national law requires the reporting persons to report to the competent national authorities for instance as part of their job duties and responsibilities or because the breach is a criminal offence.

(64)  Lack of confidence in the effectiveness of reporting is one of the main factors discouraging potential whistleblowers. This warrants imposing a clear obligation on competent authorities to set up appropriate external reporting channels, to diligently follow-up on the reports received, and, within a reasonable timeframe, give feedback to the reporting persons .

(65)  It is for the Member States to designate the authorities competent to receive and give appropriate follow-up to the reports falling within the scope of this Directive. Such competent authorities may be judicial authorities, regulatory or supervisory bodies competent in the specific areas concerned, or authorities of a more general competence at a central State level, law enforcement agencies, anticorruption bodies or ombudsmen.

(66)  As recipients of reports, the authorities designated as competent should have the necessary capacities and powers to ensure appropriate follow-up - including assessing the accuracy of the allegations made in the report and addressing the breaches reported ▌by launching an internal enquiry, investigation, prosecution or action for recovery of funds, or other appropriate remedial action, in accordance with their mandate, or should have the necessary powers to refer the report to another authority that should investigate the breach reported, ensuring an appropriate follow-up by such authority. In particular, where Member States wish to establish external channels in the framework of their central State level, for instance in the State aid area, Member States should put in place adequate safeguards in order to ensure that the requirements of independence and autonomy laid down in the Directive are respected. The establishment of such external channels does not affect the powers of the Member States or of the Commission concerning supervision in the field of State aid, nor does this Directive affect the exclusive power of the Commission as regards the declaration of compatibility of State aid measures in particular pursuant to Article 107(3) TFEU. With regard to breaches of Articles 101 and 102 of the TFEU, Member States should designate as competent authorities those referred to in Article 35 of Regulation (EC) 1/2003 without prejudice to the powers of the Commission in this area.

(67)  Competent authorities should also give feedback to the reporting persons about the action envisaged or taken as follow-up (for instance, referral to another authority, closure based on lack of sufficient evidence or other grounds or launch of an investigation and possibly its findings and/or measures taken to address the issue raised), as well as about the grounds justifying the follow-up. Communications on the final outcome of the investigations should not affect the applicable Union rules which include possible restrictions on the publication of decisions in the area of financial regulation. This should apply mutatis mutandis in the field of corporate taxation, if similar restrictions are provided for by the applicable national law.

(68)  Follow up and feedback should take place within a reasonable timeframe; this is warranted by the need to promptly address the problem that may be the subject of the report, as well as to avoid unnecessary public disclosures. Such timeframe should not exceed three months, but could be extended to six months, where necessary due to the specific circumstances of the case, in particular the nature and complexity of the subject of the report, which may require a lengthy investigation.

(69)   Union law in specific areas, such as market abuse(25), civil aviation(26) or safety of offshore oil and gas operations(27) already provides for the establishment of internal and external reporting channels. The obligations to establish such channels laid down in this Directive should build as far as possible on the existing channels provided by specific Union acts.

(70)  The European Commission, as well as some bodies, offices and agencies of the Union, such as the European Anti-Fraud Office (OLAF), the European Maritime Safety Agency (EMSA), the European Aviation Safety Agency (EASA), the European Security and Markets Authority (ESMA) and the European Medicines Agency (EMA), have in place external channels and procedures for receiving reports on breaches falling within the scope of this Directive, which mainly provide for confidentiality of the identity of the reporting persons. This Directive does not affect such external reporting channels and procedures, where they exist, but will ensure that persons reporting to those institutions, bodies, offices or agencies of the Union benefit from common minimum standards of protection throughout the Union.

(71)  To ensure the effectiveness of the procedures for following-up on reports and addressing breaches of the Union rules concerned, Member States should have the possibility to take measures to alleviate burdens for competent authorities resulting from reports on minor breaches of provisions falling within the scope of this Directive, repetitive reports or reports on breaches of ancillary provisions (for instance provisions on documentation or notification obligations). Such measures may consist in allowing competent authorities, after a due review of the matter, to decide that a reported breach is clearly minor and does not require further follow-up measures pursuant to this Directive. Member States may also allow competent authorities to close the procedure regarding repetitive reports whose substance does not include any new meaningful information to a past report that was already closed, unless new legal or factual circumstances justify a different follow-up. Furthermore, Member States may allow competent authorities to prioritise the treatment of reports on serious breaches or breaches of essential provisions falling within the scope of this Directive in case of high inflows of the reports.

(72)  Where provided for under national or Union law, the competent authorities should refer cases or relevant information to institutions, bodies, offices or agencies of the Union, including, for the purposes of this Directive, the European Anti-Fraud Office (OLAF) and the European Public Prosecutor Office (EPPO), without prejudice to the possibility for the reporting person to refer directly to such bodies, offices or agencies of the Union.

(73)  In many policy areas falling within the scope of this Directive, there are cooperation mechanisms through which national competent authorities exchange information and carry out follow-up activities in relation to breaches of Union rules with a cross-border dimension. Examples range from the Administrative Assistance and Cooperation Mechanism in cases of cross-border violations of the Union agri-food chain legislation and the Food Fraud Network, the Rapid Alert System for dangerous non-food products, the Consumer Protection Cooperation Network to the Environmental Compliance Network, the European Network of Competition Authorities, and the administrative cooperation in the field of taxation. Member States’ competent authorities should make full use of such existing cooperation mechanisms where relevant as part of their obligation to follow-up on reports regarding breaches falling within the scope of this Directive. In addition, Member States’ authorities may cooperate also beyond the existing cooperation mechanisms in cases of breaches with a cross-border dimension in areas where such cooperation mechanisms do not exist.

(74)  In order to allow for effective communication with staff who are responsible for handling reports, it is necessary that the competent authorities have in place and use user-friendly channels, which are secure, ensure confidentiality for receiving and handling information provided by the reporting person and enable the storage of durable information to allow for further investigations. This may require that they are separated from the general channels through which the competent authorities communicate with the public, such as normal public complaints systems or channels through which the competent authority communicates internally and with third parties in its ordinary course of business.

(75)  Staff members of the competent authorities, who are responsible for handling reports should be professionally trained, including on applicable data protection rules, ▌in order to handle reports and to ensure communication with the reporting person, as well as to follow up on the report in a suitable manner.

(76)  Persons intending to report should be able to make an informed decision on whether, how and when to report. Competent authorities should therefore publicly disclose and make easily accessible information about the available reporting channels with competent authorities, about the applicable procedures and about the specialised staff members responsible for handling reports within these authorities. All information regarding reports should be transparent, easily understandable and reliable in order to promote and not deter reporting.

(77)  Member States should ensure that competent authorities have in place adequate protection procedures for the processing of reports of infringements and for the protection of the personal data of the persons referred to in the report. Such procedures should ensure that the identity of every reporting person, concerned person, and third persons referred to in the report (e.g. witnesses or colleagues) is protected at all stages of the procedure.▌

(78)  It is necessary that ▌staff of the competent authority who is responsible for handling reports and staff members of the competent authority who have the right to access to the information provided by a reporting person ▌comply with the duty of professional secrecy and ▌confidentiality when transmitting the data both inside and outside of the competent authority, including where a competent authority opens an investigation or an inquiry or engage in enforcement activities in connection with the report of infringements.

(79)  The regular review of the procedures of competent authorities and the exchange of good practices between them should guarantee that those procedures are adequate and thus serving their purpose.

(80)  Persons making a public disclosure ▌should ▌ qualify for protection in cases where, despite the internal and/or external report made, the breach remains unaddressed, for instance in cases where such persons have valid reasons to believe that the breach was not (appropriately) assessed or investigated or no appropriate remedial action was taken. The appropriateness of the follow-up should be assessed according to objective criteria, linked to the obligation of the competent authorities to assess the accuracy of the allegations and put an end to any possible breach of Union law. It will thus depend on the circumstances of each case and of the nature of the rules that have been breached. In particular, a decision by the authorities that a breach was clearly minor and no follow up was required may constitute an appropriate follow up pursuant to this Directive.

(81)  Persons making a public disclosure directly should also qualify for protection in cases where they have reasonable grounds to believe that there is an imminent or manifest danger for the public interest, or ▌a risk of irreversible damage, including ▌harm to physical integrity.

(82)  Similarly, such persons should qualify for protection where they have reasonable grounds to believe that in case of external reporting there is a risk of retaliation or there is a low prospect of the breach being effectively addressed, due to the particular circumstances of the case, such as that evidence may be concealed or destroyed or that an authority is in collusion with the perpetrator of the breach or involved in the breach.

(83)  Safeguarding the confidentiality of the identity of the reporting person during the reporting process and follow-up investigations is an essential ex-ante measure to prevent retaliation. The identity of the reporting person may be disclosed only where this is a necessary and proportionate obligation required by Union or national law in the context of investigations by authorities or judicial proceedings, in particular to safeguard the rights of defence of the concerned persons. Such an obligation may derive, in particular, from Directive 2012/13 of the European Parliament and of the Council of 22 May 2012, on the right to information in criminal proceedings. The protection of confidentiality should not apply where the reporting person has intentionally revealed his or her identity in the context of a public disclosure.

(84)  Any processing of personal data carried out pursuant to this Directive, including the exchange or transmission of personal data by the competent authorities, should be undertaken in accordance with Regulation (EU) 2016/679, and with Directive (EU) 2016/680(28), and any exchange or transmission of information by Union level competent authorities should be undertaken in accordance with Regulation (EC) No 45/2001(29). Particular regard should be had to the principles relating to processing of personal data set out in Article 5 of the GDPR, Article 4 of Directive (EU) 2016/680 and Article 4 of Regulation (EC) No 45/2001, and to the principle of data protection by design and by default laid down in Article 25 of the GDPR, Article 20 of Directive (EU) 2016/680 and Article XX of Regulation (EU) No 2018/XX repealing Regulation No 45/2001 and Decision No 1247/2002/EC.

(85)  The effectiveness of the procedures set out in the present Directive related to follow-up on reports on breaches of Union law in the areas falling within its scope serves an important objective of general public interest of the Union and of the Member States, within the meaning of Article 23(1)(e) GDPR, as it aims at enhancing the enforcement of Union law and policies in specific areas where breaches can cause serious harm to the public interest. The effective protection of the confidentiality of the identity of the reporting persons is necessary for the protection of the rights and freedoms of others, in particular those of the reporting persons, provided for under Article 23(1)(i) GDPR. Member States should ensure the effectiveness of this Directive, including, where necessary, by restricting, by legislative measures, the exercise of certain data protection rights of the concerned persons in line with Article 23(1)(e) and (i) and 23(2) GDPR to the extent and as long as necessary to prevent and address attempts to hinder reporting, to impede, frustrate or slow down follow-up to reports, in particular investigations, or attempts to find out the identity of the reporting persons.

(86)  The effective protection of the confidentiality of the identity of the reporting persons is equally necessary for the protection of the rights and freedoms of others, in particular those of the reporting persons, where reports are handled by authorities as defined in Article 3(7) of Directive (EU) 2016/680. Member States should ensure the effectiveness of this Directive, including, where necessary, by restricting, by legislative measures, the exercise of certain data protection rights of the concerned persons in line with Articles 13(3)(a) and (e), 15(1)(a) and (e), 16(4)(a) and (e) and Article 31(5) of Directive (EU) 2016/680 to the extent that, and for as long as, it is necessary to prevent and address attempts to hinder reporting, to impede, frustrate or slow down follow-up to reports, in particular investigations, or attempts to find out the identity of the reporting persons.

(87)  Member States should ensure the adequate record-keeping of all reports of breaches, and that every report is retrievable and that information received through reports could be used as evidence in enforcement actions where appropriate

(88)  Reporting persons should be protected against any form of retaliation, whether direct or indirect, taken, recommended or tolerated by their employer or customer/recipient of services and by persons working for or acting on behalf of the latter, including co-workers and managers in the same organisation or in other organisations with which the reporting person is in contact in the context of his or her work-related activities ▌. Protection should be provided against retaliatory measures taken vis-à-vis the reporting person him/herself but also those that may be taken vis-à vis the legal entity that the reporting person owns, works for or is otherwise connected with in a work-related context such as denial of provision of services, blacklisting or business boycotting. Indirect retaliation also includes actions taken against facilitators or co-workers or relatives of the reporting person who are also in a work-related connection with the latter’s employer or customer/recipient of services ▌.

(89)  Where retaliation occurs undeterred and unpunished, it has a chilling effect on potential whistleblowers. A clear prohibition of retaliation in law has an important dissuasive effect, further strengthened by provisions for personal liability and penalties for the perpetrators of retaliation.

(90)  Individual advice and accurate information may be provided by an independent single authority or an information centre.

(91)  Potential whistleblowers who are not sure about how to report or whether they will be protected in the end may be discouraged from reporting. Member States should ensure that relevant information is provided in a ▌way that is easily understandable and easily accessible to the general public. Individual, impartial and confidential advice, free of charge, should be available on, for example, whether the information in question is covered by the applicable rules on whistleblower protection, which reporting channel may best be used and which alternative procedures are available in case the information is not covered by the applicable rules (‘signposting’). Access to such advice can help ensure that reports are made through the appropriate channels, in a responsible manner and that breaches and wrongdoings are detected in a timely manner or even prevented. Member States may choose to extend such advice to legal counselling. Where such advice is given to reporting persons by civil society organisations which are bound by a duty of maintaining the confidentiality of the information received, Member States should ensure that such organisations do not suffer retaliation, for instance in the form of economic prejudice through a restriction on their access to funding or blacklisting that could impede the proper functioning of the organisation.

(92)  Competent authorities should provide reporting persons with the support necessary for them to effectively access protection. In particular, they should provide proof or other documentation required to confirm before other authorities or courts that external reporting had taken place. Under certain national frameworks and in certain cases, reporting persons ▌may benefit from forms of certification of the fact that they meet the conditions of the applicable rules. Notwithstanding such possibilities, they should have effective access to judicial review, whereby it falls upon the courts to decide, based on all the individual circumstances of the case, whether they meet the conditions of the applicable rules.

(93)  ▌Individuals’ legal or contractual obligations, such as loyalty clauses in contracts or confidentiality/non-disclosure agreements, cannot be relied on to preclude ▌reporting, to deny protection or to penalise reporting persons for having done so where providing the information falling within the scope of such clauses and agreements is necessary for revealing the breach. Where these conditions are met, reporting persons should not incur any kind of liability, be it civil, criminal, administrative or employment-related. Protection from liability for the reporting or disclosure of information under this Directive is warranted for information for which the reporting person had reasonable grounds to believe that its reporting or disclosure was necessary for revealing a breach pursuant to this Directive. This protection should not extend to superfluous information that the person revealed without having such reasonable grounds.

(94)  In cases where the reporting persons lawfully acquired or obtained access to the information reported or the documents containing this information, they should enjoy immunity from liability. This applies both in cases where they reveal the content of documents to which they have lawful access as well as in cases where they make copies of such documents or remove them from the premises of the organisation where they are employed, in breach of contractual or other clauses providing that the relevant documents are the property of the organisation. The reporting persons should also enjoy immunity from liability in cases where the acquisition of or access to the relevant information or documents raises an issue of civil, administrative or labour-related liability. Examples would be cases where the reporting persons acquired the information by accessing the emails of a co-worker or files which they normally do not use within the scope of their work, by taking pictures of the premises of the organisation or by accessing location they do not usually have access to. Where the reporting persons acquired or obtained access to the relevant information or documents by committing a criminal offence, such as physical trespassing or hacking, their criminal liability should remain governed by applicable national law without prejudice to Article 15 (7). Similarly, any other possible liability of the reporting persons arising from acts or omissions which are unrelated to the reporting or are not necessary for revealing a breach pursuant to this Directive should remain governed by applicable Union or national law. In these cases, it should be for the national courts to assess the liability of the reporting persons in the light of all relevant factual information and taking into account the individual circumstances of the case, including the necessity and proportionality of the act or omission in relation to the report or disclosure.

(95)  Retaliatory measures are likely to be presented as being justified on grounds other than the reporting and it can be very difficult for reporting persons to prove the link between the two, whilst the perpetrators of retaliation may have greater power and resources to document the action taken and the reasoning. Therefore, once the reporting person demonstrates prima facie that he or she made a report or public disclosure in line with this Directive and suffered a detriment, the burden of proof should shift to the person who took the detrimental action, who should then demonstrate that ▌the action taken was not linked in any way to the reporting or the public disclosure.

(96)  Beyond an explicit prohibition of retaliation provided in law, it is crucial that reporting persons who do suffer retaliation have access to legal remedies and compensation. The appropriate remedy in each case will be determined by the kind of retaliation suffered, and damage suffered should be compensated in full in accordance with national law. It may take the form of actions for reinstatement (for instance, in case of dismissal, transfer or demotion, or of withholding of training or promotion) or for restoration of a cancelled permit, licence or contract; compensation for actual and future financial losses (for lost past wages, but also for future loss of income, costs linked to a change of occupation); compensation for other economic damages such as legal expenses and costs of medical treatment, and for intangible damage (pain and suffering).

(97)  The types of legal action may vary between legal systems but they should ensure a real and effective compensation or reparation, in a way which is dissuasive and proportionate to the detriment suffered. Of relevance in this context are the Principles of the European Pillar of Social Rights, in particular Principle 7 according to which “(p)rior to any dismissal, workers have the right to be informed of the reasons and be granted a reasonable period of notice. They have the right to access to effective and impartial dispute resolution and, in case of unjustified dismissal, a right to redress, including adequate compensation. The remedies established at national level should not discourage potential future whistleblowers. For instance, allowing for compensation as an alternative to reinstatement in case of dismissal might give rise to a systematic practice in particular by larger organisations, thus having a dissuasive effect on future whistleblowers.

(98)  Of particular importance for reporting persons are interim remedies pending the resolution of legal proceedings that can be protracted. Particularly, actions of interim relief, as provided for under national law, should also be available to reporting persons in order to stop threats, attempts or continuing acts of retaliation, such as harassment ▌, or to prevent forms of retaliation, such as dismissal, which might be difficult to reverse after the lapse of lengthy periods and which can ruin financially the individual — a perspective which can seriously discourage potential whistleblowers.

(99)  Action taken against reporting persons outside the work-related context, through proceedings, for instance, related to defamation, breach of copyright, trade secrets, confidentiality and personal data protection, can also pose a serious deterrent to whistleblowing. In such proceedings, reporting persons should be able to rely on having made a report or disclosure in accordance with this Directive as a defence, provided that the information reported or disclosed was necessary to reveal the breach. In such cases, the person initiating the proceedings should carry the burden to prove that the reporting person does not meet the conditions of the Directive.

(100)  Directive (EU) 2016/943 of the European Parliament and of the Council lays down rules to ensure a sufficient and consistent level of civil redress in the event of unlawful acquisition, use or disclosure of a trade secret. However, it also provides that the acquisition, use or disclosure of a trade secret shall be considered lawful to the extent that it is allowed by Union law. Persons who disclose trade secrets acquired in a work-related context should only benefit from the protection granted by the present Directive (including in terms of not incurring civil liability), provided that they meet the conditions of this Directive, including that the disclosure was necessary to reveal a breach falling within the substantive scope of this Directive. Where these conditions are met, disclosures of trade secrets are to be considered as "allowed" by Union law within the meaning of Article 3(2) of Directive (EU) 2016/943. Moreover, both Directives should be considered as being complementary and the civil redress measures, procedures and remedies as well as exemptions provided for in Directive (EU) 2016/943 should remain applicable for all disclosures of trade secrets falling outside the scope of the present Directive. Competent authorities receiving reports including trade secrets should ensure that these are not used or disclosed for other purposes beyond what is necessary for the proper follow up of the reports.

(101)  A significant cost for reporting persons contesting retaliation measures taken against them in legal proceedings can be the relevant legal fees. Although they could recover these fees at the end of the proceedings, they might not be able to cover them up front, especially if they are unemployed and blacklisted. Assistance for criminal legal proceedings, particularly where the reporting persons meet the conditions of Directive (EU) 2016/1919 of the European Parliament and of the Council(30) and more generally support to those who are in serious financial need might be key, in certain cases, for the effective enforcement of their rights to protection.

(102)  The rights of the concerned person should be protected in order to avoid reputational damages or other negative consequences. Furthermore, the rights of defence and access to remedies of the concerned person should be fully respected at every stage of the procedure following the report, in accordance with Articles 47 and 48 of the Charter of Fundamental Rights of the European Union. Member States should protect the confidentiality of the identity of the person concerned and ensure the rights of defence ▌, including the right to access to the file, the right to be heard and the right to seek effective remedy against a decision concerning the concerned person under the applicable procedures set out in national law in the context of investigations or subsequent judicial proceedings.

(103)  Any person who suffers prejudice, whether directly or indirectly, as a consequence of the reporting or public disclosure of inaccurate or misleading information should retain the protection and the remedies available to him or her under the rules of general law. Where such inaccurate or misleading report or public disclosure was made deliberately and knowingly, the concerned persons should be entitled to compensation in accordance with national law.

(104)  Criminal, civil or administrative penalties are necessary to ensure the effectiveness of the rules on whistleblower protection. Penalties against those who take retaliatory or other adverse actions against reporting persons can discourage further such actions. Penalties against persons who make a report or public disclosure demonstrated to be knowingly false are also necessary to deter further malicious reporting and preserve the credibility of the system. The proportionality of such penalties should ensure that they do not have a dissuasive effect on potential whistleblowers.

(105)  Any decision taken by authorities adversely affecting the rights granted by this Directive, in particular decisions adopted pursuant to Article 6, shall be subject to judicial review in accordance with Article 47 of the Charter of Fundamental Rights of the European Union.

(106)  This Directive introduces minimum standards and Member States should have the power to introduce or maintain more favourable provisions to the reporting person, provided that such provisions do not interfere with the measures for the protection of concerned persons. The transposition of this Directive shall under no circumstances provide grounds for reducing the level of protection already afforded to reporting persons under national law in the areas to which it applies.

(107)  In accordance with Article 26(2) TFEU, the internal market needs to comprise an area without internal frontiers in which the free and safe movement of goods and services is ensured. The internal market should provide Union citizens with added value in the form of better quality and safety of goods and services, ensuring high standards of public health and environmental protection as well as free movement of personal data. Thus, Article 114 TFEU is the appropriate legal basis to adopt the measures necessary for the establishment and functioning of the internal market. In addition to Article 114 TFEU, this Directive should have additional specific legal bases in order to cover the fields that rely on Articles 16, ▌43(2), 50, 53(1), ▌91, 100, ▌168(4), 169, 192(1) and 325(4) TFEU and Article 31 of the Treaty establishing the Euratom for the adoption of Union measures ▌.

(108)  The material scope of this Directive is based on the identification of areas where the introduction of whistleblower protection appears justified and necessary on the basis of currently available evidence. Such material scope may be extended to further areas or Union acts, if this proves necessary as a means of strengthening their enforcement in the light of evidence that may come to the fore in the future, or on the basis of the evaluation of the way in which this Directive has operated.

(109)  Whenever subsequent legislation relevant for this Directive is adopted, it should specify where appropriate that this Directive will apply. Where necessary, Article 1 and the Annex should be amended.

(110)  The objective of this Directive, namely to strengthen enforcement in certain policy areas and acts where breaches of Union law can cause serious harm to the public interest through effective whistleblower protection, cannot be sufficiently achieved by the Member States acting alone or in an uncoordinated manner, but can rather be better achieved by Union action providing minimum standards of harmonisation on whistleblower protection. Moreover, only Union action can provide coherence and align the existing Union rules on whistleblower protection. Therefore, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve this objective.

(111)  This Directive respects fundamental rights and ▌the principles recognised in particular by the Charter of Fundamental Rights of the European Union, in particular Article 11 thereof. Accordingly, this Directive must be implemented in accordance with those rights and principles by ensuring full respect for, inter alia, freedom of expression and information, the right to protection of personal data, the freedom to conduct a business, the right to a high level of consumer protection, the right to a high level of human health protection, the right to a high level of environmental protection, the right to good administration, the right to an effective remedy and the rights of defence.

(112)  The European Data Protection Supervisor was consulted in accordance with Article 28(2) of Regulation (EC) No 45/2001 ▌.

HAVE ADOPTED THIS DIRECTIVE:

CHAPTER I

SCOPE, CONDITIONS FOR PROTECTION AND DEFINITIONS

Article 1

Purpose

The purpose of this Directive is to enhance the enforcement of Union law and policies in specific areas by laying down common minimum standards providing for a high level of protection of persons reporting on breaches.

Article 2

Material scope

1.  ▌This Directive lays down common minimum standards for the protection of persons reporting on the following breaches of Union law:

(a)  breaches falling within the scope of the Union acts set out in the Annex (Parts I and Part II) to this Directive as regards the following areas:

(i)  public procurement;

(ii)  financial services, products and markets and prevention of money laundering and terrorist financing

(iii)  product safety;

(iv)  transport safety;

(v)  protection of the environment;

(vi)  radiation protection and nuclear safety;

(vii)  food and feed safety, animal health and welfare;

(viii)  public health;

(ix)  consumer protection;

(x)  protection of privacy and personal data, and security of network and information systems.

(b)  breaches affecting the financial interests of the Union as defined by Article 325 TFEU and as further specified in relevant Union measures;

(c)  breaches relating to the internal market, as referred to in Article 26(2) TFEU, including breaches of the competition and State aid rules, and as regards acts which breach the rules of corporate tax or arrangements whose purpose is to obtain a tax advantage that defeats the object or purpose of the applicable corporate tax law

2.  This Directive is without prejudice to the possibility for Member States to extend protection under national law as regards areas or acts not covered by paragraph 1.

Article 3

Relationship with other Union acts and national provisions

1.  Where specific rules on the reporting of breaches are provided for in sector-specific Union acts listed in Part II of the Annex, those rules shall apply. The provisions of this Directive shall be applicable ▌to the extent that a matter is not mandatorily regulated in those sector-specific Union acts.

2.  This Directive shall not affect the responsibility of Member States to ensure national security and their power to protect their essential security interests. In particular, it shall not apply to reports on breaches of the procurement rules involving defence or security aspects unless they are covered by the relevant instruments of the Union.

3.  This Directive shall not affect the application of Union or national law on:

(a)  the protection of classified information;

(b)  the protection of legal and medical professional privilege;

(c)  the secrecy of judicial deliberations; and

(d)   rules on criminal procedure.

4.  This Directive shall not affect national rules on the exercise of the workers’ right to consult their representatives or trade unions and on the protection against any unjustified detrimental measure prompted by such consultations as well as on the autonomy of the social partners and their right to enter into collective agreements. This is without prejudice to the level of protection granted by this Directive.

Article 4

Personal scope

1.  This Directive shall apply to reporting persons working in the private or public sector who acquired information on breaches in a work-related context including, at least, the following:

(a)  persons having the status of worker, within the meaning of Article 45(1) TFEU, including civil servants;

(b)  persons having the status of self-employed, within the meaning of Article 49 TFEU;

(c)  shareholders and persons belonging to the administrative, management or supervisory body of an undertaking, including non-executive members, as well as volunteers and paid or unpaid trainees;

(d)  any persons working under the supervision and direction of contractors, subcontractors and suppliers.

2.  This Directive shall apply to reporting persons also where they report or disclose information acquired in a work-based relationship which has since ended.

3.  This Directive shall also apply to reporting persons whose work-based relationship is yet to begin in cases where information concerning a breach has been acquired during the recruitment process or other precontractual negotiation.

4.  The measures for the protection of reporting persons set out in Chapter IV shall also apply, where relevant, to

(a)  facilitators,

(b)  third persons connected with the reporting persons and who may suffer retaliation in a work-related context, such as colleagues or relatives of the reporting person, and

(c)  legal entities that the reporting persons own, work for or are otherwise connected with in a work related context.

Article 5

Conditions for protection of reporting persons

1.  Persons reporting information on breaches falling within the areas covered by this Directive shall qualify for protection provided that:

(a)  they had reasonable grounds to believe that the information reported was true at the time of reporting and that the information fell within the scope of this Directive;

(b)  they reported internally in accordance with Article 7 and externally in accordance with Article 10, or directly externally or publicly disclosed information in accordance with Article 15 of this Directive.

2.  Without prejudice to existing obligations to provide for anonymous reporting by virtue of Union law, this Directive does not affect the power of Member States to decide whether private or public entities and competent authorities shall or shall not accept and follow-up on anonymous reports of breaches.

3.  Persons who reported or publicly disclosed information anonymously but were subsequently identified shall nonetheless qualify for protection in case they suffer retaliation, provided that they meet the conditions laid down in paragraph 1.

4.  A person reporting to relevant institutions, bodies, offices or agencies of the Union on breaches falling within the scope of this Directive shall qualify for protection as laid down in this Directive under the same conditions as a person who reported externally.

Article 6

Definitions

For the purposes of this Directive, the following definitions shall apply:

(1)  ‘breaches’ means acts or omissions:

(i)  that are unlawful and relate to the Union acts and areas falling within the scope referred to in Article 2 and in the Annex; or

(ii)  that defeat the object or the purpose of the ▌rules in these Union acts and areas;

(2)  ‘information on breaches’ means information or reasonable suspicions about actual or potential breaches, and about attempts to conceal breaches which ▌occurred or are very likely to occur in the organisation at which the reporting person works or has worked or in another organisation with which he or she is or was in contact through his or her work;

(3)  ‘report’ means the provision of information on breaches;

(4)  ‘internal reporting’ means provision of information on breaches within a public or private legal entity;

(5)  ‘external reporting’ means provision of information on breaches to the competent authorities;

(6)  ‘public disclosure’ means making information on breaches ▌ available to the public domain;

(7)  ‘reporting person’ means a natural ▌ person who reports or discloses information on breaches acquired in the context of his or her work-related activities;

(8)  ‘facilitator’ means a natural person who assists the reporting person in the reporting process in a work-related context, the assistance of which should be confidential;

(9)  ‘work-related context’ means current or past work activities in the public or private sector through which, irrespective of their nature, persons may acquire information on breaches and within which these persons may suffer retaliation if they report them.

(10)  ‘concerned person’ means a natural or legal person who is referred to in the report or disclosure as a person to whom the breach is attributed or with which he or she is associated;

(11)  ‘retaliation’ means any direct or indirect act or omission which occurs in a work-related context prompted by the internal or external reporting or by public disclosure, and which causes or may cause unjustified detriment to the reporting person;

(12)  ‘follow-up’ means any action taken by the recipient of the report▌ or any competent authority, to assess the accuracy of the allegations made in the report and, where relevant, to address the breach reported, including through actions such as internal enquiry, investigation, prosecution, action for recovery of funds and closure

(13)  ‘feedback’ means the provision to the reporting persons of information on the action envisaged or taken as follow-up to their report and on the grounds for such follow up.

(14)  ‘competent authority’ means any national authority entitled to receive reports in accordance with Chapter III and give feedback to the reporting persons and/or designated to carry out the duties provided for in this Directive, in particular as regards the follow -up of reports.

CHAPTER II

INTERNAL REPORTING AND FOLLOW-UP OF REPORTS

Article 7

Reporting through internal channels

1.  As a general principle and without prejudice to Articles 10 and 15, information on breaches falling within the scope of this Directive may be reported through the internal channels and procedures provided for in this Chapter.

2.  Member States shall encourage the use of internal channels before external reporting, where the breach can be effectively addressed internally and where the reporting person considers that there is no risk of retaliation.

3.  Appropriate information relating to such use of internal channels shall be provided in the context of the information given by legal entities in the public and private sector pursuant to article 9(1)(g), and by competent authorities pursuant to Article 12(4)(a) and to Article 13.

Article 8

Obligation to establish internal channels

1.  Member States shall ensure that legal entities in the private and in the public sector establish internal channels and procedures for reporting and following up on reports, following consultation and in agreement with the social partners, where provided for by national law.

2.  Such channels and procedures shall allow for reporting by employees of the entity. They may allow for reporting by other persons who are in contact with the entity in the context of their work-related activities, referred to in Article 4(1)(b),(c) and (d) ▌.

3.  The legal entities in the private sector referred to in paragraph 1 shall be those with 50 or more employees.

4.  The threshold under paragraph 3 shall not apply to the entities falling within the scope of Union acts referred to in Part I.B and Part II of the Annex.

5.  Reporting channels may be operated internally by a person or department designated for that purpose or provided externally by a third party. The safeguards and requirements referred to in Article 9(1) have to be respected equally by entrusted third parties operating the reporting channel for a private entity.

6.  Legal entities in the private sector with 50 to 249 employees may share resources as regards the receipt and possibly also the investigations of reports. This is without prejudice to their obligations to maintain confidentiality and to give feedback, and to address the reported breach.

7.  Following an appropriate risk assessment taking into account the nature of activities of the entities and the ensuing level of risk for, in particular, the environment and public health, Member States may require ▌private legal entities with less than 50 employees to establish internal reporting channels and procedures

8.  Any decision taken by a Member State to require the private legal entities to establish internal reporting channels pursuant to paragraph 7 shall be notified to the Commission, together with a justification and the criteria used in the risk assessment. The Commission shall communicate that decision to the other Member States.

9.  The legal entities in the public sector referred to in paragraph 1 shall be all public legal entities, including any entity owned or controlled by a public legal entity.

Member States may exempt from the obligation referred to in paragraph 1 municipalities with less than 10 000 inhabitants, or less than 50 employees, or other entities with less than 50 employees.

Member States may provide that internal reporting channels are shared between municipalities, or operated by joint municipal authorities in accordance with national law, provided that the shared internal channels are distinct and autonomous from the external channels.

Article 9

Procedures for internal reporting and follow-up of reports

1.  The procedures for reporting and following-up of reports referred to in Article 8 shall include the following:

(a)  channels for receiving the reports which are designed, set up and operated in a secure manner that ensures the confidentiality of the identity of the reporting person and any third party mentioned in the report, and prevents access to non-authorised staff members;

(b)  an acknowledgment of receipt of the report to the reporting person within no more than seven days of that receipt;

(c)  the designation of an impartial person or department competent for following up on the reports which may be the same person or department as the one receiving the reports and which will maintain communication with and, where necessary, ask for further information from and provide feedback to the reporting person;

(d)  diligent follow-up to the report by the designated person or department;

(e)  diligent follow up where provided for in national law as regards anonymous reporting;

(f)  a reasonable timeframe▌ to provide feedback to the reporting person about the follow-up to the report, not exceeding three months from the acknowledgment of receipt of or if no acknowledgement was sent, from the expiry of the seven-day period after the report was made;

(g)  clear and easily accessible information regarding the ▌ conditions and procedures for reporting externally to competent authorities pursuant to Article 10 and, where relevant, to institutions, bodies, offices or agencies of the Union.

2.  The channels provided for in point (a) of paragraph 1 shall allow for reporting in writing and/or orally, through telephone lines or other voice messaging systems, and upon request of the reporting person, by means of a physical meeting within a reasonable timeframe.

CHAPTER III

EXTERNAL REPORTING AND FOLLOW-UP OF REPORTS

Article 10

Reporting through external channels

Without prejudice to Article 15, reporting persons shall provide information on breaches falling within the scope of this Directive using the channels and procedures referred to in articles 11 and 12, after having used the internal channel or by directly reporting to competent authorities.

Article 11

Obligation to establish external reporting channels and to followup on reports

1.  Member States shall designate the authorities competent to receive, give feedback or follow up on the reports and shall provide them with adequate resources.

2.  Member States shall ensure that the competent authorities:

(a)  establish independent and autonomous external reporting channels, ▌for receiving and handling information provided by the reporting person;

(b)  promptly acknowledge, within seven days the receipt of the reports unless the reporting person explicitly requested otherwise or the competent authority reasonably believes that acknowledging the report would jeopardise the protection of the reporting person’s identity;

(c)  diligently follow-up on the reports;

(d)  give feedback to the reporting person about the follow-up of the report within a reasonable timeframe not exceeding three months, or six months in duly justified cases. The competent authorities shall communicate to the reporting person the final outcome of the investigations, in accordance with the procedures provided for under national law;

(e)  transmit in due time the information contained in the report to competent institutions, bodies, offices or agencies of the Union, as appropriate, for further investigation, where provided for under national or Union law.

3.  Member States may provide that competent authorities, after having duly reviewed the matter, may decide that a reported breach is clearly minor and does not require further follow-up measures pursuant to this Directive. This shall not affect other obligations or other applicable procedures to address the reported breach, or the protection granted by this Directive in relation to reporting through the internal and/or external channels. In such a case, the competent authorities shall notify their decision and its grounds to the reporting person.

4.  Member States may provide that competent authorities may decide that repetitive reports whose substance does not include any new meaningful information compared to a past report that was already closed, do not require follow-up, unless new legal or factual circumstances justify a different follow-up. In such a case, they shall inform the reporting person about the grounds for their decision.

5.  Member States may provide that, in the event of high inflows of reports, competent authorities may deal with reports on serious breaches or breaches of essential provisions falling within the scope of this Directive as a matter of priority, without prejudice to the timeline as set out in point (b) of paragraph 2 of this Article.

6.  Member States shall ensure that any authority which has received a report but does not have the competence to address the breach reported transmits it to the competent authority, within a reasonable time, in a secure manner, and that the reporting person is informed, without delay, of such a transmission.

Article 12

Design of external reporting channels

1.  ▌External reporting channels shall be considered independent and autonomous, if they meet all of the following criteria:

(a)  they are designed, set up and operated in a manner that ensures the completeness, integrity and confidentiality of the information and prevents access to non-authorised staff members of the competent authority;

(b)  they enable the storage of durable information in accordance with Article 18 to allow for further investigations.

2.  The external reporting channels shall allow for reporting in writing and orally through telephone or other voice messaging systems and, upon request by the reporting person, by means of a physical meeting within a reasonable timeframe.

3.  Competent authorities shall ensure that, where a report is received through other channels than the reporting channels referred to in paragraphs 1 and 2 or by other staff members than those responsible for handling reports, the staff members who received it are refrained from disclosing any information that might identify the reporting or the concerned person and promptly forward the report without modification to the ▌staff members responsible for handling reports.

4.  Member States shall ensure that competent authorities have staff members responsible for handling reports, and in particular for:

(a)  providing any interested person with information on the procedures for reporting;

(b)  receiving and following-up reports;

(c)  maintaining contact with the reporting person for the purpose of providing feedback and ask for further information where necessary.

5.  These staff members shall receive specific training for the purposes of handling reports.

Article 13

Information regarding the receipt of reports and their follow-up

Member States shall ensure that competent authorities publish on their websites in a separate, easily identifiable and accessible section at least the following information:

(a)  the conditions under which reporting persons qualify for protection under this Directive;

(b)  the contact details for using the external reporting channels as provided for under Article 12 in particular the electronic and postal addresses, and the phone numbers, indicating whether the phone conversations are recorded ▌;

(c)  the procedures applicable to the reporting of breaches, including the manner in which the competent authority may request the reporting person to clarify the information reported or to provide additional information, the timeframe for giving feedback to the reporting person and the type and content of this feedback;

(d)  the confidentiality regime applicable to reports, and in particular the information in relation to the processing of personal data in accordance with Article 17 of this Directive, Articles 5 and 13 of Regulation (EU) 2016/679, Article 13 of Directive (EU) 2016/680 and Article 11 of Regulation (EU) 2018/1725, as applicable;

(e)  the nature of the follow-up to be given to reports;

(f)  the remedies and procedures available against retaliation and possibilities to receive confidential advice for persons contemplating making a report;

(g)  a statement clearly explaining the conditions under which persons reporting to the competent authority would not incur liability due to a breach of confidentiality as provided for in Article 21(4).

(h)  contact information of the single independent administrative authority as provided for in Article 20(2) where applicable.

Article 14

Review of the procedures by competent authorities

Member States shall ensure that competent authorities review their procedures for receiving reports and their follow-up regularly, and at least once every three years. In reviewing such procedures competent authorities shall take account of their experience and that of other competent authorities and adapt their procedures accordingly.

CHAPTER IV

PUBLIC DISCLOSURES

Article 15

Public disclosures

1.  A person who publicly discloses information on breaches falling within the scope of this Directive shall qualify for protection under this Directive if one of the following conditions is fulfilled:

(a)  he or she first reported internally and externally, or directly externally in accordance with Chapters II and III, but no appropriate action was taken in response to the report within the timeframe referred to in point (f) of Article 9(1) and in point (d) of Article 11(2); or

(b)  he or she had reasonable grounds to believe that:

(i)  the breach may constitute an imminent or manifest danger for the public interest, such as where there is a situation of emergency or a risk of irreversible damage; or

(ii)  in case of external reporting, there is a risk of retaliation or there is a low prospect of the breach being effectively addressed, due to the particular circumstances of the case, such as that evidence may be concealed or destroyed or that an authority is in collusion with the perpetrator of the breach or involved in the breach.

2.  This Article shall not apply to cases where a person directly discloses information to the press pursuant to specific national provisions establishing a system of protection relating to the freedom of expression and information.

CHAPTER V

RULES APPLICABLE TO INTERNAL AND EXTERNAL REPORTING

Article 16

Duty of confidentiality

1.  Member States shall ensure that the identity of the reporting person is not disclosed without the explicit consent of this person to anyone beyond the authorised staff members competent to receive and/or follow-up on reports. This shall also apply to any other information from which the identity of the reporting person may be directly or indirectly deduced

2.  By derogation to paragraph 1, the identity of the reporting person and any other information referred to in paragraph 1 may be disclosed only where this is a necessary and proportionate obligation imposed by Union or national law in the context of investigations by national authorities or judicial proceedings, including with a view to safeguarding the rights of defence of the concerned person.

3.  Such disclosures shall be subject to appropriate safeguards under the applicable rules. In particular, the reporting person shall be informed before his or her identity is disclosed, unless such information would jeopardise the investigations or judicial proceedings. When informing the reporting person, the competent authority shall send him or her a written justification explaining the reasons for the disclosure of the confidential data concerned.

4.  Member States shall ensure that competent authorities receiving reports including trade secrets do not use or disclose them for other purposes beyond what is necessary for the proper follow-up of the reports.

Article 17

Processing of personal data

Any processing of personal data carried out pursuant to this Directive, including the exchange or transmission of personal data by the competent authorities, shall be made in accordance with Regulation (EU) 2016/679 and Directive (EU) 2016/680. Any exchange or transmission of information by Union institutions, bodies, offices and agencies shall be undertaken in accordance with Regulation (EU) 2018/1725.

Personal data which are manifestly not relevant for the handling of a specific case shall not be collected or, if accidentally collected, shall be deleted without undue delay.

Article 18

Record keeping of the reports

1.  Member States shall ensure that competent authorities and the private and public legal entities keep records of every report received, in compliance with the confidentiality requirements provided for in article 16 of this Directive. The reports shall be stored for no longer than it is necessary and proportionate in view of the requirement imposed on competent authorities and on the private and public legal entities pursuant to this directive.

2.  Where a recorded telephone line or another voice messaging system is used for reporting, subject to the consent of the reporting person, the competent authorities and the private and public legal entities shall have the right to document the oral reporting in one of the following ways:

(a)  a recording of the conversation in a durable and retrievable form;

(b)  a complete and accurate transcript of the conversation prepared by the ▌ staff members of the competent authority responsible for handling reports.

The competent authorities and the public and private legal entities shall offer the possibility to the reporting person to check, rectify and agree the transcript of the call by signing it.

3.  Where an unrecorded telephone line or another voice messaging system is used for reporting, the competent authorities and the private and public legal entities shall have the right to document the oral reporting in the form of accurate minutes of the conversation prepared by the▌ staff members responsible for handling the report. The competent authorities and the public and private legal entities shall offer the possibility to the reporting person to check, rectify and agree with ▌minutes of the call by signing them.

4.  Where a person requests a meeting with the ▌staff members of the competent authorities or the private and public legal entities for reporting according to Articles 9(2) and 12(2) ▌, competent authorities and the private and public legal entities shall ensure, subject to the consent of the reporting person, that complete and accurate records of the meeting are kept in a durable and retrievable form.

Competent authorities and private and public legal entities shall have the right to document the records of the meeting in one of the following ways:

(a)  a recording of the conversation in a durable and retrievable form;

(b)  accurate minutes of the meeting prepared by the ▌staff members responsible for handling the report.

The competent authorities and the public and private legal entities shall offer the possibility to the reporting person to check, rectify and agree with the minutes of the meeting by signing them.

CHAPTER VI

PROTECTION MEASURES

Article 19

Prohibition of retaliation ▌

Member States shall take the necessary measures to prohibit any form of retaliation, including threats and attempts of retaliation, whether direct or indirect,▌ including in particular in the form of:

(a)  suspension, lay-off, dismissal or equivalent measures;

(b)  demotion or withholding of promotion;

(c)  transfer of duties, change of location of place of work, reduction in wages, change in working hours;

(d)  withholding of training;

(e)  negative performance assessment or employment reference;

(f)  imposition or administering of any discipline, reprimand or other penalty, including a financial penalty;

(g)  coercion, intimidation, harassment or ostracism ▌;

(h)  discrimination, disadvantage or unfair treatment;

(i)  failure to convert a temporary employment contract into a permanent one, where the worker had legitimate expectations that he or she would be offered permanent employment;

(j)  failure to renew or early termination of the temporary employment contract;

(k)  damage, including to the person’s reputation, particularly in social media, or financial loss, including loss of business and loss of income;

(l)  blacklisting on the basis of a sector or industry-wide informal or formal agreement, which entails that the person will not, in the future, find employment in the sector or industry;

(m)  early termination or cancellation of contract for goods or services;

(n)  cancellation of a licence or permit.

(o)  psychiatric or medical referrals.

Article 20

Measures of support

1.  Member States shall ensure that persons referred to in Article 4 have access, as appropriate, to support measures, in particular, the following:

(i)  access to comprehensive and independent information and advice, which shall be easily accessible to the public and free of charge, on procedures and remedies available on protection against retaliation and the rights of the concerned person.

(ii)  ▌access to effective assistance from competent authorities before any relevant authority involved in their protection against retaliation, including, where provided for under national law, certification of the fact that they qualify for protection under the Directive.

(iii)  access to legal aid in criminal and in cross-border civil proceedings in accordance with Directive (EU) 2016/1919 and Directive 2008/52/EC of the European Parliament and of the Council, and access to legal aid in further proceedings and legal counselling or other legal assistance in accordance with national law.

2.  Member States may provide for financial assistance and support, including psychological support, for reporting persons in the framework of legal proceedings.

3.  The support measures referred to in this Article may be provided, as appropriate, by an information centre or a single and clearly identified independent administrative authority.

Article 21

Measures for the protection ▌against retaliation

1.  Member States shall take the necessary measures to ensure the protection of reporting persons meeting the conditions set out in Article 5 against retaliation. Such measures shall include, in particular, those set out in paragraphs 2 to 8.

2.  Without prejudice to Article 3 (2) and (3), persons making a report or a public disclosure in accordance with this Directive shall not be considered to have breached any restriction on disclosure of information and shall not incur liability of any kind in respect of such reporting or disclosure provided that they had reasonable grounds to believe that the reporting or disclosure of such information was necessary for revealing a breach pursuant to this Directive.

3.  Reporting persons shall not incur liability in respect of the acquisition of or access to the relevant information, provided that such acquisition or access did not constitute a self-standing criminal offence. In the latter case, the criminal liability shall remain governed by applicable national law.

4.  Any other possible liability of the reporting persons arising from acts or omissions which are unrelated to the reporting or are not necessary for revealing a breach pursuant to this Directive shall remain governed by applicable Union or national law.

5.  In ▌proceedings before a court or other authority relating to a detriment suffered by the reporting person, and subject to him or her establishing that he or she made a report or public disclosure and suffered a detriment, it shall be presumed that the detriment was made in retaliation for▌ the report or disclosure. In such cases, it shall be for the person who has taken the detrimental measure to prove that this measure was▌ based on duly justified grounds.

6.  Reporting persons and facilitators shall have access to remedial measures against retaliation as appropriate, including interim relief pending the resolution of legal proceedings, in accordance with the national framework.

7.  ▌In judicial proceedings, including for defamation, breach of copyright, breach of secrecy, breach of data protection rules, disclosure of trade secrets, or for compensation requests based on private, public, or on collective labour law, reporting persons shall not incur liability of any kind for having made a report or public disclosure in accordance with this Directive and shall have the right to rely on that reporting or disclosure to seek dismissal of the case, provided that they had reasonable grounds to believe that the reporting or disclosure was necessary for revealing a breach pursuant to this Directive. Where a person reports or publicly discloses information on breaches falling within the scope of this Directive, which include trade secrets and meet the conditions of this Directive, such reporting or public disclosure shall be considered lawful under the conditions of Article 3(2) of the Directive (EU) 2016/943.

8.  Member States shall take the necessary measures to ensure remedies and full compensation for damages suffered by reporting persons meeting the conditions set out in Article 5 in accordance with national law.

Article 22

Measures for the protection of concerned persons

1.  Member States shall ensure in accordance with the Charter of Fundamental Rights of the European Union that the concerned persons fully enjoy the right to an effective remedy and to a fair trial as well as the presumption of innocence and the rights of defence, including the right to be heard and the right to access their file ▌.

2.  Competent authorities shall ensure that the identity of the concerned persons is ▌ protected for as long as the investigation is ongoing, in accordance with national law.

3.  The procedures set out in Articles 12, 17 and 18 shall also apply for the protection of the identity of the concerned persons.

Article 23

Penalties

1.  Member States shall provide for effective, proportionate and dissuasive penalties applicable to natural or legal persons that:

(a)  hinder or attempt to hinder reporting;

(b)  take retaliatory measures against ▌ persons referred to in Article 4;

(c)  bring vexatious proceedings against ▌ persons referred to in Article 4;

(d)  breach the duty of maintaining the confidentiality as referred to in Article 16 of the identity of reporting persons.

2.  Member States shall provide for effective, proportionate and dissuasive penalties applicable to persons where it is established that they knowingly made false reports or false public disclosures. Member States shall also provide for measures for compensating damages resulting from such reports or disclosures in accordance with national law.

Article 24

No Waiver of Rights and Remedies

Member States shall ensure that the rights and remedies provided for under this Directive may not be waived or limited by any agreement, policy, form or condition of employment, including a pre-dispute arbitration agreement.

CHAPTER VII

FINAL PROVISIONS

Article 25

More favourable treatment and non-regression clause

1.  Member States may introduce or retain provisions more favourable to the rights of the reporting persons than those set out in this Directive, without prejudice to Article 22 and Article 23(2).

2.  The implementation of this Directive shall under no circumstances constitute grounds for a reduction in the level of protection already afforded by Member States in the fields covered by the Directive.

Article 26

Transposition and transitional period

1.  Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by ... [2 years after adoption].

2.  In derogation of paragraph 1, Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with the obligation to set up an internal channel set out Article 8(3) as regards legal entities with more than 50 and less than 250 employees by ... [two years after transposition].

3.   When Member States adopt the provisions referred in paragraphs 1 and 2, 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. They shall forthwith communicate to the Commission the text of those provisions.

Article 27

Reporting, evaluation and review

1.  Member States shall provide the Commission with all relevant information regarding the implementation and application of this Directive. On the basis of the information provided, the. Commission shall, by ... [2 years after transposition], submit a report to the European Parliament and the Council on the implementation and application of this Directive.

2.  Without prejudice to reporting obligations laid down in other Union legal acts, Member States shall, on an annual basis, submit the following statistics on the reports referred to in Chapter III to the Commission, preferably in an aggregated form, if they are available at a central level in the Member State concerned:

(a)  the number of reports received by the competent authorities;

(b)  the number of investigations and proceedings initiated as a result of such reports and their▌ outcome;

(c)  if ascertained, the estimated financial damage▌ and the amounts recovered following investigations and proceedings related to the breaches reported.

3.  The Commission shall, by … [4 years after transposition], taking into account its report submitted pursuant to paragraph 1 and the Member States’ statistics submitted pursuant to paragraph 2, submit a report to the European Parliament and to the Council assessing the impact of national law transposing this Directive. The report shall evaluate the way in which this Directive has operated and consider the need for additional measures, including, where appropriate, amendments with a view to extending the scope of this Directive to further Union acts or areas, in particular the improvement of the working environment to protect workers’ health and safety and working conditions.

In addition, the report shall evaluate how Member States made use of existing cooperation mechanisms as part of their obligations to follow up reports regarding breaches falling within the scope of this Directive and more generally how they cooperate in cases of breaches with a cross-border dimension.

4.  The Commission shall make the reports mentioned in paragraph 1 and 3 public and easily accessible.

Article 28

Entry into force

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

Article 29

Addressees

This Directive is addressed to the Member States.

Done at …,

For the European Parliament For the Council

The President The President

ANNEX

Part I

A.   Article 2(a)(i) – public procurement:

1.  Rules of procedure for public procurement and the award of concessions, for the award of contracts in the fields of defence ▌and security, and for the award of contracts by entities operating in the fields of water, energy, transport and postal services sectors and any other contract or service as regulated by:

(i)  Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts (OJ L 94, 28.3.2014, p. 1);

(ii)  Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ L 94, 28.3.2014, p. 65);

(iii)  Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ L 94, 28.3.2014, p. 243);

(iv)  Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC (OJ L 216, 20.8.2009, p. 76).

2.  Review procedures regulated by:

(i)  Council Directive 92/13/EEC of 25 February 1992 coordinating the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (OJ L 76, 23.3.1992, p. 14);

(ii)  Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts (OJ L 395, 30.12.1989, p. 33).

B.  Article 2(a)(ii) – financial services, products and markets and, prevention of money laundering and terrorist financing:

Rules establishing a regulatory and supervisory framework and consumer and investor protection in the Union’s financial services and capital markets, banking, credit, investment, insurance and re-insurance, occupational or personal pensions products, securities, investment funds, payment ▌services and the activities listed in Annex I to Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338), as regulated by:

(i)  Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC (OJ L 267, 10.10.2009, p. 7);

(ii)  Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p. 1);

(iii)  Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (OJ L 86, 24.3.2012, p. 1);

(iv)  Regulation (EU) No 345/2013 of the European Parliament and of the Council of 17 April 2013 on European venture capital funds (OJ L 115, 25.4.2013, p. 1);

(v)  Regulation (EU) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on European social entrepreneurship fund (OJ L 115, 25.4.2013, p. 18);

(vi)  Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 (OJ L 60, 28.2.2014, p. 34);

(vii)  Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC (OJ L 158, 27.5.2014, p. 77);

(viii)  Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (OJ L 173, 12.6.2014, p. 84);

(ix)  Directive 2015/2366/EU of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 337, 23.12.2015, p. 35);

(x)  Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids (OJ L 142, 30.4.2004, p. 12);

(xi)  Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies (OJ L 184, 14.7.2007, p. 17).

(xii)  Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, p. 38);

(xiii)  Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1).

(xiv)  Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 (OJ L 171, 29.6.2016, p. 1);

(xv)  Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 335, 17.12.2009, p. 1)

(xvi)  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);

(xvii)  Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council (OJ L 35, 11.2.2003, p. 1);

(xviii)  Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (recast) (OJ L 173, 12.6.2014, p. 149);

(xix)  Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes (OJ L 84, 26.3.1997, p. 22);

(xx)  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).

C.  Article 2(a)(iii) – product safety and compliance:

1.  ▌Safety and compliance requirements of products placed in the Union market as defined and regulated by:

(i)  Directive 2001/95/EC of the European Parliament and of the Council of 3 December 2001 on general product safety (OJ L 11, 15.1.2002, p. 4);

(ii)  Union harmonisation legislation concerning manufactured products, including labelling requirements, other than food, feed, medicinal products for human and veterinary use, living plants and animals, products of human origin and products of plants and animals relating directly to their future reproduction as listed in the Annexes of Regulation XX on market surveillance and compliance of products(31);

(iii)  Directive 2007/46/EC of the European Parliament and of the Council of 5 September 2007 establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles (Framework Directive) (OJ L 263, 9.10.2007, p. 1).

2.  Marketing and use of sensitive and dangerous products, as regulated by:

(i)  Directive 2009/43/EC of the European Parliament and of the Council of 6 May 2009 simplifying terms and conditions of transfers of defence-related products within the Community (OJ L 146, 10.06.2009, p. 1);

(ii)  Council Directive 91/477/EEC of 18 June 1991 on control of the acquisition and possession of weapons (OJ L 256, 13.9.1991, p. 51);

(iii)  Regulation (EU) No 98/2013 of 15 January 2013 on the marketing and use of explosives precursors (OJ L 39, 9.2.2013, p. 1).

D.  Article 2(a)(iv) – transport safety:

1.  Safety requirements in the railway sector as regulated by Directive (EU) 2016/798 of the European Parliament and of the Council of 11 May 2016 on railway safety (OJ L 138, 26.5.2016, p. 102).

2.  Safety requirements in the civil aviation sector as regulated by Regulation (EU) No 996/2010 of the European Parliament and of the Council of 20 October 2010 on the investigation and prevention of accidents and incidents in civil aviation and repealing Directive 94/56/EC (OJ L 295, 12.11.2010, p. 35).

3.  Safety requirements in the road sector as regulated by:

(i)  Directive 2008/96/EC of the European Parliament and of the Council of 19 November 2008 on road infrastructure safety management (OJ L 319, 29.11.2008, p. 59);

(ii)  Directive 2004/54/EC of the European Parliament and of the Council of 29 April 2004 on minimum safety requirements for tunnels in the Trans-European Road Network (OJ L 167, 30.4.2004, p. 39);

(iii)  Regulation (EC) No 1071/2009 of the European Parliament and of the Council of 21 October 2009 establishing common rules concerning the conditions to be complied with to pursue the occupation of road transport operator and repealing Council Directive 96/26/EC (OJ L 300, 14.11.2009, p. 51).

4.  Safety requirements in the maritime sector as regulated by:

(i)  Regulation (EC) No 391/2009 of the European Parliament and of the Council of 23 April 2009 on common rules and standards for ship inspection and survey organisations (Recast) (OJ L 131, 28.5.2009, p. 11);

(ii)  Regulation (EC) 392/2009 of the European Parliament and of the Council of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents (OJ L 131, 28.5.2009, p. 24);

(iii)  Directive 2014/90/EU of the European Parliament and of the Council of 23 July 2014 on marine equipment and repealing Council Directive 96/98/EC (OJ L 257, 28.8.2014, p. 146);

(iv)  Directive 2009/18/EC of the European Parliament and of the Council of 23 April 2009 establishing the fundamental principles governing the investigation of accidents in the maritime transport sector and amending Council Directive 1999/35/EC and Directive 2002/59/EC (OJ L 131, 28.5.2009, p. 114);

(v)  Directive 2008/106/EC of the European Parliament and of the Council of 19 November 2008 on the minimum level of training of seafarers (OJ L 323, 3.12.2008, p. 33);

(vi)  Directive 98/41/EC of 18 June 1998 on the registration of persons sailing on board passenger ships operating to or from ports of the Member States of the Community (OJ L 188, 2.7.1998, p.35);

(vii)  Directive 2001/96/EC of the European Parliament and of the Council of 4 December 2001 establishing harmonised requirements and procedures for the safe loading and unloading of bulk carriers (OJ L 13, 16.1.2002, p. 9).

5.  Safety requirements as regulated by Directive 2008/68/EC of the European Parliament and of the Council of 24 September 2008 on the inland transport of dangerous goods (OJ L 260, 30.9.2008, p. 13).

E.  Article 2(a)(v) – protection of the environment:

1.   Any criminal offence against the protection of the environment as regulated by Directive 2008/99/EC of the European Parliament and of the Council of 19 November 2008 on the protection of the environment through criminal law (OJ L 328, 6.12.2008, p. 28) or any unlawful conduct infringing the legislation set out in the Annexes of the Directive 2008/99/EC;

2.  Provisions on the environment and the climate, as regulated by:

(i)  Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (OJ L 275, 25.10.2003, p. 32)

(ii)  Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC (OJ L 140, 5.6.2009, p. 16);(iii) Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC (OJ L 315, 14.11.2012, p. 1).

(iii)  Regulation (EU) No 525/2013 of the European Parliament and of the Council of 21 May 2013 on a mechanism for monitoring and reporting greenhouse gas emissions and for reporting other information at national and Union level relevant to climate change and repealing Decision No 280/2004/EC (OJ L 165, 18.6.2013, p. 13);

(iv)  Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources (OJ L 328, 21.12.2018, p. 82)

3.  Provisions on sustainable development and waste management, as regulated by:

(i)  Directive 2008/98/EC of the European Parliament and of the Council of 19 November 2008 on waste and repealing certain Directives (OJ L 312, 22.11.2008, p. 3);

(ii)  Regulation (EU) No 1257/2013 of the European Parliament and of the Council of 20 November 2013 on ship recycling and amending Regulation (EC) No 1013/2006 and Directive 2009/16/EC (OJ L 330, 10.12.2013, p. 1);

(iii)   Regulation (EU) No 649/2012 of the European Parliament and of the Council of 4 July 2012 concerning the export and import of hazardous chemicals (OJ L 201, 27.7.2012, p. 60);

4.  Provisions on marine, air and noise pollution, as regulated by:

(i)  Directive 1999/94/EC relating to the availability of consumer information on fuel economy and CO2 emissions in respect of the marketing of new passenger cars (OJ L 12, 18.1.2000, p. 16);

(ii)  Directive 2001/81/EC of the European Parliament and of the Council of 23 October 2001 on national emission ceilings for certain atmospheric pollutants (OJ L 309, 27.11.2001, p. 22);

(iii)  Directive 2002/49/EC of the European Parliament and of the Council of 25 June 2002 relating to the assessment and management of environmental noise (OJ L 189, 18.7.2002, p. 12);

(iv)  Regulation (EC) No 782/2003 of the European Parliament and of the Council of 14 April 2003 on the prohibition of organotin compounds on ships (OJ EU L 115, 9.5.2003, p. 1);

(v)   Directive (EC) 2004/35 of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage (OJ L 143, 30.4.2004, p. 56);

(vi)  Directive 2005/35/EC on ship-source pollution and on the introduction of penalties for infringements (OJ L 255, 30.9.2005, p. 11);

(vii)  Regulation (EC) No 166/2006 of the European Parliament and of the Council of 18 January 2006 concerning the establishment of a European Pollutant Release and Transfer Register and amending Council Directives 91/689/EEC and 96/61/EC (OJ L 33, 4.2.2006, p. 1);

(viii)  Directive 2009/33/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles (OJ L 120, 15.5.2009, p. 12);

(ix)  Regulation (EC) No 443/2009 of the European Parliament and of the Council of 23 April 2009 setting emission performance standards for new passenger cars as part of the Community's integrated approach to reduce CO2 emissions from light-duty vehicles (OJ L 140, 5.6.2009, p. 1);

(x)  Regulation (EC) No 1005/2009 of the European Parliament and of the Council of 16 September 2009 on substances that deplete the ozone layer (OJ L 286, 31.10.2009, p. 1);

(xi)  Directive 2009/126/EC of the European Parliament and of the Council of 21 October 2009 on Stage II petrol vapour recovery during refuelling of motor vehicles at service stations (OJ L 285, 31.10.2009, p. 36);

(xii)  Regulation (EU) No 510/2011 of the European Parliament and of the Council of 11 May 2011 setting emission performance standards for new light commercial vehicles as part of the Union's integrated approach to reduce CO2 emissions from light-duty vehicles (OJ L 145, 31.5.2011, p. 1);

(xiii)  Directive 2014/94/EU of the European Parliament and of the Council of 22 October 2014 on the deployment of alternative fuels infrastructure (OJ L 307, 28.10.2014, p. 1);

(xiv)   Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April 2015 on the monitoring, reporting and verification of carbon dioxide emissions from maritime transport, and amending Directive 2009/16/EC (OJ L 123, 19.5.2015, p. 55);

(xv)  Directive (EU) 2015/2193 of the European Parliament and of the Council of 25 November 2015 on the limitation of emissions of certain pollutants into the air from medium combustion plants (OJ L 313, 28.11.2015, p. 1);

5.  Provisions on the protection and management of water and soils, as regulated by:

(i)  Directive 2007/60/EC of the European Parliament and of the Council of 23 October 2007 on the assessment and management of flood risks (OJ L 288, 6.11.2007, p. 27);

(ii)  Directive 2008/105/EC of the European Parliament and of the Council of 16 December 2008 on environmental quality standards in the field of water policy, amending and subsequently repealing Council Directives 82/176/EEC, 83/513/EEC, 84/156/EEC, 84/491/EEC, 86/280/EEC and amending Directive 2000/60/EC of the European Parliament and of the Council (OJ L 348, 24.12.2008, p. 84);

(iii)  Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment (OJ L 26, 18.1.2012, p. 1).

6.  Provisions relating to the protection of nature and biodiversity, as regulated by:

(i)  Council Regulation (EC) No 1936/2001 of 27 September 2001 laying down control measures applicable to fishing for certain stocks of highly migratory fish (OJ L 263, 3.10.2001, p. 1);

(ii)  Council Regulation (EC) No 812/2004 of 26 April 2004 laying down measures concerning bycatches of cetaceans in fisheries and amending Regulation (EC) No 88/98 (OJ L 150, 30.4.2004, p. 12);

(iii)  Regulation (EC) No 1007/2009 of the European Parliament and of the Council of 16 September 2009 on trade in seal products (OJ L 286, 31.10.2009, p. 36);

(iv)  Council Regulation (EC) No 734/2008 of 15 July 2008 on the protection of vulnerable marine ecosystems in the high seas from the adverse impacts of bottom fishing gears (OJ L 201, 30.7.2008, p. 8);

(v)  Directive 2009/147/EC of the European Parliament and of the Council of 30 November 2009 on the conservation of wild birds (OJ L 20, 26.1.2010, p. 7);

(vi)  Regulation of (EU) 995/2010 of the European Parliament and of the Council of 20 October 2010 laying down the obligations of operators who place timber and timber products on the market (OJ L 295, 12.11.2010, p. 23);

(vii)  Regulation (EU) No 1143/2014 of the European Parliament and of the Council of 22 October 2014 on the prevention and management of the introduction and spread of invasive alien species (OJ L 317, 4.11.2014, p. 35);

7.  Provisions on chemicals, as regulated under Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC (OJ L 396, 30.12.2006, p.1);

8.  Provisions relating to organic products, as regulated under Regulation (EU) 2018/848 of the European Parliament and of the Council of 30 May 2018 on organic production and labelling of organic products and repealing Council Regulation (EC) No 834/2007 (OJ L 150, 14.6.2018, p. 1).

F.  Article 2(a)(vi) – radiation protection and nuclear safety

Rules on nuclear safety as regulated by:

(i)  Council Directive 2009/71/Euratom of 25 June 2009 establishing a Community framework for the nuclear safety of nuclear installations (OJ L 172, 2.7.2009, p. 18);

(ii)  Council Directive 2013/51/Euratom of 22 October 2013 laying down requirements for the protection of the health of the general public with regard to radioactive substances in water intended for human consumption (OJ L 296, 7.11.2013, p. 12);

(iii)  Council Directive 2013/59/Euratom of 5 December 2013 laying down basic safety standards for protection against the dangers arising from exposure to ionising radiation, and repealing Directives 89/618/Euratom, 90/641/Euratom, 96/29/Euratom, 97/43/Euratom and 2003/122/Euratom (OJ L 13, 17.1.2014, p. 1);

(iv)  Council Directive 2011/70/Euratom of 19 July 2011 establishing a Community framework for the responsible and safe management of spent fuel and radioactive waste (OJ L 199, 2.8.2011, p. 48);

(v)  Council Directive 2006/117/Euratom of 20 November 2006 on the supervision and control of shipments of radioactive waste and spent fuel (OJ L 337, 5.12.2006, p. 21).

(vi)  Council Regulation (Euratom) 2016/52 of 15 January 2016 laying down maximum permitted levels of radioactive contamination of food and feed following a nuclear accident or any other case of radiological emergency, and repealing Regulation (Euratom) No 3954/87 and Commission Regulations (Euratom) No 944/89 and (Euratom) No 770/90 (OJ L 13, 20.1.2016, p. 2);

(vii)  Council Regulation (Euratom) No 1493/93 of 8 June 1993 on shipments of radioactive substances between Member States.

G.  Article 2(a)(vii) – food and feed safety, animal health and animal welfare:

1.  Union food and feed law governed by the general principles and requirements as defined by Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety (OJ L 31, 1.2.2002, p. 1).

2.  Animal health as regulated by:

(i)   Regulation (EU) 2016/429 of the European Parliament and of the Council of 9 March 2016 on transmissible animal diseases and amending and repealing certain acts in the area of animal health (‘Animal Health Law’) (OJ L 84, 31.3.2016, p. 1).

(ii)  Regulation (EC) No 1069/2009 of the European Parliament and of the Council of 21 October 2009 laying down health rules as regards animal by-products and derived products not intended for human consumption (OJ L 300, 14.11.2009, p. 1);

3.  Regulation (EU) 2017/625 of the European Parliament and of the Council of 15 March 2017 on official controls and other official activities performed to ensure the application of food and feed law, rules on animal health and welfare, plant health and plant protection products, amending Regulations (EC) No 999/2001, (EC) No 396/2005, (EC) No 1069/2009, (EC) No 1107/2009, (EU) No 1151/2012, (EU) No 652/2014, (EU) 2016/429 and (EU) 2016/2031 of the European Parliament and of the Council, Council Regulations (EC) No 1/2005 and (EC) No 1099/2009 and Council Directives 98/58/EC, 1999/74/EC, 2007/43/EC, 2008/119/EC and 2008/120/EC, and repealing Regulations (EC) No 854/2004 and (EC) No 882/2004 of the European Parliament and of the Council, Council Directives 89/608/EEC, 89/662/EEC, 90/425/EEC, 91/496/EEC, 96/23/EC, 96/93/EC and 97/78/EC and Council Decision 92/438/EEC (Official Controls Regulation) (OJ L 95, 7.4.2017, p. 1).

4.   Provisions and standards on the protection and well-being of animals, as regulated by:

(i)  Council Directive 98/58/EC of 20 July 1998 concerning the protection of animals kept for farming purposes (OJ L 221, 8.8.1998, p. 23);

(ii)  Council Regulation (EC) No 1/2005 of 22 December 2004 on the protection of animals during transport and related operations and amending Directives 64/432/EEC and 93/119/EC and Regulation (EC) No 1255/97 (OJ L 3, 5.1.2005, p. 1);

(iii)  Council Regulation (EC) No 1099/2009 of 24 September 2009 on the protection of animals at the time of killing (OJ L 303, 18.11.2009, p. 1);

(iv)  Council Directive 1999/22/EC of 29 March 1999 relating to the keeping of wild animals in zoos (OJ L 94, 9.4.1999, p. 24).

H.  Article 2(a)(viii) – public health:

1.  Measures setting high standards of quality and safety of organs and substances of human origin, as regulated by:

(i)  Directive 2002/98/EC of the European Parliament and of the Council of 27 January 2003 setting standards of quality and safety for the collection, testing, processing, storage and distribution of human blood and blood components and amending Directive 2001/83/EC (OJ L 33, 8.2.2003, p. 30);

(ii)  Directive 2004/23/EC of the European Parliament and of the Council of 31 March 2004 on setting standards of quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells (OJ L 102, 7.4.2004, p. 48);

(iii)  Directive 2010/53/EU of the European Parliament and of the Council of 7 July 2010 on standards of quality and safety of human organs intended for transplantation (OJ L 207, 6.8.2010, p. 14).

2.  Measures setting high standards of quality and safety for medicinal products and devices of medical use as regulated by:

(i)  Regulation (EC) No 141/2000 of the European Parliament and of the Council of 16 December 1999 on orphan medicinal products (OJ L 18, 22.1.2000, p. 1);

(ii)  Directive 2001/83/EC of 6 November 2001 on the Community code relating to medicinal products for human use (OJ L 311, 28.11.2001, p. 67);

(iii)  Regulation (EU) 2019/6 of the European Parliament and of the Council of 11 December 2018 on veterinary medicinal products and repealing Directive 2001/82/EC (OJ L 4, 7.1.2019 p.43);

(iv)  Regulation (EC) 726/2004 of the European Parliament and of the Council of 31 March 2004 laying down Community procedures for the authorisation and supervision of medicinal products for human and veterinary use and establishing a European Medicines Agency (OJ L 136, 30.4.2004, p. 1);

(v)  Regulation (EC) No 1901/2006 of the European Parliament and of the Council of 12 December 2006 on medicinal products for paediatric use and amending Regulation (EEC) No 1768/92, Directive 2001/20/EC, Directive 2001/83/EC and Regulation (EC) No 726/2004 (OJ L 378, 27.12.2006, p. 1);

(vi)  Regulation (EC) 1394/2007 of the European Parliament and of the Council of 13 November 2007 on advanced therapy medicinal products and amending Directive 2001/83/EC and Regulation (EC) No 726/2004 (OJ L 324, 10.12.2007, p. 121);

(vii)  Regulation (EU) 536/2014 of the European Parliament and of the Council of 16 April 2014 on clinical trials on medicinal products for human use, and repealing Directive 2001/20/EC (OJ L 158, 27.5.2014, p. 1).

3.  Patients’ rights as regulated by Directive 2011/24/EU of the European Parliament and of the Council of 9 March 2011 on the application of patients’ rights in cross-border healthcare (OJ L 88, 4.4.2011, p. 45).

4.  Manufacture, presentation and sale of tobacco and related products regulated by Directive 2014/40/EU of the European Parliament and of the Council of 3 April 2014 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products and repealing Directive 2001/37/EC (OJ L 127, 29.4.2014, p. 1).

I.  Article 2(a)(ix) – consumer protection:

Consumer rights and consumer protection as regulated by:

(i)  Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers (OJ L 80, 18.3.1998, p. 27);

(ii)  Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees (OJ L 171, 7.7.1999, p. 12);

(iii)  Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC (OJ L 271, 9.10.2002, p. 16);

(iv)  Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’) (OJ L 149, 11.6.2005, p. 22);

(v)  Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC (OJ L 133, 22.5.2008, p. 66);

(vi)  Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council (OJ L 304, 22.11.2011, p. 64);

(vii)  Directive 2014/92/EU of the European Parliament and of the Council of 23 July 2014 on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features (OJ L 257, 28.8.2014, p. 214).

J.  Article 2(a)(x) –protection of privacy and personal data, and security of network and information systems:

(i)  Directive 2002/58/EC of the European Parliament and of the Council concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications) (OJ L 201, 31.7.2002, p. 37);

(ii)  Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1);

(iii)  Directive (EU) 2016/1148 of the European Parliament and of the Council of 6 July 2016 concerning measures for a high common level of security of network and information systems across the Union (OJ L 194, 19.7.2016, p. 1).

Part II

Article 3(1) of the Directive refers to the following Union legislation:

A.  Article 2(a)(ii) – financial services, products and markets and prevention of money laundering and terrorist financing:

1.  Financial services:

(i)  Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32);

(ii)  Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs) (OJ L 354, 23.12.2016, p. 37);

(iii)  Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC (OJ L 157, 9.6.2006, p. 87);

(iv)  Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ L 173, 12.6.2014, p. 1);

(v)  Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338);

(vi)  Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, p. 349);

(vii)  Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1);

(viii)  Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) (OJ L 352, 9.12.2014, p. 1);

(ix)  Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (OJ L 337, 23.12.2015, p. 1);

(x)  Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (recast) (OJ L 26, 2.2.2016, p. 19);

(xi)  Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (OJ L 168, 30.6.2017, p. 12).

2.  Prevention of money laundering and terrorist financing:

(i)  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);

(ii)  Regulation (EU) 2015/847 of the European Parliament and of the Council of 20 May 2015 on information accompanying transfers of funds and repealing Regulation (EC) No 1781/2006 (OJ L 141, 5.6.2015, p. 1).

B.  Article 2(a)(iv) – transport safety:

(i)  Regulation (EU) No 376/2014 of the European Parliament and of the Council of 3 April 2014 on the reporting, analysis and follow-up of occurrences in civil aviation amending Regulation (EU) No 996/2010 of the European Parliament and of the Council and repealing Directive 2003/42/EC of the European Parliament and of the Council and Commission Regulations (EC) No 1321/2007 and (EC) No 1330/2007 (OJ L 122, 24.4.2014, p. 18);

(ii)  Directive 2013/54/EU of the European Parliament and of the Council of 20 November 2013 concerning certain flag State responsibilities for compliance with and enforcement of the Maritime Labour Convention, 2006 (OJ L 329, 10.12.2013, p. 1);

(iii)  Directive 2009/16/EC of the European Parliament and of the Council of 23 April 2009 on port State control (OJ L 131, 28.5.2009, p. 57).

C.  Article 2(a)(v) – protection of the environment:

(i)  Directive 2013/30/EU of the European Parliament and of the Council of 12 June 2013 on safety of offshore oil and gas operations and amending Directive 2004/35/EC (OJ L 178, 28.6.2013, p. 66).

ANNEX TO THE LEGISLATIVE RESOLUTION

Commission statement on the Directive on the protection of persons reporting on breaches of Union law

At the time of the review to be conducted in accordance with Article 27 of the Directive, the Commission will consider the possibility of proposing to extend its scope of application to certain acts based on Articles 153 TFEU and 157 TFEU, after consulting the social partners, where appropriate, in accordance with Article 154 TFEU.

(1) OJ C 405, 9.11.2018, p. 1.
(2) OJ C 62, 15.2.2019, p. 155.
(3)* TEXT HAS NOT YET UNDERGONE LEGAL-LINGUISTIC FINALISATION.
(4)OJ C […], […], p. […].
(5)OJ C […], […], p. […].
(6)OJ C […], […], p. […].
(7) Position of the European Parliament of 16 April 2019.
(8) Communication of 8.12.2010 "Reinforcing sanctioning regimes in the financial services sector".
(9)The body of relevant ‘Union harmonisation legislation’ is circumscribed and listed in Regulation [XXX] laying down rules and procedures for compliance with and enforcement of Union harmonisation legislation, 2017/0353 (COD).
(10)Regulated by Directive (EC) 2001/95 of the European Parliament and of the Council, of 3 December 2001, on general product safety (OJ L 11, p. 4).
(11)Regulation (EU) No 376/2014 of the European Parliament and of the Council, of 3 April 2014, on the reporting, analysis and follow-up of occurrences in civil aviation (OJ L 122, p. 18).
(12)Directive 2013/54/EU, of the European Parliament and of the Council, of 20 November 2013, concerning certain flag State responsibilities for compliance with and enforcement of the Maritime Labour Convention (OJ L 329, p. 1), Directive 2009/16/EC of the European Parliament and of the Council, of 23 April 2009, on port State control (OJ L 131, p. 57).
(13)COM (2018) 10 final.
(14)Directive 2013/30/EU of the European Parliament and of the Council, of 12 June 2013, on safety of offshore oil and gas operations (OJ L 178, p. 66).
(15)Council Directive 2014/87/Euratom of 8 July 2014 amending Directive 2009/71/Euratom establishing a Community framework for the nuclear safety of nuclear installations (OJ L 219, 25.7.2014, p. 42).
(16)Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety (OJ L 31, p. 1).
(17)OJ L 84, p. 1.
(18)Directive (EU) 2016/1148 of the European Parliament and of the Council of 6 July 2016 concerning measures for a high common level of security of network and information systems across the Union.
(19) OJ C 313, 23.10.1996, p. 1.
(20) OJ C 151, 20.5.1997, p. 1.
(21)OJ L 173, p. 1.
(22)Commission Implementing Directive (EU) 2015/2392 of 17 December 2015 on Regulation (EU) No 596/2014 of the European Parliament and of the Council as regards reporting to competent authorities of actual or potential infringements of that Regulation (OJ L 332, p. 126).
(23) OJ L 56, 4.3.1968, p. 1.
(24)CM/Rec (2014)7.
(25) Cited above.
(26) Regulation (EU) No 376/2014 of the European Parliament and of the Council of 3 April 2014 on the reporting, analysis and follow-up of occurrences in civil aviation, (OJ L 122, p. 18).
(27) Directive 2013/30/EU of the European Parliament and of the Council of 12 June 2013 on safety of offshore oil and gas operations and amending Directive 2004/35/EC (OJ L 178, 28.6.2013, p. 66).
(28) Directive (EU) 2016/680 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and on the free movement of such data, and repealing Council Framework Decision 2008/977/JHA (OJ L 119, 4.5.2016, p. 89).
(29) Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (OJ L 8, 12.1.2001, p. 1).
(30) Directive (EU) 2016/1919 of the European Parliament and of the Council of 26 October 2016 on legal aid for suspects and accused persons in criminal proceedings and for requested persons in European arrest warrant proceedings (OJ L 297 4.11.2016, p. 1).
(31)2017/0353 (COD) - This is currently a Proposal for a Regulation (EU) 2019/... of the European Parliament and of the Council of ... on market surveillance and compliance of products and amending Directive 2004/42/EC and Regulations (EC) No 765/2008 and (EU) No 305/2011 amending amending Council Directive 2004/42/EC, Regulations (EC) No 765/2008 and (EU) No 305/2011 listing in the Annex all the harmonised legislation containing requirements on the design and labelling of a product.


Cross-border distribution of collective investment undertakings (Directive) ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 16 April 2019 on the proposal for a directive of the European Parliament and of the Council amending Directive 2009/65/EC of the European Parliament and of the Council and Directive 2011/61/EU of the European Parliament and of the Council with regard to cross-border distribution of collective investment funds (COM(2018)0092 – C8-0111/2018 – 2018/0041(COD))
P8_TA-PROV(2019)0367A8-0430/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0092),

–  having regard to Article 294(2) and Article 53(1) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0111/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 11 July 2018(1),

–  having regard to the provisional agreement approved by the responsible committee under Rule 69f(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 27 February 2019 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0430/2018),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 16 April 2019 with a view to the adoption of Directive (EU) 2019/… of the European Parliament and of the Council amending Directives 2009/65/EC and 2011/61/EU with regard to cross-border distribution of collective investment undertakings

P8_TC1-COD(2018)0041


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 53(1) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee(2),

Acting in accordance with the ordinary legislative procedure(3),

Whereas:

(1)  Common objectives of Directive 2009/65/EC of the European Parliament and of the Council(4) and Directive 2011/61/EU of the European Parliament and of the Council(5) include ensuring a level playing field among collective investment undertakings and removing restrictions to the free movement of units and shares of collective investment undertakings in the Union, at the same time ensuring more uniform protection for investors. While those objectives have been largely achieved, certain barriers still hamper the ability of fund managers to fully benefit from the internal market.

(2)  This Directive is complemented by Regulation (EU) 2019/… of the European Parliament and of the Council(6)(7). That Regulation lays down additional rules and procedures concerning undertakings for collective investment in transferable securities (UCITS) and alternative investment fund managers (AIFMs). That Regulation and this Directive should collectively further coordinate the conditions for fund managers operating in the internal market and facilitate cross-border distribution of the funds they manage.

(3)  It is necessary to fill in the regulatory gap and align the procedure ▌for notifying competent authorities of changes regarding UCITS with the notification procedure laid down in Directive 2011/61/EU.

(4)  Regulation (EU) 2019/… + further strengthens the principles applicable to marketing communications governed by Directive 2009/65/EC and extends the application of those principles to AIFMs, thereby resulting in a high standard of investor protection, regardless of the type of investor. The corresponding provisions of Directive 2009/65/EC relating to marketing communications and accessibility of national laws and regulations relevant to the arrangement of marketing units of UCITS are therefore no longer necessary and should be deleted.

(5)  The provisions of Directive 2009/65/EC which require UCITS to provide facilities to investors, as implemented by certain national legal systems, have proven to be burdensome. In addition, local facilities are rarely used by investors in the manner intended by that Directive. The preferred method of contact has shifted to direct interaction between investors and fund managers, either electronically or by telephone, whereas payments and redemptions are executed through other channels. While those local facilities are currently used for administrative purposes such as cross-border recovery of regulatory fees, such issues should be addressed via other means including cooperation between competent authorities. Consequently, rules should be established which modernise and specify the requirements for providing facilities to retail investors, and Member States should not require a local physical presence for the provision of such facilities. In any case, those rules should ensure that investors have access to the information to which they are entitled.

(6)  In order to ensure the consistent treatment of retail investors, it is necessary that the requirements relating to facilities are also applied to AIFMs where Member States allow them to market units or shares of alternative investment funds (AIFs) to retail investors in their territories.

(7)  The absence of clear and uniform conditions for the discontinuation of marketing of units or shares of a UCITS or an AIF in a host Member State creates economic and legal uncertainty for fund managers. Therefore, Directives 2009/65/EC and 2011/61/EU should set out clear conditions ▌under which de-notification of the arrangements made for marketing as regards some or all of the units or shares could take place. ▌Those conditions should balance, on the one hand, the ability of collective investment undertakings or their managers to terminate their arrangements made for marketing of their shares or units when the established conditions are met and, on the other hand, the interests of investors in such undertakings.

(8)  The possibility to cease marketing UCITS or AIFs in a particular Member State should neither come at a cost to investors nor diminish their safeguards under Directive 2009/65/EC or Directive 2011/61/EU, in particular with regard to their right to accurate information on the continued activities of those funds.

(9)  There are cases where an AIFM wishing to test investor appetite for a particular investment idea or investment strategy is faced with diverging treatment of pre-marketing in different national legal systems. The definition of pre-marketing and the conditions under which it is permitted vary considerably between those Member States in which it is permitted, whereas in other Member States there is no concept of pre-marketing at all. To address those divergences, a harmonised definition of pre-marketing should be provided and the conditions under which an EU AIFM can engage in pre-marketing should be established.

(10)  For pre-marketing to be recognised as such under Directive 2011/61/EU, it should be addressed to potential professional investors and concern an investment idea or investment strategy in order to test their interest in an AIF or a compartment which is not yet established, or which is established, but not yet notified for marketing in accordance with that Directive. Accordingly, during the course of pre-marketing, it should not be possible for investors to subscribe to the units or shares of an AIF and the distribution of subscription forms or similar documents to potential professional investors, whether in draft or final form, should not be permitted. EU AIFMs should ensure that investors do not acquire units or shares in an AIF through pre-marketing and that investors contacted as part of pre-marketing can only acquire units or shares in that AIF through marketing permitted under Directive 2011/61/EU. Any subscription by professional investors, within 18 months of the EU AIFM having begun pre-marketing, to units or shares of an AIF referred to in the information provided in the context of pre-marketing, or of an AIF established as a result of the pre-marketing, should be considered to be the result of marketing and should be subject to the applicable notification procedures referred to in Directive 2011/61/EU. To ensure that national competent authorities can exercise control over pre-marketing in their Member State, an EU AIFM should send, within 2 weeks of having begun pre-marketing, an informal letter, in paper form or by electronic means, to the competent authorities of its home Member State, specifying inter alia in which Member States it is or has engaged in pre-marketing, the periods during which the pre-marketing is taking or has taken place and including, where relevant, a list of its AIFs and compartments of AIFs which are or were the subject of pre-marketing. The competent authorities of the home Member State of the EU AIFM should promptly inform the competent authorities of the Member States in which the EU AIFM is or has engaged in pre-marketing thereof.

(11)  EU AIFMs should ensure that their pre-marketing is adequately documented.

(12)  National laws, regulations and administrative provisions necessary to comply with Directive 2011/61/EU and, in particular, with harmonised rules on pre-marketing, should not in any way disadvantage EU AIFMs vis-à-vis non-EU AIFMs. This concerns both the current situation in which non-EU AIFMs do not have passporting rights, and a situation in which the provisions on such passporting in Directive 2011/61/EU become applicable.

(13)  In order to ensure legal certainty, it is necessary to synchronise the application dates of national laws, regulations and administrative provisions implementing this Directive and Regulation (EU) 2019/…(8) with regard to relevant provisions on marketing communications and pre-marketing.

(14)  In accordance with the Joint Political Declaration of 28 September 2011 of Member States and the Commission on explanatory documents(9), Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Amendments to Directive 2009/65/EC

Directive 2009/65/EC is amended as follows:

(1)  in Article 17(8), the following subparagraphs are added:

▌"

‘Where, pursuant to a change as referred to in the first subparagraph, the management company would no longer comply with this Directive, the ▌competent authorities of the management company’s home Member State shall inform the management company within 15 working days of receipt of all the information referred to in the first subparagraph that it is not to implement that change. In that case, the competent authorities of the management company’s home Member State shall inform the competent authorities of the management company’s host Member State accordingly.

Where a change referred to in the first subparagraph is implemented after information has been transmitted in accordance with the second subparagraph and pursuant to that change the management company no longer complies with this Directive, the competent authorities of the management company’s home Member State ▌shall take all appropriate measures in accordance with Article 98 and shall notify the competent authorities of the management company’s host Member State without undue delay of the measures taken.’;

"

(2)  Article 77 is deleted;

(3)  in Article 91, paragraph 3 is deleted;

(4)  Article 92 is replaced by the following:"

‘Article 92

1.  Member States shall ensure that a UCITS makes available, in each Member State where it intends to market its units, facilities to perform the following tasks:

   (a) process ▌subscription, ▌repurchase and redemption orders and make other payments to unit-holders relating to the units of the UCITS, in accordance with the conditions set out in the documents required pursuant to Chapter IX;
   (b) provide investors with information on how orders referred to in point (a) can be made and how repurchase and redemption proceeds are paid;
   (c) facilitate the handling of information and access to procedures and arrangements referred to in Article 15 relating to the investors’ exercise of their rights arising from their investment in the UCITS in the Member State where the UCITS is marketed;
   (d) make the information and documents required pursuant to Chapter IX available to investors under the conditions laid down in Article 94, for the purposes of inspection and obtaining copies thereof;
   (e) provide investors with information relevant to the tasks that the facilities perform in a durable medium; and
   (f) act as a contact point for communicating with the competent authorities.

2.  Member States shall not require a UCITS ▌to have a physical presence in the host Member State or to appoint a third party for the purposes of paragraph 1.

3.  The UCITS ▌shall ensure that the facilities to perform the tasks referred to in paragraph 1, including electronically, are provided:

   (a) ▌in the official language or one of the official languages of the Member State where the UCITS is marketed or in a language approved by the competent authorities of that Member State;
   (b) by the UCITS ▌itself, by a third party which is subject to regulation and supervision governing the tasks to be performed, or by both.

For the purposes of point (b), where the tasks are to be performed by a third party, the appointment of that third party shall be evidenced by a written contract, which specifies which of the tasks referred to in paragraph 1 are not to be performed by the UCITS ▌and that the third party will receive all the relevant information and documents from the UCITS ▌.’;

"

(5)  ▌Article 93 is amended as follows:

(a)  in paragraph 1, the following subparagraph is added:"

‘The notification letter shall also include the details necessary, including the address, for the invoicing or for the communication of any applicable regulatory fees or charges by the competent authorities of the host Member State and information on the facilities for performing the tasks referred to in Article 92(1).’;

"

(b)   paragraph 8 is replaced by the following:"

‘8. In the event of a change to the information in the notification letter submitted in accordance with paragraph 1, or a change regarding share classes to be marketed, the UCITS shall give written notice thereof to the competent authorities of both the UCITS home Member State and the UCITS host Member State at least 1 month before implementing that change.

Where, pursuant to a change as referred to in the first subparagraph, the UCITS would no longer comply with this Directive, the ▌competent authorities of the UCITS home Member State shall inform the UCITS within 15 working days of receipt of all the information referred to in the first subparagraph that it is not to implement that change. In that case, the competent authorities of the UCITS home Member State shall notify the competent authorities of the UCITS host Member State accordingly.

Where a change referred to in the first subparagraph is implemented after information has been transmitted in accordance with the second subparagraph and pursuant to that change the UCITS no longer complies with this Directive, the competent authorities of the home Member State of the UCITS shall take all appropriate measures in accordance with Article 98, including, where necessary, the express prohibition of marketing of the UCITS and shall notify the competent authorities of the UCITS host Member State without undue delay of the measures taken.’;

"

(6)  the following article is inserted:"

‘Article 93a

1.  ▌Member States shall ensure that a UCITS may de-notify arrangements made for marketing as regards units, including, where relevant, in respect of share classes, in a Member State in respect of which it has made a notification in accordance with Article 93, where all the following conditions are fulfilled:

   (a) a blanket offer is made to repurchase or redeem, free of any charges or deductions, all such units held by investors in that Member State, is publicly available for at least 30 working days, and is addressed, directly or through financial intermediaries, individually to all investors in that Member State ▌whose identity is known;
   (b) the intention to terminate arrangements made for marketing such units in that Member State ▌is made public by means of a publicly available medium, including by electronic means, which is customary for marketing UCITS and suitable for a typical UCITS investor;
   (c) any contractual arrangements with financial intermediaries or delegates are modified or terminated with effect from the date of de-notification in order to prevent any new or further, direct or indirect, offering or placement of the units identified in the notification referred to in paragraph 2.

The information referred to in points (a) and (b) shall clearly describe the consequences for investors if they do not accept the offer to redeem or repurchase their units.

The information referred to in points (a) and (b) of the first subparagraph shall be provided in the official language or one of the official languages of the Member State in respect of which the UCITS has made a notification in accordance with Article 93 or in a language approved by the competent authorities of that Member State. As of the date referred to in point (c) of the first subparagraph, the UCITS shall cease any new or further, direct or indirect, offering or placement of its units which were the subject of de-notification in that Member State.

2.  The UCITS shall submit a notification to the competent authorities of its home Member State containing the information referred to in points (a), (b) and (c) of the first subparagraph of paragraph 1.

3.  The competent authorities of the UCITS home Member State shall verify whether the notification submitted by the UCITS in accordance with paragraph 2 is complete. The competent authorities of the UCITS home Member State shall, no later than 15 working days from the receipt of a complete notification ▌, transmit that notification to the competent authorities of the Member State identified in the notification referred to in paragraph 2, and to ESMA.

Upon transmission of the notification pursuant to the first subparagraph, the competent authorities of the UCITS home Member State shall promptly notify the UCITS of that transmission.

4.  The UCITS shall provide investors who remain invested in the UCITS as well as the competent authorities of the UCITS home Member State with the information required under Articles 68 to 82 and under Article 94.

5.  The competent authorities of the UCITS home Member State shall transmit to the competent authorities of the Member State identified in the notification referred to in paragraph 2 of this Article information on any changes to the documents referred to in Article 93(2).

6.   The competent authorities of the Member State identified in the notification referred to in paragraph 2 of this Article shall have the same rights and obligations as the competent authorities of the UCITS host Member State as set out in Article 21(2), Article 97(3) and Article 108. Without prejudice to other monitoring activities and supervisory powers as referred to in Article 21(2) and Article 97, as from the date of transmission under paragraph 5 of this Article, the competent authorities of the Member State identified in the notification referred to in paragraph 2 of this Article shall not require the UCITS concerned to demonstrate compliance with national laws, regulations and administrative provisions governing marketing requirements referred to in Article 5 of Regulation (EU) 2019/… of the European Parliament and of the Council*(10).

7.  Member States shall allow for the use of any electronic or other distance communication means for the purposes of paragraph 4, provided that the information and communication means are available for investors in the official language or one of the official languages of the Member State where the investor is located or in a language approved by the competent authorities of that Member State.

_____________

* Regulation (EU) 2019/… of the European Parliament and of the Council of … on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014 (OJ L …).’;

"

(7)  in Article 95(1), point (a) is deleted.

Article 2

Amendments to Directive 2011/61/EU

Directive 2011/61/EU is amended as follows:

(1)  in Article 4(1), the following point is inserted:"

‘(aea) ‘pre-marketing’ means ▌provision of information or communication, direct or indirect, on investment strategies or investment ideas by an EU AIFM or on its behalf, to potential professional investors domiciled or with a registered office in the Union in order to test their interest in an AIF or a compartment which is not yet established, or which is established, but not yet notified for marketing in accordance with Article 31 or 32, in that Member State where the potential investors are domiciled or have their registered office, and which in each case does not amount to an offer or placement to the potential investor to invest in the units or shares of that AIF or compartment;’;

"

(2)  the following article is inserted at the beginning of CHAPTER VI:"

‘Article 30a

Conditions for pre-marketing in the Union by an EU AIFM

1.  Member States shall ensure that an authorised EU AIFM may engage in pre-marketing in the Union, except where the information presented to potential professional investors:

   (a) is sufficient to allow investors to commit to acquiring units or shares of a particular AIF;
   (b) amounts to subscription forms or similar documents whether in a draft or a final form; or
   (c) amounts to ▌constitutional documents, a prospectus or offering documents of a not-yet-established AIF in a final form ▌.

Where a draft prospectus or offering documents are provided, they shall not contain information sufficient to allow investors to take an investment decision and shall clearly state that:

   (a) they do not constitute an offer or an invitation to subscribe to units or shares of an AIF; and
   (b) the information presented therein should not be relied upon because it is incomplete and may be subject to change.

▌Member States shall ensure that an EU AIFM is not required to notify the competent authorities of the content or of the addressees of pre-marketing, or to fulfil any conditions or requirements other than those set out in this Article, before it engages in pre-marketing.

2.  EU AIFMs shall ensure that investors do not acquire units or shares in an AIF through pre-marketing and that investors contacted as part of pre-marketing may only acquire units or shares in that AIF through marketing permitted under Article 31 or 32.

Any subscription by professional investors, within 18 months of the EU AIFM having begun pre-marketing, to units or shares of an AIF referred to in the information provided in the context of pre-marketing, or of an AIF established as a result of the pre-marketing, ▌shall be considered to be the result of marketing and shall be subject to the applicable notification procedures referred to in Articles 31 and 32.

Member States shall ensure that an EU AIFM sends, within 2 weeks of it having begun pre-marketing, an informal letter, in paper form or by electronic means, to the competent authorities of its home Member State. That letter shall specify the Member States in which and the periods during which the pre-marketing is taking or has taken place, a brief description of the pre-marketing including information on the investment strategies presented and, where relevant, a list of the AIFs and compartments of AIFs which are or were the subject of pre-marketing. The competent authorities of the home Member State of the EU AIFM shall promptly inform the competent authorities of the Member States in which the EU AIFM is or was engaged in pre-marketing. The competent authorities of the Member State in which pre-marketing is taking or has taken place may request the competent authorities of the home Member State of the EU AIFM to provide further information on the pre-marketing is taking or has taken place on its territory.

3.  A third party shall only engage in pre-marketing on behalf of an authorised EU AIFM where it is authorised as an investment firm in accordance with Directive 2014/65/EU of the European Parliament and of the Council*, as a credit institution in accordance with Directive 2013/36/EU of the European Parliament and of the Council**, as a UCITS management company in accordance with Directive 2009/65/EC, as an AIFM in accordance with this Directive, or acts as a tied agent in accordance with Directive 2014/65/EU. Such a third party shall be subject to the conditions set out in this Article.

4.  An EU AIFM shall ensure that pre-marketing is adequately documented.

_____________

* Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, p. 349).

** Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).’;

"

(3)  ▌in Article 32(7), the second, third and fourth subparagraphs are replaced by the following:"

‘If, pursuant to a planned change, the AIFM’s management of the AIF would no longer comply with this Directive or the AIFM would otherwise no longer comply with this Directive, the relevant competent authorities of the home Member State of the AIFM shall inform the AIFM within 15 working days of receipt of all the information referred to in the first subparagraph that it is not to implement the change. In that case, the competent authorities of the home Member State of the AIFM shall notify the competent authorities of the host Member State of the AIFM accordingly.

If a planned change is implemented notwithstanding the first and second subparagraphs, or if an unplanned change has taken place pursuant to which the AIFM’s management of the AIF would no longer comply with this Directive or the AIFM otherwise would no longer comply with this Directive, the competent authorities of the home Member State of the AIFM shall take all due measures in accordance with Article 46, including, if necessary, the express prohibition of marketing of the AIF and shall notify the competent authorities of the host Member State of the AIFM accordingly without undue delay.

If the changes do not affect the compliance of the AIFM’s management of the AIF with this Directive, or the compliance by the AIFM with this Directive otherwise, the competent authorities of the home Member State of the AIFM shall within 1 month inform the competent authorities of the host Member State of the AIFM of those changes.’;

"

(4)  the following article is inserted:"

‘Article 32a

De-notification of arrangements made for the marketing of units or shares of some or all EU AIFs in the Member States other than in the home Member State of the AIFM

1.  Member States shall ensure that an EU AIFM may de-notify arrangements made for marketing as regards units or shares of some or all of its AIFs in a Member State in respect of which it has made a notification in accordance with Article 32, where all ▌the following conditions are fulfilled:

   (a) except in the case of closed-ended AIFs and funds regulated by Regulation (EU) 2015/760 of the European Parliament and of the Council*, a blanket offer is made to repurchase or redeem, free of any charges or deductions, all such AIF units or shares held by investors in that Member State, is publicly available for at least 30 working days, and is addressed, directly or through financial intermediaries, individually to all investors in that Member State whose identity is known;
   (b) the intention to terminate arrangements made for marketing units or shares of some or all of its AIFs in that Member State is made public by means of a publicly available medium, including by electronic means, which is customary for marketing AIFs and suitable for a typical AIF investor;
   (c) any contractual arrangements with financial intermediaries or delegates are modified or terminated with effect from the date of de-notification in order to prevent any new or further, direct or indirect, offering or placement of the units or shares identified in the notification referred to in paragraph 2.

As of the date referred to in point (c) of the first subparagraph, the AIFM shall cease any new or further, direct or indirect, offering or placement of units or shares of the AIF it manages in the Member State in respect of which it has submitted a notification in accordance with paragraph 2.

2.  The AIFM shall submit a notification to the competent authorities of its home Member State containing the information referred to in points (a), (b) and (c) of the first subparagraph of paragraph 1.

3.  The competent authorities of the home Member State of the AIFM shall verify whether the notification submitted by the AIFM in accordance with paragraph 2 is complete. The competent authorities of the home Member State of the AIFM shall, no later than 15 working days from the receipt of a complete notification, transmit that notification to the competent authorities of the Member State identified in the notification referred to in paragraph 2, and to ESMA.

Upon transmission of the notification pursuant to the first subparagraph, the competent authorities of the home Member State of the AIFM shall promptly notify the AIFM of that transmission.

For a period of 36 months from the date referred to in point (c) of the first subparagraph of paragraph 1, the AIFM shall not engage in pre-marketing of units or shares of the EU AIFs referred to in the notification, or in respect of similar investment strategies or investment ideas, in the Member State identified in the notification referred to in paragraph 2.

4.  The AIFM shall provide investors who remain invested in the EU AIF as well as the competent authorities of the home Member State of the AIFM with the information required under Articles 22 and 23.

5.  The competent authorities of the home Member State of the AIFM shall transmit to the competent authorities of the Member State identified in the notification referred to in paragraph 2, information on any changes to the documentation and information referred to in points (b) to (f) of Annex IV.

6.  The competent authorities of the Member State identified in the notification referred to in paragraph 2 of this Article shall have the same rights and obligations as the competent authorities of the host Member State of the AIFM as set out in in Article 45.

7.   Without prejudice to other supervisory powers referred to in Article 45(3), as from the date of transmission under paragraph 5 of this Article, the competent authorities of the Member State identified in the notification referred to in paragraph 2 of this Article, shall not require the AIFM concerned to demonstrate compliance with national laws, regulations and administrative provisions governing marketing requirements as referred to in Article 5 of Regulation (EU) 2019/… of the European Parliament and of the Council**(11).

8.  Member States shall allow for the use of any electronic or other distance communication means for the purposes of paragraph 4.

_____________

* Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds (OJ L 123, 19.5.2015, p. 98).

** Regulation (EU) 2019/… of the European Parliament and of the Council of … on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014 (OJ L …).’;

"

(5)  in Article 33(6), the second and third subparagraphs are replaced by the following:"

‘If, pursuant to a planned change, the AIFM’s management of the AIF would no longer comply with this Directive or the AIFM would otherwise no longer comply with this Directive, the relevant competent authorities of the home Member State of the AIFM shall inform the AIFM within 15 working days of receipt of all the information referred to in the first subparagraph that it is not to implement the change.

If a planned change is implemented notwithstanding the first and second subparagraphs or if an unplanned change has taken place pursuant to which the AIFM’s management of the AIF would no longer comply with this Directive or the AIFM otherwise would no longer comply with this Directive, the competent authorities of the home Member State of the AIFM shall take all due measures in accordance with Article 46 and shall notify accordingly the competent authorities of the host Member State of the AIFM without undue delay.’;

"

(6)  the following article is inserted:"

‘Article 43a

Facilities available to retail investors

1.  Without prejudice to Article 26 of Regulation (EU) 2015/760 ▌, Member States shall ensure that an AIFM makes available, in each Member State where it intends to market units or shares of an AIF to retail investors, facilities to perform the following tasks:

   (a) process investors’ subscription, payment, repurchase and redemption orders relating to the units or shares of the AIF, in accordance with the conditions set out in the AIF’s ▌documents;
   (b) provide investors with information on how orders referred to in point (a) can be made and how repurchase and redemption proceeds are paid;
   (c) facilitate the handling of information relating to the exercise of investors’ rights arising from their investment in the AIF in the Member State where the AIF is marketed;
   (d) make the information and documents required pursuant to Articles 22 and 23 available to investors for the purposes of inspection and obtaining copies thereof;
   (e) provide investors with information relevant to the tasks that the facilities perform in a durable medium as defined in point (m) of Article 2(1) of Directive 2009/65/EC; and
   (f) act as a contact point for communicating with the competent authorities.

2.  Member States shall not require an AIFM to have a physical presence in the host Member State or to appoint a third party for the purposes of paragraph 1.

3.  The AIFM shall ensure that the facilities to perform the tasks referred to in paragraph 1, including electronically, are provided:

   (a) ▌in the official language or one of the official languages of the Member State where the AIF is marketed or in a language approved by the competent authorities of that Member State;
   (b) ▌by the AIFM itself, by a third party which is subject to regulation and supervision governing the tasks to be performed, or by both.

For the purposes of point (b), where the tasks are to be performed by a third party, the appointment of that third party shall be evidenced by a written contract, which specifies which of the tasks referred to in paragraph 1 are not to be performed by the AIFM and that the third party will receive all the relevant information and documents from the AIFM.’;

"

(7)  the following article is inserted:"

‘Article 69a

Assessment of the passport regime

Before the entry into force of the delegated acts referred to in Article 67(6) pursuant to which the rules set out in Article 35 and Articles 37 to 41 become applicable, the Commission shall submit a report to the European Parliament and to the Council, taking into account the result of an assessment of the passport regime provided in this Directive including the extension of that regime to non-EU AIFMs. That report shall be accompanied, where appropriate, by a legislative proposal.’;

"

(8)  in Annex IV, the following points are added:"

‘(i) the details necessary, including the address, for the invoicing or for the communication of any applicable regulatory fees or charges by the competent authorities of the host Member State;

   (j) information on the facilities for performing the tasks referred to in Article 43a.’;

"

Article 3

Transposition

1.  By … [24 months after the date of entry into force of this Directive], Member States shall adopt and publish the national laws, regulations and administrative provisions necessary to comply with this Directive. They shall immediately inform the Commission thereof.

They shall apply those provisions from … [24 months after the date of entry into force of this Directive].

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. The methods of making such reference shall be laid down by Member States.

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.

Article 4

Evaluation

By ... [60 months after the date of entry into force of this Directive], the Commission shall, on the basis of a public consultation and in light of discussions with ESMA and competent authorities, conduct an evaluation of the application of this Directive. By ... [72 months after the date of entry into force of this Directive], the Commission shall present a report on the application of this Directive.

Article 5

Review

By ... [48 months after the date of entry into force of this Directive], the Commission shall present a report assessing, inter alia, the merits of harmonising the provisions applicable to UCITS management companies testing investor appetite for a particular investment idea or investment strategy, and whether any amendments to Directive 2009/65/EC are needed to that end.

Article 6

Entry into force

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

Article 7

This Directive is addressed to the Member States.

Done at ...

For the European Parliament For the Council

The President The President

(1) OJ C 367, 10.10.2018, p. 50.
(2)OJ C 367, 10.10.2018, p. 50.
(3) Position of the European Parliament of 16 April 2019.
(4) Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32).
(5) Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p. 1).
(6) Regulation (EU) 2019/… of the European Parliament and of the Council of … on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014 (OJ L …).
(7)+ OJ: Please insert in the text the number of the Regulation contained in document PE-CONS …/… (2018/0045(COD)) and insert the number, date and OJ reference of that Regulation in the footnote.
(8)+ OJ: Please insert in the text the number of the Regulation contained in document PE-CONS …/… (2018/0045(COD)).
(9)OJ C 369, 17.12.2011, p. 14.
(10)+ OJ: Please insert in the text the number of the Regulation contained in document PE-CONS …/… (2018/0045(COD)) and insert the number, date and OJ reference of that Regulation in the footnote.
(11)+ OJ: Please insert in the text the number of the Regulation contained in document PE-CONS …/… (2018/0045(COD)) and insert the number, date and OJ reference of that Regulation in the footnote.


Cross-border distribution of collective investment undertakings (Regulation) ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 16 April 2019 on the proposal for a regulation of the European Parliament and of the Council on facilitating cross-border distribution of collective investment funds and amending Regulations (EU) No 345/2013 and (EU) No 346/2013 (COM(2018)0110 – C8-0110/2018 – 2018/0045(COD))
P8_TA-PROV(2019)0368A8-0431/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0110),

–  having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0110/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 11 July 2018(1),

–  having regard to the provisional agreement approved by the responsible committee under Rule 69f(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 27 February 2019 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0431/2018),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 16 April 2019 with a view to the adoption of Regulation (EU) 2019/… of the European Parliament and of the Council on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014

P8_TC1-COD(2018)0045


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee(2),

Acting in accordance with the ordinary legislative procedure(3),

Whereas:

(1)  Divergent regulatory and supervisory approaches concerning the cross-border distribution of alternative investment funds (AIFs), as defined in Directive 2011/61/EU of the European Parliament and of the Council(4), including european venture capital funds (EuVECA), as defined in Regulation (EU) No 345/2013 of the European Parliament and of the Council(5), European social entrepreneurship funds (EuSEF), as defined in Regulation (EU) No 346/2013 of the European Parliament and of the Council(6), and European Long-Term Investment Funds (ELTIF), as defined in Regulation (EU) 2015/760 of the European Parliament and of the Council(7), as well as undertakings for collective investment in transferable securities (UCITS), within the meaning of Directive 2009/65/EC of the European Parliament and of the Council(8), result in fragmentation and barriers to cross-border marketing and access of AIFs and UCITS, which in turn could prevent them from being marketed in other Member States. A UCITS might be externally or internally managed, depending on its legal form. Any provisions of this Regulation relating to UCITS management companies should apply both to a company, the regular business of which is the management of UCITS and to any UCITS which has not designated a UCITS management company.

(2)  In order to enhance the regulatory framework applicable to collective investment undertakings and to better protect investors, marketing communications addressed to investors in AIFs and UCITS should be identifiable as such, and should describe the risks and rewards of purchasing units or shares of an AIF or UCITS in an equally prominent manner. In addition, all information included in marketing communications addressed to investors should be presented in a manner that is fair, clear and not misleading. To safeguard investor protection and secure a level playing field between AIFs and UCITS, the standards for marketing communications should apply to marketing communications of AIFs and UCITS.

(3)  Marketing communications addressed to investors in AIFs and UCITS should specify where, how and in which language investors can obtain summarised information on investor rights and they should clearly state that the AIFM, the EuVECA manager, the EuSEF manager or the UCITS management company (together, ‘managers of collective investment undertakings’), has the right to terminate the arrangements made for marketing.

(4)  In order to increase transparency and investor protection and facilitate access to information on national laws and regulations and administrative provisions applicable to marketing communications, competent authorities should publish such texts on their websites in, as a minimum, a language customary in the sphere of international finance, including their non-official summaries which would allow managers of collective investment undertakings to get a broad overview of those laws, regulations and administrative provisions. The publication should only be for information purposes and should not create legal obligations. For the same reasons, the European Supervisory Authority (European Securities and Markets Authority) established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council(9) (ESMA) should create a central database containing summaries of national requirements for marketing communications and hyperlinks to the information published on the websites of competent authorities.

(5)  In order to promote good practices of investor protection which are enshrined in the national requirements for fair and clear marketing communications, including on-line aspects of such marketing communications, ESMA should issue guidelines on the application of those requirements for marketing communications.

(6)  Competent authorities should be able to require prior notification of marketing communications for the purpose of ex-ante verification of compliance of those communications with this Regulation and other applicable requirements, such as whether the marketing communications are identifiable as such, whether they describe the risks and rewards of purchasing units of a UCITS and, where a Member State allows marketing of AIFs to retail investors, the risks and rewards of purchasing units or shares of an AIF in an equally prominent manner and whether all information in the marketing communications is presented in a manner that is fair, clear and not misleading. That verification should be performed within a limited timeframe. Where competent authorities require prior notification, this should not prevent them from verifying marketing communications ex-post.

(7)  Competent authorities should report to ESMA the results of those verifications, requests for amendments and any sanctions imposed on managers of collective investment undertakings. With a view to increasing awareness and transparency on the rules applicable to marketing communications, on the one hand, and ensuring investor protection, on the other hand, ESMA should every second year prepare and send to the European Parliament, the Council and the Commission a report on those rules and their practical application on the basis of ex-ante and ex-post verifications of marketing communications by competent authorities.

(8)  To ensure equal treatment of managers of collective investment undertakings and to facilitate their decision-making regarding whether to engage in cross-border distribution of investment funds, it is important that fees and charges levied by competent authorities for ▌supervision of cross-border activities are proportionate to the supervisory tasks carried out and publicly disclosed, and that, in order to enhance transparency, those fees and charges are published on the websites of the competent authorities. For the same reason, hyperlinks to the information published on the websites of competent authorities in relation to the fees and charges should be published on the ESMA website in order to have a central point for information. The ESMA website should also include an interactive tool enabling indicative calculations of those fees and charges levied by competent authorities.

(9)  To ensure better recovery of fees or charges and to increase the transparency and clarity of the fees and charges structure, where such fees or charges are levied by the competent authorities, managers of collective investment undertakings should receive an invoice, an individual payment statement or a payment instruction clearly setting out the amount of fees or charges due and the means of payment.

(10)  Since ESMA, in accordance with Regulation (EU) No 1095/2010, should monitor and assess market developments in the area of its competence, it is appropriate and necessary to enhance the knowledge of ESMA by enlarging ESMA’s currently existing databases to include a central database listing all AIFs and UCITS that are marketed cross-border, the managers of those collective investment undertakings and the Member States in which the marketing takes place. For that purpose, and in order to enable ESMA to maintain the central database up-to-date, competent authorities should transmit to ESMA information on the notifications and notification letters and information that they have received under Directives 2009/65/EC and 2011/61/EU in relation to cross-border marketing activity as well as information about any changes which should be reflected in that database. In that respect, ESMA should establish a notification portal into which competent authorities should upload all documents regarding the cross-border distribution of UCITS and AIFs.

(11)  In order to ensure a level playing field between qualifying venture capital funds as defined in Regulation (EU) No 345/2013, or qualifying social entrepreneurship funds as defined in Regulation (EU) No 346/2013, on the one hand, and other AIFs, on the other hand, it is necessary to include in those Regulations rules on pre-marketing that are identical to the rules laid down in Directive 2011/61/EU on pre-marketing. Such rules should enable managers registered in accordance with those Regulations to target investors by testing their appetite for upcoming investment opportunities or strategies through qualifying venture capital funds and qualifying social entrepreneurship funds.

(12)  In accordance with Regulation (EU) No 1286/2014 of the European Parliament and of the Council(10), certain companies and persons referred to in Article 32 of that Regulation are exempt from the obligations under that Regulation until 31 December 2019. That Regulation also provides that the Commission is to review it by 31 December 2018, in order to assess, inter alia, whether that transitional exemption should be prolonged, or whether, following the identification of any necessary adjustments, the provisions on key investor information in Directive 2009/65/EC should be replaced by or considered equivalent to the key information document as laid down in that Regulation.

(13)  In order to allow the Commission to conduct the review in accordance with Regulation (EU) No 1286/2014 as originally provided for, the deadline for that review should be prolonged by 12 months. The competent committee of the European Parliament should support the Commission’s review process by organising a hearing on the topic with relevant stakeholders representing industry and consumer interests.

(14)  In order to avoid investors receiving two different pre-disclosure documents, namely a key investor information document (KIID) as required by Directive 2009/65/EC and a key information document (KID) as required by Regulation (EU) No 1286/2014, for the same collective investment undertaking while the legislative acts resulting from the Commission’s review in accordance with that Regulation are being adopted and implemented, the transitional exemption from the obligations under that Regulation should be prolonged by 24 months. Without prejudice to that prolongation, all institutions and supervisory authorities involved should endeavour to act as fast as possible to facilitate the termination of that transitional exemption.

(15)  The Commission should be empowered to adopt implementing technical standards, developed by ESMA, with regard to the standard forms, templates and procedures for publication and notification by competent authorities of the national laws, regulations and administrative provisions and their summaries on marketing requirements applicable in their territories, the levels of fees or charges levied by them for cross-border activities, and, where applicable, relevant calculation methodologies. Furthermore, to improve the transmission to ESMA, implementing technical standards should also be adopted with respect to notifications, notification letters and information on cross-border marketing activities that are required by Directives 2009/65/EC and 2011/61/EU and the technical arrangements necessary for the functioning of the notification portal to be established by ESMA . The Commission should adopt those implementing technical standards by means of implementing acts pursuant to Article 291 of the Treaty on the Functioning of the European Union (TFEU) and in accordance with Article 15 of Regulation (EU) No 1095/2010.

(16)  It is necessary to specify the information to be communicated every quarter to ESMA, in order to keep the databases of all collective investment undertakings and their managers up to date.

(17)  Any processing of personal data carried out within the framework of this Regulation, such as the exchange or transmission of personal data by the competent authorities, should be undertaken in accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council(11), and any exchange or transmission of information by ESMA should be undertaken in accordance with Regulation (EU) 2018/1725 of the European Parliament and of the Council(12).

(18)  In order to enable the competent authorities to exercise the functions attributed to them in this Regulation, Member States should ensure that those authorities have all the necessary supervisory and investigative powers.

(19)  By … [5 years after the entry into force of this Regulation], the Commission should conduct an evaluation of the application of this Regulation. The evaluation should take account of market developments and assess whether the measures introduced have improved the cross-border distribution of collective investment undertakings.

(20)  By … [2 years after the entry into force of this Regulation] the Commission should publish a report on reverse solicitation and demand on the own initiative of an investor, specifying the extent of that form of subscription to funds, its geographical distribution including in third countries, and its impact on the passporting regime.

(21)  In order to ensure legal certainty, it is necessary to synchronise the application dates of national laws, regulations and administrative provisions implementing Directive (EU) 2019/… of the European Parliament and of the Council(13)(14) and of this Regulation with regard to provisions on marketing communications and pre-marketing.

(22)  Since the objective of this Regulation, namely to enhance market efficiency while establishing the capital markets union, cannot be sufficiently achieved by the Member States but can rather, by reason of its effects, be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective,

HAVE ADOPTED THIS REGULATION:

Article 1

Subject matter

This Regulation establishes uniform rules on the publication of national provisions concerning marketing requirements for collective investment undertakings and on marketing communications addressed to investors, as well as common principles concerning fees and charges levied on managers of collective investment undertakings in relation to their cross-border activities. It also provides for the establishment of a central database on the cross-border marketing of collective investment undertakings.

Article 2

Scope

This Regulation shall apply to:

(a)  alternative investment fund managers;

(b)  UCITS management companies, including any UCITS which has not designated a UCITS management company;

(c)  EuVECA managers; and

(d)  EuSEF managers.

Article 3

Definitions

For the purposes of this Regulation, the following definitions apply:

(a)  'alternative investment funds' or ‘AIFs’ means AIFs as defined in point (a) of Article 4(1) of Directive 2011/61/EU, and include EuVECA, EuSEF and ELTIF;

(b)  'alternative investment fund managers' or ‘AIFMs’ means AIFMs as defined in point (b) of Article 4(1) of Directive 2011/61/EU and authorised in accordance with Article 6 of that Directive;

(c)  ‘EuVECA manager’ means a manager of a qualifying venture capital fund as defined in point (c) of the first paragraph of Article 3 of Regulation (EU) No 345/2013 and registered in accordance with Article 14 of that Regulation;

(d)  ‘EuSEF manager’ means a manager of a qualifying social entrepreneurship fund as defined in point (c) of Article 3(1) of Regulation (EU) No 346/2013 and registered in accordance with Article 15 of that Regulation;

(e)  ‘competent authorities’ means competent authorities as defined in point (h) of Article 2(1) of Directive 2009/65/EC or in point (f) of Article 4(1) of Directive 2011/61/EU or competent authorities of the EU AIF as defined in point (h) of Article 4(1) of Directive 2011/61/EU;

(f)  ‘home Member State’ means the Member State in which the AIFM, the EuVECA manager, the EuSEF manager or the UCITS management company has its registered office;

(g)  ‘UCITS’ means a UCITS authorised in accordance with Article 5 of Directive 2009/65/EC;

(h)  ‘UCITS management company’ means a management company as defined in point (b) of Article 2(1) of Directive 2009/65/EC.

Article 4

Requirements for marketing communications

1.  AIFMs, EuVECA managers, EuSEF managers and UCITS management companies shall ensure that all marketing communications addressed to investors are identifiable as such and describe the risks and rewards of purchasing units or shares of an AIF or units of a UCITS in an equally prominent manner, and that all information included in marketing communications is fair, clear and not misleading.

2.  UCITS management companies shall ensure that ▌marketing communications that contain specific information about a UCITS do not contradict or diminish the ▌significance of the information ▌contained in the prospectus referred to in Article 68 of Directive 2009/65/EC or the key investor information referred to in Article 78 of that Directive. UCITS management companies shall ensure that all marketing communications indicate that a prospectus exists and that the key investor information is available. Such marketing communications shall specify where, how and in which language investors or potential investors can obtain the prospectus and the key investor information and shall provide hyperlinks to or website addresses for those documents.

3.  Marketing communications referred to in paragraph 2 shall specify where, how and in which language investors or potential investors can obtain a summary of investor rights and shall provide a hyperlink to such a summary, which shall include, as appropriate, information on access to collective redress mechanisms at Union and national level in the event of litigation.

Such marketing communications shall also contain clear information that the manager or management company referred to in paragraph 1 of this Article may decide to terminate the arrangements made for the marketing of its collective investment undertakings in accordance with Article 93a of Directive 2009/65/EC and Article 32a of Directive 2011/61/EU.

4.  AIFMs, EuVECA managers and EuSEF managers shall ensure that ▌marketing communications comprising an invitation to purchase units or shares of an AIF that contain specific information about an AIF do not contradict the information which is to be disclosed to the investors in accordance with Article 23 of Directive 2011/61/EU, with Article 13 of Regulation (EU) No 345/2013 or with Article 14 of Regulation (EU) No 346/2013, or diminish its significance.

5.  Paragraph 2 of this Article shall apply mutatis mutandis to AIFs which publish a prospectus in accordance with Regulation (EU) 2017/1129 of the European Parliament and the Council(15), or in accordance with national law, or apply rules on the format and content of the key investor information referred to in Article 78 of Directive 2009/65/EC.

6.  By … [24 months after the date of entry into force of this Regulation], ESMA shall issue guidelines, and thereafter update those guidelines periodically, on the application of the requirements for marketing communications referred to in paragraph 1, taking into account on-line aspects of such marketing communications.

Article 5

Publication of national provisions concerning marketing requirements

1.  Competent authorities shall publish and maintain on their websites up-to-date and complete information on the applicable national laws, regulations and administrative provisions governing marketing requirements for AIFs and UCITS, and the summaries thereof, in, as a minimum, a language customary in the sphere of international finance.

2.  Competent authorities shall notify to ESMA ▌the hyperlinks to the websites of competent authorities where the information referred to in paragraph 1 is published.

Competent authorities shall notify ESMA of any change in the information provided under the first subparagraph of this paragraph without undue delay.

3.  ESMA shall develop draft implementing technical standards to determine standard forms, templates and procedures for the publications and notifications under this Article.

ESMA shall submit those draft implementing standards to the Commission by … [18 months after the date of entry into force of this Regulation].

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 1095/2010.

Article 6

ESMA central database on national provisions concerning marketing requirements

By … [30 months after the date of entry into force of this Regulation], ESMA shall publish and maintain on its website a central database containing the ▌summaries referred to in Article 5(1), and the hyperlinks to the websites of competent authorities referred to in Article 5(2).

Article 7

Ex-ante verification of marketing communications

1.  For the sole purpose of verifying compliance with this Regulation and with national provisions concerning marketing requirements, competent authorities may require prior notification of marketing communications which UCITS ▌management companies intend to use directly or indirectly in their dealings with investors.

The requirement for prior notification referred to in the first subparagraph shall not constitute a prior condition for the marketing of units of UCITS and shall not be part of the notification procedure referred to in Article 93 of Directive 2009/65/EC.

Where competent authorities require prior notification as referred to in the first subparagraph, they shall, within 10 working days of receipt of marketing communications, inform the UCITS management company of any request to amend its marketing communications.

The prior notification referred to in the first subparagraph may be required on a systematic basis or in accordance with any other verification practices and shall be without prejudice to any supervisory powers to verify marketing communications ex-post.

2.  Competent authorities that require prior notification of marketing communications shall establish, apply, and publish on their websites, procedures for such prior notification. The internal rules and procedures shall ensure transparent and non-discriminatory treatment of all UCITS, regardless of the Member States in which the UCITS are authorised.

3.  Where ▌AIFMs, EuVECA managers or EuSEF managers market units or shares of ▌their AIFs to retail investors, paragraphs 1 and 2 ▌shall apply mutatis mutandis to those AIFMs, EuVECA managers or EuSEF managers.

Article 8

ESMA report on marketing communications

1.   By 31 March 2021 and every second year thereafter, competent authorities ▌shall report ▌the following information to ESMA ▌:

(a)  the ▌number of requests for amendments of marketing communications made on the basis of ex-ante verification, where applicable;

(b)  the number of requests for amendments and decisions taken on the basis of ex-post verifications, clearly distinguishing the most frequent breaches, including a description and the nature of those breaches;

(c)  a description of the most frequent breaches of the requirements referred to in Article 4; and

(d)  one example of each of the breaches referred to in points (b) and (c).

2.   By 30 June 2021 and every second year thereafter , ESMA shall submit a report to the European Parliament, the Council and the Commission which presents an overview of marketing requirements referred to in Article 5(1) in all Member States and contains an analysis of the effects of national laws, regulations and administrative provisions governing marketing communications based also on the information received in accordance with paragraph 1 of this Article.

Article 9

Common principles concerning fees or charges

1.  Where fees or charges are levied by competent authorities for carrying out their duties in relation to the cross-border activities of AIFMs, EuVECA managers, EuSEF managers and UCITS management companies, such fees or charges shall be consistent with the overall cost relating to the ▌performance of the functions of the competent authority.

2.  For ▌the fees or charges referred to in paragraph 1 of this Article, competent authorities shall send an invoice, an individual payment statement or a payment instruction, clearly setting out the means of payment and the date when payment is due, to the address referred to in the third subparagraph of Article 93(1) of Directive 2009/65/EC or point (i) of Annex IV of Directive 2011/61/EU.

Article 10

Publication of national provisions concerning fees and charges

1.  By … [6 months after the date of entry into force of this Regulation], competent authorities shall publish and maintain up-to-date information on their websites ▌listing the fees or charges referred to in Article 9(1), or, where applicable, the calculation methodologies for those fees or charges, in, as a minimum, a language customary in the sphere of international finance.

2.  Competent authorities shall notify to ESMA the hyperlinks to the websites of competent authorities where the information referred to in paragraph 1 is published.

3.  ESMA shall develop draft implementing technical standards to determine the standard forms, templates and procedures for the publications and notifications under this Article.

ESMA shall submit those draft implementing standards to the Commission by … [18 months after the date of entry into force of this Regulation].

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 1095/2010.

Article 11

ESMA publication on fees and charges

1.  By … [30 months after the date of entry into force of this Regulation], ESMA shall publish on its website hyperlinks to the websites of competent authorities as referred to in Article 10(2). Those hyperlinks shall be kept up to date.

2.  By ... [30 months after the date of entry into force of this Regulation], ESMA shall develop and make available on its website an interactive tool publicly accessible in, as a minimum, a language customary in the sphere of international finance that provides an indicative calculation of the fees or charges referred to in Article 9(1). That tool shall be kept up to date.

Article 12

ESMA central database on cross-border marketing of AIFs and UCITS

1.  By … [30 months after the date of entry into force of this Regulation], ESMA shall publish ▌ on its website a central database on cross-border marketing of AIFs and UCITS, publicly accessible in a language customary in the sphere of international finance, listing ▌:

(a)  all AIFs that are marketed in a Member State other than the home Member State, their AIFM, EuSEF manager or EuVECA manager, and the Member States in which they are marketed; and

(b)  all UCITS that are marketed in a Member State other than the UCITS home Member State as defined in point (e) of Article 2(1) of Directive 2009/65/EC, their UCITS management company and the Member States in which they are marketed.

That central database shall be kept up to date.

2.  The obligations in this Article and in Article 13 related to the database referred to in paragraph 1 of this Article shall be without prejudice to the obligations related to the list referred to in the second subparagraph of Article 6(1) of Directive 2009/65/EC, to the central public register referred to in the second subparagraph of Article 7(5) of Directive 2011/61/EU, to the central database referred to in Article 17 of Regulation (EU) No 345/2013 and to the central database referred to in Article 18 of Regulation (EU) No 346/2013.

Article 13

Standardisation of notifications to ESMA

1.  On a quarterly basis, competent authorities of home Member States shall communicate to ESMA the information which is necessary for the creation and maintenance of the central database referred to in Article 12 of this Regulation regarding any notification, ▌notification letter ▌or ▌information referred to in ▌Article 93(1) and Article 93a(2) of Directive 2009/65/EC and in Article 31(2), ▌Article 32(2) and Article 32a(2) ▌of Directive 2011/61/EU, and any changes to that information, if such changes would result in a change to the information in that central database.

2.  ESMA shall establish a notification portal into which each competent authority shall upload all documents referred to in paragraph 1.

3.  ESMA shall develop draft implementing technical standards to specify the information to be communicated, as well as the forms, templates and procedures for communication of the information by the competent authorities for the purposes of paragraph 1, and the technical arrangements necessary for the functioning of the notification portal referred to in paragraph 2.

ESMA shall submit those draft implementing technical standards to the Commission by … [18 months after the date of entry into force of this Regulation].

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 1095/2010.

Article 14

Powers of competent authorities

1.  Competent authorities shall have all supervisory and investigatory powers that are necessary for the exercise of their functions pursuant to this Regulation.

2.  The powers conferred on competent authorities pursuant to Directives 2009/65/EC and 2011/61/EU, Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) 2015/760, including those related to penalties or other measures, shall also be exercised with respect to the managers referred to in Article 4 of this Regulation.

Article 15

Amendments to Regulation (EU) No 345/2013

Regulation (EU) No 345/2013 is amended as follows:

(1)  in Article 3, the following point is added:"

‘(o) ‘pre-marketing’ means ▌provision of information or communication, direct or indirect, on investment strategies or investment ideas by a manager of a qualifying venture capital fund, or on its behalf, to potential investors domiciled or with a registered office in the Union in order to test their interest in a qualifying venture capital fund which is not yet established, or in a qualifying venture capital fund which is established, but not yet notified for marketing in accordance with Article 15, in that Member State where the potential investors are domiciled or have their registered office, and which in each case does not amount to an offer or placement to the potential investor to invest in the units or shares of that qualifying venture capital fund.’;

"

(2)  the following Article is inserted:"

‘Article 4a

1.  A manager of a qualifying venture capital fund may engage in pre-marketing in the Union, except where the information presented to potential investors:

   (a) is sufficient to allow investors to commit to acquiring units or shares of a particular qualifying venture capital fund;
   (b) amounts to ▌subscription forms or similar documents whether in a draft or a final form ▌; or
   (c) amounts to constitutional documents, a prospectus or offering documents of a not-yet-established qualifying venture capital fund in a final form.

Where a draft prospectus or offering documents are provided, they shall not contain information sufficient to allow investors to take an investment decision and shall clearly state that:

   (a) they do not constitute an offer or an invitation to subscribe to units or shares of a qualifying venture capital fund; and
   (b) the information presented therein should not be relied upon because it is incomplete and may be subject to change.

2.  Competent authorities shall not require a manager of a qualifying venture capital fund to notify the competent authorities of the content or of the addressees of pre-marketing, or to fulfil any conditions or requirements other than those set out in this Article, before it engages in pre-marketing.

3.   Managers of qualifying venture capital funds shall ensure that investors do not acquire units or shares in a qualifying venture capital fund through pre-marketing and that investors contacted as part of pre-marketing may only acquire units or shares in that qualifying venture capital fund through marketing permitted under Article 15.

Any subscription by professional investors, within 18 months of the manager of a qualifying venture capital fund having begun pre-marketing, to units or shares of a qualifying venture capital fund referred to in the information provided in the context of pre-marketing, or of a qualifying venture capital fund established as a result of the pre-marketing, shall be considered to be the result of marketing and shall be subject to the applicable notification procedures referred to in Article 15.

4.  Within 2 weeks of having begun pre-marketing, a manager of a qualifying venture capital fund shall send an informal letter, in paper form or by electronic means, to the competent authorities of its home Member State. That letter shall specify the Member States in which and the periods during which the pre-marketing is taking or has taken place, a brief description of the pre-marketing including information on the investment strategies presented and, where relevant, a list of the qualifying venture capital funds which are or were the subject of pre-marketing. The competent authorities of the home Member State of the manager of a qualifying venture capital fund shall promptly inform the competent authorities of the Member States in which the manager of a qualifying venture capital fund is or was engaged in pre-marketing. The competent authorities of the Member State in which pre-marketing is taking or has taken place may request the competent authorities of the home Member State of the manager of a qualifying venture capital fund to provide further information on the pre-marketing that is taking or has taken place on its territory.

5.  A third party shall only engage in pre-marketing on behalf of an authorised manager of qualifying venture capital fund where it is authorised as an investment firm in accordance with Directive 2014/65/EU of the European Parliament and of the Council*, as a credit institution in accordance with Directive 2013/36/EU of the European Parliament and of the Council**, as a UCITS management company in accordance with Directive 2009/65/EC, as an alternative investment fund manager in accordance with Directive 2011/61/EU, or acts as a tied agent in accordance with Directive 2014/65/EU. Such a third party shall be subject to the conditions set out in this Article.

6.  A manager of a qualifying venture capital fund ▌shall ensure that pre-marketing is adequately documented.

_____________

* Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, p. 349).

** Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).’.

"

Article 16

Amendments to Regulation (EU) No 346/2013

Regulation (EU) No 346/2013 is amended as follows:

(1)  in Article 3, the following point is added:"

‘(o) ‘pre-marketing’ means ▌provision of information or communication, direct or indirect, on investment strategies or investment ideas by a manager of a qualifying social entrepreneurship fund, or on its behalf, to potential investors domiciled or with a registered office in the Union in order to test their interest in a ▌qualifying social entrepreneurship fund which is not yet established, or in a qualifying social entrepreneurship fund which is established, but not yet notified for marketing in accordance with Article 16, in that Member State where the potential investors are domiciled or have their registered office, and which in each case does not amount to an offer or placement to the potential investor to invest in the units or shares of that qualifying social entrepreneurship fund.’;

"

(2)  the following Article is inserted:"

‘Article 4a

1.  A manager of a qualifying social entrepreneurship fund may engage in pre-marketing in the Union, except where the information presented to potential investors:

   (a) is sufficient to allow investors to commit to acquiring units or shares of a particular qualifying social entrepreneurship fund;
   (b) amounts to ▌subscription forms or similar documents whether in a draft or a final form ▌; or
   (c) amounts to constitutional documents, a prospectus or offering documents of a not-yet-established qualifying social entrepreneurship fund in a final form.

Where a draft prospectus or offering documents are provided, they shall not contain information sufficient to allow investors to take an investment decision and shall clearly state that:

   (a) they do not constitute an offer or an invitation to subscribe to units or shares of a qualifying social entrepreneurship fund; and
   (b) the information presented therein should not be relied upon because it is incomplete and may be subject to change.

2.  Competent authorities shall not require a manager of a qualifying social entrepreneurship fund to notify the competent authorities of the content or of the addressees of pre-marketing, or to fulfil any conditions or requirements other than those set out in this Article, before it engages in pre-marketing.

3.  Managers of qualifying social entrepreneurship funds shall ensure that investors do not acquire units or shares in a qualifying social entrepreneurship fund through pre-marketing and that investors contacted as part of pre-marketing may only acquire units or shares in that qualifying social entrepreneurship fund through marketing permitted under Article 16.

Any subscription by professional investors, within 18 months of the manager of a qualifying social entrepreneurship fund having begun pre-marketing, to units or shares of a qualifying social entrepreneurship fund referred to in the information provided in the context of pre-marketing, or of a qualifying social entrepreneurship fund established as a result of the pre-marketing, shall be considered to be the result of marketing and shall be subject to the applicable notification procedures referred to in Article 16.

4.  Within 2 weeks of having begun pre-marketing, a manager of a qualifying social entrepreneurship fund shall send an informal letter, in paper form or by electronic means, to the competent authorities of its home Member State. That letter shall specify the Member States in which and the periods during which the pre-marketing is taking or has taken place, a brief description of the pre-marketing including information on the investment strategies presented and, where relevant, a list of the qualifying social entrepreneurship funds which are or were the subject of pre-marketing. The competent authorities of the home Member State of the manager of a qualifying social entrepreneurship fund shall promptly inform the competent authorities of the Member States in which the manager of a qualifying social entrepreneurship fund is or was engaged in pre-marketing. The competent authorities of the Member State in which pre-marketing is taking or has taken place may request the competent authorities of the home Member State of the manager of a qualifying social entrepreneurship fund to provide further information on the pre-marketing that is taking or has taken place on its territory.

5.  A third party shall only engage in pre-marketing on behalf of an authorised manager of a qualifying social entrepreneurship fund where it is authorised as an investment firm in accordance with Directive 2014/65/EU of the European Parliament and of the Council*, as a credit institution in accordance with Directive 2013/36/EU of the European Parliament and of the Council**, as a UCITS management company in accordance with Directive 2009/65/EC, as an alternative investment fund manager in accordance with Directive 2011/61/EU, or acts as a tied agent in accordance with Directive 2014/65/EU. Such a third party shall be subject to the conditions set out in this Article.

6.  A manager of a qualifying social entrepreneurship fundshall ensure that pre-marketing is adequately documented.

_____________

* Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, p. 349).

** Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).’.

"

Article 17

Amendments to Regulation (EU) No 1286/2014

Regulation (EU) No 1286/2014 is amended as follows:

(1)  in Article 32(1), “31 December 2019” is replaced by “31 December 2021”;

(2)  Article 33 is amended as follows:

(a)  in the first subparagraph of paragraph 1, “31 December 2018” is replaced by “31 December 2019”;

(b)  in the first subparagraph of paragraph 2, “31 December 2018” is replaced by “31 December 2019”;

(c)  in the first subparagraph of paragraph 4, “31 December 2018” is replaced by “31 December 2019”.

Article 18

Evaluation

By ... [60 months after the date of entry into force of this Regulation] the Commission shall, on the basis of a public consultation and in light of discussions with ESMA and competent authorities, conduct an evaluation of the application of this Regulation.

By ... [24 months after the date of entry into force of this Regulation] the Commission shall, on the basis of a consultation of competent authorities, ESMA and other relevant stakeholders, submit a report to the European Parliament and to the Council on reverse solicitation and demand on the own initiative of an investor, specifying the extent of that form of subscription to funds, its geographical distribution, including in third countries, and its impact on the passporting regime. That report shall also examine whether the notification portal established in accordance with Article 13(2) should be developed so that all transfers of documents between competent authorities take place through it.

Article 19

Entry into force and application

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

It shall apply from … [the date of entry into force of this Regulation].

However, Article 4(1) to (5), Article 5(1) and (2), Article 15 and Article 16 shall apply from ... [24 months after the date of entry into force of this Regulation].

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

Done at ...,

For the European Parliament For the Council

The President The President

(1) OJ C 367, 10.10.2018, p. 50.
(2)OJ C 367, 10.10.2018, p. 50.
(3) Position of the European Parliament of 16 April 2019.
(4)Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p. 1).
(5) Regulation (EU) No 345/2013 of the European Parliament and of the Council of 17 April 2013 on European venture capital funds (OJ L 115, 25.4.2013, p. 1).
(6) Regulation (EU) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on European social entrepreneurship funds (OJ L 115, 25.4.2013, p. 18).
(7) Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds (OJ L 123, 19.5.2015, p. 98).
(8)Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32).
(9) Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (OJ L 331, 15.12.2010, p. 84).
(10) Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) (OJ L 352, 9.12.2014, p. 1).
(11)Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (OJ L 119, 4.5.2016, p. 1).
(12)Regulation (EU) 2018/1725 of the European Parliament and of the Council of 23 October 2018 on the protection of natural persons with regard to the processing of personal data by the Union institutions, bodies, offices and agencies and on the free movement of such data, and repealing Regulation (EC) No 45/2001 and Decision No 1247/2002/EC (OJ L 295, 21.11.2018, p. 39).
(13) Directive (EU) 2019/... of the European Parliament and of the Council of … amending Directives 2009/65/EC and 2011/61/EU with regard to cross-border distribution of collective investment undertakings (OJ L …).
(14)+ OJ: Please insert in the text the number of the Directive contained in document PE-CONS 54/19 (2018/0041(COD)) and insert the number, date and OJ reference of that Directive in the footnote.
(15)Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (OJ L 168, 30.6.2017, p. 12).


Capital Requirements (Regulation) ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 16 April 2019 on the proposal for a regulation of the European Parliament and of the Council 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 amending Regulation (EU) No 648/2012 (COM(2016)0850 – C8-0480/2016 – 2016/0360A(COD))
P8_TA-PROV(2019)0369A8-0242/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2016)0850),

–  having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0480/2016),

—  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the reasoned opinion submitted, within the framework of Protocol No 2 on the application of the principles of subsidiarity and proportionality, by the Swedish Parliament, asserting that the draft legislative act does not comply with the principle of subsidiarity,

–  having regard to the opinion of the European Central Bank of 8 November 2017(1),

–  having regard to the opinion of the European Economic and Social Committee of 30 March 2017(2),

–  having regard to the decision by the Conference of Presidents on 18 May 2017 to authorise the Committee on Economic and Monetary Affairs to split the above-mentioned Commission proposal and to draw up two separate legislative reports on the basis thereof,

–  having regard to the provisional agreement approved by the committee responsible under Rule 69f(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 15 February 2019 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0242/2018),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 16 April 2019 with a view to the adoption of Regulation (EU) 2019/… of the European Parliament and of the Council 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

P8_TC1-COD(2016)0360A


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Central Bank(3),

Having regard to the opinion of the European Economic and Social Committee(4),

Acting in accordance with the ordinary legislative procedure(5),

Whereas:

(1)  In the aftermath of the financial crisis that unfolded in 2007-2008, the Union implemented a substantial reform of the financial services regulatory framework to enhance the resilience of its financial institutions. That reform was largely based on international standards agreed in 2010 by the Basel Committee on Banking Supervision (BCBS), known as the Basel III framework. Among its many measures, the reform package included the adoption of Regulation (EU) No 575/2013 of the European Parliament and of the Council(6) and Directive 2013/36/EU of the European Parliament and of the Council(7), which strengthened the prudential requirements for credit institutions and investment firms (institutions).

(2)  While the reform has rendered the financial system more stable and resilient against many types of possible future shocks and crises, it did not address all identified problems. An important reason for that was that international standard setters, such as the BCBS and the Financial Stability Board (FSB), had not finished their work on internationally agreed solutions to tackle those problems at the time. Now that work on important additional reforms has been completed, the outstanding problems should be addressed.

(3)  In its communication of 24 November 2015 entitled ‘Towards the completion of the Banking Union’, the Commission recognised the need for further risk reduction and committed bringing forward a legislative proposal that would build on internationally agreed standards. The need to take further concrete legislative steps in terms of reducing risks in the financial sector has also been recognised by the Council in its conclusions of 17 June 2016 and by the European Parliament in its resolution of 10 March 2016 on the Banking Union – Annual Report 2015(8).

(4)  Risk reduction measures should not only further strengthen the resilience of the European banking system and the markets' confidence in it, but also provide the basis for further progress in completing the banking union. Those measures should also be considered against the background of broader challenges affecting the Union economy, in particular the need to promote growth and jobs at times of uncertain economic outlook. In that context, various major policy initiatives, such as the Investment Plan for Europe and the capital markets union, have been launched in order to strengthen the economy of the Union. It is therefore important that all risk reduction measures interact smoothly with those policy initiatives as well as with broader recent reforms in the financial sector.

(5)  The provisions of this Regulation should be equivalent to internationally agreed standards and ensure the continued equivalence of Directive 2013/36/EU and Regulation (EU) No 575/2013 with the Basel III framework. The targeted adjustments in order to reflect Union specificities and broader policy considerations should be limited in terms of scope or time in order not to impinge on the overall soundness of the prudential framework.

(6)  Existing risk reduction measures and, in particular, reporting and disclosure requirements should also be improved to ensure that they can be applied in a more proportionate way and that they do not create an excessive compliance burden, especially for smaller and less complex institutions.

(7)  A precise definition of small and non-complex institutions is necessary for targeted simplifications of requirements with respect to the application of the principle of proportionality. By itself, a single absolute threshold does not take into account the specificities of the national banking markets. It is therefore necessary for Member States to be able to use their discretion to bring the threshold in line with domestic circumstances and adjust it downwards, as appropriate. Since the size of an institution is not in itself the defining factor for its risk profile, it is also necessary to apply additional qualitative criteria to ensure that an institution is only considered to be a small and non-complex institution and able to benefit from more proportionate rules where the institution fulfils all the relevant criteria.

(8)  Leverage ratios contribute to preserving financial stability by acting as a backstop to risk based capital requirements and by constraining the building up of excessive leverage during economic upturns. The BCBS has revised the international standard on the leverage ratio in order to specify further certain aspects of the design of that ratio. Regulation (EU) No 575/2013 should be aligned with the revised standard so as to ensure a level playing field internationally for institutions established inside the Union but operating outside the Union, and to ensure that leverage ratio remains an effective complement to risk-based own funds requirements. Therefore, a leverage ratio requirement should be introduced to complement the current system of reporting and disclosure of the leverage ratio.

(9)  In order not to unnecessarily constrain lending by institutions to corporates and private households and to prevent unwarranted adverse impacts on market liquidity, the leverage ratio requirement should be set at a level where it acts as a credible backstop to the risk of excessive leverage without hampering economic growth.

(10)  The European Supervisory Authority (European Banking Authority) (EBA), established by Regulation (EU) No 1093/2010 of the European Parliament and of the Council(9), concluded in its report of 3 August 2016 on the leverage ratio requirement that a Tier 1 capital leverage ratio calibrated at 3 % for any type of credit institution would constitute a credible backstop function. A 3 % leverage ratio requirement was also agreed upon at international level by the BCBS. The leverage ratio requirement should therefore be calibrated at 3 %.

(11)  A 3 % leverage ratio requirement would however constrain certain business models and lines of business more than others. In particular, public lending by public development banks and officially supported export credits would be impacted disproportionally. The leverage ratio should therefore be adjusted for those types of exposures. Clear criteria that help ascertain the public mandate of such credit institutions should therefore be set out and cover aspects such as their establishment, the type of activities undertaken, their goal, the guarantee arrangements by public bodies and limits to deposit taking activities. The form and manner of establishment of such credit institutions should remain, however, at the discretion of Member State's central government, regional government or local authority and may consist of setting up a new credit institution, acquisition or take-over, including through concessions and in the context of resolution proceedings, of an already existing entity by such public authorities.

(12)  A leverage ratio should also not undermine the provision of central clearing services by institutions to clients. Therefore, the initial margin on centrally cleared derivative transactions received by institutions ▌ from their clients and that they pass on to central counterparties (CCPs), should be excluded from the total exposure measure.

(13)  In exceptional circumstances that warrant the exclusion of certain exposures to central banks from the leverage ratio and in order to facilitate the implementation of monetary policies, competent authorities should be able to exclude such exposures from the total exposure measure on a temporary basis. For that purpose, they should publicly declare, after consultation with the relevant central bank, that such exceptional circumstances exist. The leverage ratio requirement should be recalibrated commensurately to offset the impact of the exclusion. Such recalibration should ensure the exclusion of risks to financial stability affecting the relevant banking sectors, and that the resilience provided by the leverage ratio is maintained.

(14)  It is appropriate to implement a leverage ratio buffer requirement for institutions identified as global systemically important institutions (G-SIIs) in accordance with Directive 2013/36/EU and with the BCBSs standard on a leverage ratio buffer for global systemically important banks (G-SIBs) published in December 2017. The leverage ratio buffer was calibrated by the BCBS for the specific purpose of mitigating the comparably larger risks to financial stability posed by G-SIBs and, against that background, should only apply to G-SIIs at this stage. However, further analysis should be done to determine whether it would be appropriate to apply the leverage ratio buffer requirement to other systemically important institutions (O-SIIs), as defined in Directive 2013/36/EU, and, if that is the case, in what manner the calibration should be tailored to the specific features of those institutions.

(15)  On 9 November 2015, the FSB ▌ published the Total Loss-absorbing Capacity (TLAC) Term Sheet (the 'TLAC standard') which was endorsed by the G20 at the November 2015 summit in Turkey. The TLAC standard requires G‑SIBs, to hold a sufficient amount of highly loss absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in the event of a resolution. The TLAC standard should be implemented in Union law.

(16)  The implementation of the TLAC standard in Union law needs to take into account the existing institution-specific minimum requirement for own funds and eligible liabilities (MREL), set out in Directive 2014/59/EU of the European Parliament and of the Council(10). As the TLAC standard and the MREL pursue the same objective of ensuring that institutions have sufficient loss absorption capacity, the two requirements should be complementary elements of a common framework. Operationally, the harmonised minimum level of the TLAC standard should be introduced into Regulation (EU) No 575/2013 through a new requirement for own funds and eligible liabilities, while the institution-specific add-on for G-SIIs and the institution-specific requirement for non-G-SIIs should be introduced through targeted amendments to Directive 2014/59/EU and Regulation (EU) No 806/2014 of the European Parliament and of the Council(11). The provisions introducing the TLAC standard in Regulation (EU) No 575/2013 should be read together with the provisions that are introduced into Directive 2014/59/EU and Regulation (EU) No 806/2014, and with Directive 2013/36/EU.

(17)  In accordance with the TLAC standard that only covers G-SIBs, the minimum requirement for a sufficient amount of own funds and highly loss absorbing liabilities introduced in this Regulation should only apply to G-SIIs. However, the rules concerning eligible liabilities introduced in this Regulation should apply to all institutions, in line with the complementary adjustments and requirements set out in Directive 2014/59/EU.

(18)  In line with the TLAC standard, the requirement for own funds and eligible liabilities should apply to resolution entities which are either themselves G-SIIs or are part of a group identified as a G-SII. The requirement for own funds and eligible liabilities should apply on either an individual basis or a consolidated basis, depending on whether such resolution entities are stand-alone institutions with no subsidiaries or parent undertakings.

(19)  Directive 2014/59/EU allows for resolution tools to be used not only for institutions but also for financial holding companies and mixed financial holding companies. Parent financial holding companies and parent mixed financial holding companies should therefore have sufficient loss absorption capacity in the same way as parent institutions.

(20)  To ensure the effectiveness of the requirement for own funds and eligible liabilities, it is essential that the instruments held for meeting that requirement have a high loss absorption capacity. Liabilities that are excluded from the bail-in tool referred to in Directive 2014/59/EU do not have that capacity, and neither do other liabilities that, although bail-inable in principle might raise difficulties for being bailed in in practice. Those liabilities should therefore not be considered eligible for the requirement for own funds and eligible liabilities. On the other hand, capital instruments, as well as subordinated liabilities have a high loss absorption capacity. Also, the loss absorption potential of liabilities that rank pari passu with certain excluded liabilities should be recognised up to a certain extent, in line with the TLAC standard.

(21)  To avoid double counting of liabilities for the purposes of the requirement for own funds and eligible liabilities, rules should be introduced for the deduction of holdings of eligible liabilities items that mirror the corresponding deduction approach already developed in Regulation (EU) No 575/2013 for capital instruments. Under that approach, holdings of eligible liabilities instruments should first be deducted from eligible liabilities and, to the extent there are not sufficient liabilities, those eligible liabilities instruments should be deducted from Tier 2 instruments.

(22)  The TLAC standard contains some eligibility criteria for liabilities that are stricter than the current eligibility criteria for capital instruments. To ensure consistency, eligibility criteria for capital instruments should be aligned as regards the non-eligibility of instruments issued through special purpose entities as of 1 January 2022.

(23)  It is necessary to provide for a clear and transparent approval process for Common Equity Tier 1 instruments that can contribute to maintaining the high quality of those instruments. To that end, competent authorities should be responsible for approving those instruments before institutions can classify them as Common Equity Tier 1 instruments. However, competent authorities should not need to require prior permission for Common Equity Tier 1 instruments that are issued on the basis of legal documentation already approved by the competent authority and governed by substantially the same provisions as those governing capital instruments for which the institution has received prior permission from the competent authority to classify as Common Equity Tier 1 instruments. In such a case, instead of requesting prior approval, it should be possible for institutions to notify their competent authorities of their intention to issue such instruments. They should do so sufficiently in advance of the instruments' classification as Common Equity Tier 1 instruments to leave time to competent authorities to review the instruments, if necessary. In view of EBA's role in furthering the convergence of supervisory practices and enhancing the quality of own funds instruments, competent authorities should consult EBA before approving any new form of Common Equity Tier 1 instruments.

(24)  Capital instruments are eligible as Additional Tier 1 or Tier 2 instruments only to the extent that they comply with the relevant eligibility criteria. Such capital instruments may consist of equity or liabilities, including subordinated loans that fulfil those criteria.

(25)  Capital instruments or parts of capital instruments should only be eligible to qualify as own funds instruments to the extent they are paid up. As long as parts of an instrument are not paid up, those parts should not be eligible to qualify as own funds instruments.

(26)  Own funds instruments and eligible liabilities should not be subject to set-off or netting arrangements which would undermine their loss absorption capacity in resolution. This should not mean that the contractual provisions governing the liabilities should contain a clause explicitly stating that the instrument is not subject to set-off or netting rights.

(27)  Due to the evolution of the banking sector in an even more digital environment, software is becoming a more important type of asset. Prudently valued software assets, the value of which is not materially affected by the resolution, insolvency or liquidation of an institution, should not be subject to the deduction of intangible assets from Common Equity Tier 1 items. That specification is important, as software is a broad concept that covers many different types of assets, not all of which preserve their value in the situation of a gone concern. In that context, differences in the valuation and amortisation of software assets and the realised sales of such assets should be taken into account. Furthermore, consideration should be given to international developments and differences in the regulatory treatment of investments in software, to different prudential rules that apply to institutions and insurance undertakings, and to the diversity of the financial sector in the Union, including non-regulated entities such as financial technology companies.

(28)  In order to avoid cliff-edge effects, it is necessary to grandfather the existing instruments with respect to certain eligibility criteria. For liabilities issued before ... [the date of entry into force of this amending Regulation], certain eligibility criteria for own funds instruments and eligible liabilities should be waived. Such a grandfathering should apply to liabilities counting towards, where applicable, the subordinated portion of TLAC, and the subordinated portion of the MREL under Directive 2014/59/EU, as well as to liabilities counting towards, where applicable, the non-subordinated portion of TLAC, and the non-subordinated portion of the MREL under Directive 2014/59/EU. For own funds instruments, the grandfathering should end on … [six years after the date of entry into force of this amending Regulation].

(29)  Eligible liabilities instruments, including those which have a residual maturity of less than one year, can only be redeemed after the resolution authority has granted its prior permission. Such prior permission could also be a general prior permission, in which case the redemption would have to occur within the limited period of time and for a predetermined amount covered by the general prior permission.

(30)  Since the adoption of Regulation (EU) No 575/2013, the international standard on the prudential treatment of institutions' exposures to CCPs has been amended in order to improve the treatment of institutions' exposures to qualifying CCPs (QCCPs). Notable revisions of that standard included the use of a single method for determining the own funds requirement for exposures due to default fund contributions, an explicit cap on the overall own funds requirements applied to exposures to QCCPs, and a more risk-sensitive approach for capturing the value of derivatives in the calculation of the hypothetical resources of a QCCP. At the same time, the treatment of exposures to non-qualifying CCPs was left unchanged. Given that the revised international standards introduced a treatment that is better suited to the central clearing environment, Union law should be amended to incorporate those standards.

(31)  In order to ensure that institutions adequately manage their exposures in the form of units or shares in collective investment undertakings (CIUs), the rules spelling out the treatment of those exposures should be risk sensitive and should promote transparency with respect to the underlying exposures of CIUs. The BCBS has therefore adopted a revised standard that sets a clear hierarchy of approaches to calculate risk-weighted exposure amounts for those exposures. That hierarchy reflects the degree of transparency over the underlying exposures. Regulation (EU) No 575/2013 should be aligned with those internationally agreed rules.

(32)  For an institution that provides a minimum value commitment to the ultimate benefit of retail clients for an investment in a unit or share in a CIU including as part of a government-sponsored private pension scheme, no payment by the institution or undertaking included in the same scope of prudential consolidation is required unless the value of the customer’s shares or units in the CIU falls below the guaranteed amount at one or more points in time specified in the contract. The likelihood of the commitment being exercised is therefore low in practice. Where an institution’s minimum value commitment is limited to a percentage of the amount that a client had originally invested into shares or units in a CIU (fixed-amount minimum value commitment) or to an amount that depends on the performance of financial indicators or market indices up to a given time, any currently positive difference between the value of the customer’s shares or units and the present value of the guaranteed amount at a given date constitutes a buffer and reduces the risk for the institution to have to pay out the guaranteed amount. All those reasons justify a reduced credit conversion factor.

(33)  For calculating the exposure value of derivative transactions under the counterparty credit risk framework, Regulation (EU) No 575/2013 currently gives institutions the choice between three different standardised approaches: the Standardised Method (SM), the Mark-to-Market Method (MtMM) and the Original Exposure Method (OEM).

(34)  Those standardised approaches however do not recognise appropriately the risk-reducing nature of collateral in the exposures. Their calibrations are outdated and they do not reflect the high level of volatility observed during the financial crisis. Neither do they recognise appropriately netting benefits. To address those shortcomings, the BCBS decided to replace the SM and the MtMM with a new standardised approach for computing the exposure value of derivative exposures, the so-called Standardised Approach for Counterparty Credit Risk (SA-CCR). Given that the revised international standards introduced a new standardised approach that is better suited to the central clearing environment, Union law should be amended to incorporate those standards.

(35)  The SA-CCR is more risk sensitive than the SM and the MtMM and should therefore lead to own funds requirements that better reflect the risks related to institutions' derivative transactions. At the same time, for some of the institutions which currently use the MtMM the SA-CCR may prove to be too complex and burdensome to implement. For institutions that meet predefined eligibility criteria, and for institutions that are part of a group which meets those criteria on a consolidated basis, a simplified version of the SA-CCR (the "simplified SA-CCR") should be introduced. Since such a simplified version will be less risk sensitive than the SA-CCR, it should be appropriately calibrated in order to ensure that it does not underestimate the exposure value of derivative transactions.

(36)  For institutions which have ▌ limited derivative exposures and which currently use the MtMM or the OEM, both the SA-CCR and the simplified SA-CCR could be too complex to implement. The OEM should therefore be reserved as an alternative approach for those institutions that meet predefined eligibility criteria, and for institutions that are part of a group which meets those criteria on a consolidated basis, but should be revised in order to address its major shortcomings.

(37)  To guide an institution in its choice of permitted approaches clear criteria should be introduced. Those criteria should be based on the size of the derivative activities of an institution which indicates the degree of sophistication an institution should be able to comply with to compute the exposure value.

(38)  During the financial crisis, trading book losses for some institutions established in the Union were substantial. For some of them, the level of capital required against those losses proved insufficient, leading them to seek extraordinary public financial support. Those observations led the BCBS to remove a number of weaknesses in the prudential treatment for trading book positions which are the own funds requirements for market risk.

(39)  In 2009, the first set of reforms was finalised at international level and transposed into Union law by means of Directive 2010/76/EU of the European Parliament and of the Council(12). The 2009 reform, however, did not address the structural weaknesses of the own funds requirements for market risk standards. The lack of clarity about the boundary between the trading and banking books gave opportunities for regulatory arbitrage while the lack of risk sensitivity of the own funds requirements for market risk did not allow to capture the full range of risks to which institutions were exposed.

(40)  The BCBS initiated the fundamental review of the trading book (FRTB) to address the structural weaknesses of the own funds requirements for market risk standards. That work led to the publication in January 2016 of a revised market risk framework. In December 2017, the Group of Central Bank Governors and Heads of Supervision agreed to extend the implementation date of the revised market risk framework in order to allow institutions additional time to develop the necessary systems infrastructure but also for the BCBS to address certain specific issues related to the framework. This includes a review of the calibrations of the standardised and internal model approaches to ensure consistency with the BCBSs original expectations. Upon finalisation of that review, and before an impact assessment is performed to assess the impact of the resulting revisions to the FRTB framework on institutions in the Union, all institutions that would be subject to the FRTB framework in the Union should start reporting the calculations derived from the revised standardised approach. To that end, in order to make the calculations for reporting requirements fully operational in line with international developments, the power to adopt an act in accordance with Article 290 of the Treaty on the Functioning of the European Union (TFEU) should be delegated to the Commission. The Commission should adopt that delegated act by 31 December 2019. Institutions should start reporting that calculation no later than one year after the adoption of that delegated act. In addition, institutions that obtain approval to use the revised internal model approach of the FRTB framework for reporting purposes should also report the calculation under the internal model approach three years after its full operationalisation.

(41)  Introducing reporting requirements for the FRTB approaches should be considered as a first step towards the full implementation of the FRTB framework in the Union. Taking into account the final revisions to the FRTB framework performed by the BCBS, the results of the impact of those revisions on institutions in the Union and on the FRTB approaches already set out in this Regulation for reporting requirements, the Commission should submit, where appropriate, a legislative proposal to the European Parliament and to the Council by 30 June 2020 on how the FRTB framework should be implemented in the Union to establish the own funds requirements for market risk.

(42)  A proportionate treatment for market risk should also apply to institutions with limited trading book activities, allowing more institutions with small trading book activities to apply the credit risk framework for banking book positions as set out under a revised version of the derogation for small trading book business. The principle of proportionality should also be taken into account when the Commission reassesses how institutions with medium-sized trading book business should calculate the own funds requirements for market risk. In particular, the calibration of the own funds requirements for market risk for institutions with medium-sized trading book business should be reviewed in light of developments at international level. In the meantime, institutions with medium-sized trading book business, as well institutions with small trading book business, should be exempted from the reporting requirements under the FRTB.

(43)  The large exposures framework should be strengthened to improve the ability of institutions to absorb losses and to better comply with international standards. To that end, a higher quality of capital should be used as a capital base for the calculation of the large exposures limit and exposures to credit derivatives should be calculated in accordance with the SA-CCR. Moreover, the limit on the exposures that G-SIIs may have towards other G-SIIs should be lowered to reduce systemic risks related to interlinks among large institutions and the impact that the default of G-SIIs counterparty may have on financial stability.

(44)  While the liquidity coverage ratio (LCR) ensures that institutions will be able to withstand severe stress on a short-term basis, it does not ensure that those institutions will have a stable funding structure on a longer-term horizon. It became thus apparent that a detailed binding stable funding requirement should be developed at Union level which should be met at all times with the aim of preventing excessive maturity mismatches between assets and liabilities and overreliance on short‑term wholesale funding.

(45)  Consistent with the BCBSs stable funding standard, rules should, therefore, be adopted to define the stable funding requirement as a ratio of an institution's amount of available stable funding to its amount of required stable funding over a one-year horizon. That ▌ binding requirement should be called the net stable funding ratio (NSFR) requirement. The amount of available stable funding should be calculated by multiplying the institution's liabilities and own funds by appropriate factors that reflect their degree of reliability over the one-year horizon of the NSFR. The amount of required stable funding should be calculated by multiplying the institution's assets and off-balance-sheet exposures by appropriate factors that reflect their liquidity characteristics and residual maturities over the one-year horizon of the NSFR.

(46)  The NSFR should be expressed as a percentage and set at a minimum level of 100 %, which indicates that an institution holds sufficient stable funding to meet its funding needs over a one-year horizon under both normal and stressed conditions. Should its NSFR fall below the 100 % level, the institution should comply with the specific requirements laid down in Regulation (EU) No 575/2013 for a timely restoration of its NSFR to the minimum level. The application of supervisory measures in cases of non-compliance with the NSFR requirement should not be automatic ▌. Competent authorities should instead assess the reasons for non-compliance with the NSFR requirement before defining potential supervisory measures.

(47)  In accordance with the recommendations made by EBA in its report of 15 December 2015 on net stable funding requirements under Article 510 of Regulation (EU) No 575/2013 the rules for calculating the NSFR should be closely aligned with the BCBSs standards, including developments in those standards regarding the treatment of derivative transactions. The necessity to take into account some European specificities to ensure that the NSFR requirement does not hinder the financing of the European real economy, however, justifies adopting some adjustments to the NSFR developed by the BCBS for the definition of the European NSFR requirement. Those adjustments due to the European context are recommended by EBA and relate mainly to specific treatments for: pass-through models in general and covered bonds issuance in particular; trade finance activities; centralised regulated savings; residential guaranteed loans; ▌ credit unions; CCPs and central securities depositories (CSDs) not undertaking any significant maturity transformation. Those proposed specific treatments broadly reflect the preferential treatment granted to those activities in the European LCR compared to the LCR developed by the BCBS. Because the NSFR complements the LCR, those two ratios should be consistent in their definition and calibration. This is in particular the case for required stable funding factors applied to LCR high quality liquid assets for the calculation of the NSFR that should reflect the definitions and haircuts of the European LCR, regardless of compliance with the general and operational requirements set out for the LCR calculation that are not appropriate in the one-year horizon of the NSFR calculation.

(48)  Beyond European specificities, the ▌ treatment of derivative transactions in the NSFR developed by the BCBS could have an important impact on institutions’ derivative activities and, consequently, on European financial markets and on the access to some operations for end-users. Derivative transactions and some interlinked transactions, including clearing activities, could be unduly and disproportionately impacted by the introduction of the NSFR developed by BCBS without having been subject to extensive quantitative impact studies and public consultation. The additional requirement to hold between 5 % and 20 % of stable funding against gross derivative liabilities is very widely seen as a rough measure to capture additional funding risks related to the potential increase of derivative liabilities over a one-year horizon and is under review at BCBS level. That requirement, introduced at a level of 5 % in line with the discretion left to jurisdictions by the BCBS to reduce the required stable funding factor on gross derivative liabilities, could then be amended to take into account developments at the BCBS level and to avoid possible unintended consequences such as hindering the good functioning of the European financial markets and the provision of risk hedging tools to institutions and end-users, including corporates, to ensure their financing as an objective of the capital markets union.

(49)  The asymmetric treatment by the BCBS of short-term funding, such as repos (stable funding not recognised) and short-term lending, such as reverse repos (some stable funding required – 10 % if collateralised by level 1 high quality liquid assets (HQLA) as defined in the LCR and 15 % for other transactions) with financial customers is intended to discourage extensive short-term funding links between financial customers, because such links are a source of interconnection and make it more difficult to resolve a particular institution without a contagion of risk to the rest of the financial system in case of failure. However, the calibration of the asymmetry is ▌ conservative and may affect the liquidity of securities usually used as collateral in short-term transactions, in particular sovereign bonds, as institutions will probably reduce the volume of their operations on repo markets. It could also undermine market-making activities, because repo markets facilitate the management of the necessary inventory, thereby contradicting the objectives of the capital markets union. To allow for sufficient time for institutions to progressively adapt to that conservative calibration, a transitional period, during which the required stable funding factors would be temporarily reduced, should be introduced. The size of the temporary reduction in the required stable funding factors should depend on the types of transactions and on the type of collateral used in those transactions.

(50)  In addition to the temporary recalibration of the BCBS required stable funding factor that applies to short-term reverse repo transactions with financial customers secured by sovereign bonds ▌, some other adjustments have proven to be necessary to ensure that the introduction of the NSFR requirement does not hinder the liquidity of sovereign bonds markets. The BCBS 5 % required stable funding factor that applies to level 1 HQLA, including sovereign bonds, implies that institutions would need to hold ready available long-term unsecured funding in such percentage regardless of the time during which they expect to hold such sovereign bonds. This could potentially further incentivise institutions to deposit cash at central banks rather than to act as primary dealers and provide liquidity in sovereign bond markets. Moreover, it is not consistent with the LCR that recognises the full liquidity of those assets even in time of severe liquidity stress (0 % haircut). The required stable funding factor of level 1 HQLA as defined in the European LCR, excluding extremely high quality covered bonds, should therefore be reduced from 5 % to 0 %.

(51)  Furthermore, all level 1 HQLA as defined in the European LCR, excluding extremely high quality covered bonds, received as variation margin in derivative contracts should offset derivative assets while the NSFR developed by the BCBS only accepts cash respecting the conditions of the leverage framework to offset derivative assets. That broader recognition of assets received as variation margin will contribute to the liquidity of sovereign bonds markets, avoid penalising end-users that hold high amounts of sovereign bonds but few cash (like pension funds) and avoid adding additional tensions on the demand for cash on repo markets.

(52)  The NSFR requirement should apply to institutions both on an individual and a consolidated basis, unless competent authorities waive the application of the NSFR requirement on an individual basis. Where the application of the NSFR requirement on an individual basis has not been waived, transactions between two institutions belonging to the same group or to the same institutional protection scheme should in principle receive symmetrical available and required stable funding factors to avoid a loss of funding in the internal market and to not impede the effective liquidity management in European groups where liquidity is centrally managed. Such preferential symmetrical treatments should only be granted to intragroup transactions where all the necessary safeguards are in place, on the basis of additional criteria for cross-border transactions, and only with the prior approval of the competent authorities involved as it cannot be assumed that institutions experiencing difficulties in meeting their payment obligations will always receive funding support from other undertakings belonging to the same group or to the same institutional protection scheme.

(53)  Small and non-complex institutions should be given the opportunity to use a simplified version of the NSFR requirement. A simplified, less granular version of the NSFR should involve collecting a limited number of data points, which would, reduce the complexity of the calculation for those institutions in accordance with the principle of proportionality, while ensuring that those institutions still maintain a sufficient stable funding factor by means of a calibration that should be at least as conservative as the one of the fully‑fledged NSFR requirement. However, competent authorities should be able to require small and non‑complex institutions to apply the fully-fledged NSFR requirement instead of the simplified version.

(54)  The consolidation of subsidiaries in third countries should take due account of the stable funding requirements applicable in those countries. Accordingly, consolidation rules in the Union should not introduce a more favourable treatment for available and required stable funding in third-country subsidiaries than the treatment which is available under the national law of those third countries.

(55)  Institutions should be required to report to their competent authorities in the reporting currency the binding detailed NSFR for all items and separately for items denominated in each significant currency to ensure an appropriate monitoring of possible currencies mismatches. The NSFR requirement should not subject institutions to any double reporting requirements or to reporting requirements not in line with the rules in force and institutions should be granted sufficient time to get prepared to the entry into force of new reporting requirements.

(56)  As the provision of meaningful and comparable information to the market on institutions' common key risk metrics is a fundamental tenet of a sound banking system, it is essential to reduce information asymmetry as much as possible and facilitate comparability of credit institutions’ risk profiles within and across jurisdictions. The BCBS published the revised Pillar 3 disclosure standards in January 2015 to enhance the comparability, quality and consistency of institutions' regulatory disclosures to the market. It is, therefore, appropriate to amend the existing disclosure requirements to implement those new international standards.

(57)  Respondents to the Commission's call for evidence on the EU regulatory framework for financial services regarded current disclosure requirements as disproportionate and burdensome for smaller institutions. Without prejudice to aligning disclosures more closely with international standards, small and non-complex institutions should be required to produce less frequent and detailed disclosures than their larger peers, thus reducing the administrative burden to which they are subject.

(58)  Some clarifications should be made to the remuneration disclosures. The disclosure requirements relating to remuneration as set out in this Regulation should be compatible with the aims of the remuneration rules, namely to establish and maintain, for categories of staff whose professional activities have a material impact on the risk profile of institutions, remuneration policies and practices that are consistent with effective risk management. Furthermore, institutions benefitting from a derogation from certain remuneration rules should be required to disclose information concerning such derogation.

(59)  Small and medium-sized enterprises (SMEs) are one of the pillars of the Union's economy as they play a fundamental role in creating economic growth and providing employment. Given the fact that SMEs carry a lower systematic risk than larger corporates, capital requirements for SME exposures should be lower than those for large corporates to ensure an optimal bank financing of SMEs. Currently, SME exposures of up to EUR 1,5 million are subject to a 23,81 % reduction in risk weighted exposure amount. Given that the threshold of EUR 1,5 million for an SME exposure is not indicative of a change in riskiness of an SME, reduction in capital requirements should be extended to SME exposures ▌ of up to EUR 2,5 million and ▌ the part of an SME exposure exceeding EUR 2,5 million should be subject to a 15 % reduction in capital requirements.

(60)  Investments in infrastructure are essential to strengthen Europe's competitiveness and to stimulate job creation. The recovery and future growth of the Union economy depends largely on the availability of capital for strategic investments of European significance in infrastructure, in particular broadband and energy networks, as well as transport infrastructure including electromobility infrastructure, particularly in industrial centres; education, research and innovation; and renewable energy and energy efficiency. The Investment Plan for Europe aims at promoting additional funding to viable infrastructure projects through, inter alia, the mobilisation of additional private sources of finance. For a number of potential investors the main concern is the perceived absence of viable projects and the limited capacity to properly evaluate risk given their intrinsically complex nature.

(61)  In order to encourage private and public investments in infrastructure projects it is essential to lay down a regulatory environment that is able to promote high quality infrastructure projects and reduce risks for investors. In particular, own funds requirements for exposures to infrastructure projects should be reduced, provided they comply with a set of criteria able to reduce their risk profile and enhance predictability of cash flows. The Commission should review the provision on high quality infrastructure projects in order to assess: its impact on the volume of infrastructure investments by institutions and the quality of investments having regard to Union's objectives to move towards a low-carbon, climate-resilient and circular economy; and its adequacy from a prudential standpoint. The Commission should also consider whether the scope of those provisions should be extended to infrastructure investments by corporates.

(62)  As recommended by EBA, the European Supervisory Authority (European Securities and Markets Authority) (ESMA) established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council(13) and the European Central Bank, CCPs, due to their distinct business model, should be exempted from the leverage ratio requirement, because they are required to obtain a banking licence simply for the reason of being granted access to overnight central bank facilities and to fulfil their roles as key vehicles for the achievement of important political and regulatory objectives in the financial sector.

(63)  Furthermore, exposures of CSDs authorised as credit institutions and exposures of credit institutions designated in accordance with Article 54(2) of Regulation (EU) No 909/2014 of the European Parliament and of the Council(14), such as cash balances resulting from the provision of cash accounts to, and accepting deposits from, participants in a securities settlement system and holders of securities accounts, should be excluded from the total exposure measure as they do not create a risk of excessive leverage as those cash balances are used solely for the purpose of settling transaction in securities settlement systems.

(64)  Given that the guidance on additional own funds referred to in Directive 2013/36/EU is a capital target that reflects supervisory expectations, it should not be subject either to mandatory disclosure or to the prohibition of disclosure by competent authorities under Regulation (EU) No 575/2013 or that Directive.

(65)  In order to ensure an appropriate definition of some specific technical provisions of Regulation (EU) No 575/2013 and to take into account possible developments in standards at international level, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission: in respect of amending the list of products or services the assets and liabilities of which can be considered as interdependent; in respect of amending the list of multilateral development banks; in respect of amending market risk reporting requirements; and in respect of specifying additional liquidity requirements. Before the adoption of those acts it is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Inter-institutional Agreement of 13 April 2016 on Better Law-Making(15). In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(66)  Technical standards should ensure the consistent harmonisation of the requirements laid down in Regulation (EU) No 575/2013. As a body with highly specialised expertise, EBA should be mandated to develop draft regulatory technical standards which do not involve policy choices, for submission to the Commission. Regulatory technical standards should be developed in the areas of prudential consolidation, own funds, TLAC, the treatment of exposures secured by mortgages on immovable property, equity investment into funds, the calculation of loss given defaults under the Internal Ratings Based Approach for credit risk, market risk, large exposures and liquidity. The Commission should be empowered to adopt those regulatory technical standards by means of delegated acts pursuant to Article 290 TFEU and in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. The Commission and EBA should ensure that those standards and requirements can be applied by all institutions concerned in a manner that is proportionate to the nature, scale and complexity of those institutions and their activities.

(67)  To facilitate the comparability of disclosures, EBA should be mandated to develop draft implementing technical standards establishing standardised disclosure templates covering all substantial disclosure requirements set out in Regulation (EU) No 575/2013. When developing those standards, EBA should take into account the size and complexity of institutions, as well as the nature and level of risk of their activities. EBA should report on where proportionality of the Union supervisory reporting package could be improved in terms of scope, granularity or frequency and, at least, submit concrete recommendations as to how the average compliance costs for small institutions can be reduced by ideally 20 % or more and at least 10 % by means of appropriate simplification of requirements. EBA should be mandated to develop draft implementing technical standards that are to accompany that report. The Commission should be empowered to adopt those implementing technical standards by means of implementing acts pursuant to Article 291 TFEU and in accordance with Article 15 of Regulation (EU) No 1093/2010.

(68)  In order to facilitate institutions' compliance with the rules set out in this Regulation and in Directive 2013/36/EU, as well as with regulatory technical standards, implementing technical standards, guidelines and templates adopted to implement those rules, EBA should develop an IT tool aimed at guiding institutions through the relevant provisions, standards, guidelines and templates in relation to their size and business model.

(69)  In addition to the report on possible cost reductions, by … [twelve months after the date of entry into force of this amending Regulation] EBA should – in cooperation with all relevant authorities, namely those authorities that are responsible for prudential supervision, resolution and deposit guarantee schemes and in particular the European System of Central Banks (ESCB) – prepare a feasibility report regarding the development of a consistent and integrated system for collecting statistical data, resolution data and prudential data. Taking into account the previous work of the ESCB on integrated data collection, that report should provide a cost and benefit analysis regarding the creation of a central data collection point for an integrated data reporting system as regards statistical and regulatory data for all institutions located in the Union. Such a system should, amongst other things, use consistent definitions and standards for the data to be collected, and guarantee a reliable and permanent exchange of information between the competent authorities thereby ensuring strict confidentiality of the data collected, strong authentication and management of access right to the system as well as cybersecurity. By centralising and harmonising the European reporting landscape in such a way, the goal is to prevent multiple requests for similar or identical data from different authorities and thereby to significantly reduce the administrative and financial burden, both for the competent authorities and for the institutions. If appropriate, and taking into account the feasability report by EBA, the Commission should submit to the European Parliament and to the Council a legislative proposal.

(70)  The relevant competent or designated authorities should aim at avoiding any form of duplicative or inconsistent use of the macroprudential powers laid down in Regulation (EU) No 575/2013 and Directive 2013/36/EU. In particular, the relevant competent or designated authorities should duly consider whether the measures that they take under Article 124, 164 or 458 of Regulation (EU) No 575/2013 duplicate or are inconsistent with other existing or upcoming measures under Article 133 of Directive 2013/36/EU.

(71)  In view of the amendments to the treatment of exposures to QCCPs, specifically to the treatment of institutions' contributions to QCCPs' default funds, laid down in this Regulation, the relevant provisions in Regulation (EU) No 648/2012(16) which were introduced therein by Regulation (EU) No 575/2013 and which spell out the calculation of the hypothetical capital of CCPs that is then used by institutions to calculate their own funds requirements should therefore be amended accordingly.

(72)  Since the objectives of this Regulation, namely to reinforce and refine already existing Union legal acts ensuring uniform prudential requirements that apply to ▌ institutions ▌ throughout the Union, cannot be sufficiently achieved by the Member States but can rather, by reason of their scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

(73)  In order to allow for orderly divesting from insurance holdings which are not subject to supplementary supervision, an amended version of the transitional provisions in relation to the exemption from deducting equity holdings in insurance companies should be applied, with retroactive effect from 1 January 2019.

(74)  Regulation (EU) No 575/2013 should therefore be amended accordingly,

HAVE ADOPTED THIS REGULATION:

Article 1

Amendments to Regulation (EU) No 575/2013

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

(1)  Articles 1 and 2 are replaced by the following:"

"Article 1

Scope

This Regulation lays down uniform rules concerning general prudential requirements that institutions, financial holding companies and mixed financial holding companies supervised under Directive 2013/36/EU shall comply with in relation to the following items:

   (a) own funds requirements relating to entirely quantifiable, uniform and standardised elements of credit risk, market risk, operational risk ▌, settlement risk and leverage;
   (b) requirements limiting large exposures;
   (c) liquidity requirements relating to entirely quantifiable, uniform and standardised elements of liquidity risk;
   (d) reporting requirements related to points (a), (b) and (c);
   (e) public disclosure requirements.

This Regulation lays down uniform rules concerning the own funds and eligible liabilities requirements that resolution entities that are global systemically important institutions (G‑SIIs) or part of G-SIIs and material subsidiaries of non-EU G-SIIs shall comply with.

This Regulation does not govern publication requirements for competent authorities in the field of prudential regulation and supervision of institutions as set out in Directive 2013/36/EU.

Article 2

Supervisory powers

   1. For the purpose of ensuring compliance with this Regulation, competent authorities shall have the powers and shall follow the procedures set out in Directive 2013/36/EU and in this Regulation.
   2. For the purpose of ensuring compliance with this Regulation, resolution authorities shall have the powers and shall follow the procedures set out in Directive 2014/59/EU of the European Parliament and of the Council* and in this Regulation.
   3. For the purpose of ensuring compliance with the requirements concerning own funds and eligible liabilities, competent authorities and resolution authorities shall cooperate.
   4. For the purpose of ensuring compliance within their respective competences, the Single Resolution Board established by Article 42 of Regulation (EU) No 806/2014 of the European Parliament and of the Council**, and the European Central Bank with regard to matters relating to the tasks conferred on it by Council Regulation (EU) No 1024/2013***, shall ensure the regular and reliable exchange of relevant information.

__________________

* 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).

** 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).

*** 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).";

"

(2)  Article 4 is amended as follows:

(a)  paragraph 1 is amended as follows:

(i)  point (7) is replaced by the following:"

“(7) 'collective investment undertaking' or 'CIU' means a UCITS as defined in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the Council* or an alternative investment fund (AIF) as defined in point (a) of Article 4(1) of Directive 2011/61/EU of the European Parliament and of the Council**;

__________________

* Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32).

** Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p. 1).”;

"

(ii)  point (20) is replaced by the following:"

"(20) 'financial holding company' means a financial institution, the subsidiaries of which are exclusively or mainly institutions or financial institutions, and which is not a mixed financial holding company; the subsidiaries of a financial institution are mainly institutions or financial institutions where at least one of them is an institution and where more than 50 % of the financial institution's equity, consolidated assets, revenues, personnel or other indicator considered relevant by the competent authority ▌ are associated with subsidiaries that are institutions or financial institutions;";

"

(iii)  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 a financial holding company, a mixed financial holding company, a payment institution as defined in point (4) of Article 4 of Directive (EU) 2015/2366 of the European Parliament and of the Council* , and an asset management company, but excluding insurance holding companies and mixed-activity insurance holding companies as defined, respectively, in points (f) and (g) of Article 212(1) of Directive 2009/138/EC;

__________________

* Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 337, 23.12.2015, p. 35).";

"

(iv)  point (28) is replaced by the following:"

"(28) ‘parent institution in a Member State’ means an institution in a Member State which has an institution, a financial institution or an ancillary services undertaking as a subsidiary or which holds a participation in an institution, financial institution or ancillary services undertaking, and which is not itself a subsidiary of another institution authorised in the same Member State, or of a financial holding company or mixed financial holding company set up in the same Member State";

"

(v)  the following points are inserted:"

"(29a) ‘parent investment firm in a Member State’ means a parent institution in a Member State that is an investment firm;

   (29b) ‘EU parent investment firm’ means an EU parent institution that is an investment firm;
   (29c) ‘parent credit institution in a Member State’ means a parent institution in a Member State that is a credit institution;
   (29d) ‘EU parent credit institution’ means an EU parent institution that is a credit institution;";

"

(vi)  in point (39), the following paragraph is added:"

"Two or more natural or legal persons who fulfil the conditions set out in point (a) or (b) because of their direct exposure to the same CCP for clearing activities purposes are not considered as constituting a group of connected clients;";

"

(vii)  point (41) is replaced by the following:"

"(41) ‘consolidating supervisor’ means a competent authority responsible for the exercise of supervision on a consolidated basis in accordance with Article 111 of Directive 2013/36/EU;";

"

(viii)  in point (71), the introductory phrase in point (b) is replaced by the following:"

"(b) for the purposes of Article 97 it means the sum of the following:";

"

(ix)  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 of the European Parliament and of the Council*;

__________________

* Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, p. 349).”;

"

(x)  point (86) is replaced by the following:"

"(86) 'trading book' means all positions in financial instruments and commodities held by an institution either with trading intent or to hedge positions held with trading intent ▌ in accordance with Article 104 ▌;";

"

(xi)  point (91) is replaced by the following:"

“(91) 'trade exposure' means a current exposure, including a variation margin due to the clearing member but not yet received, and any potential future exposure of a clearing member or a client, to a CCP arising from contracts and transactions listed in points (a), (b) and (c) of Article 301(1), as well as initial margin;”;

"

(xii)  point (96) is replaced by the following:"

"(96) 'internal hedge' means a position that materially offsets the component risk elements between a trading book position and one or more non-trading book positions or between two trading desks;";

"

(xiii)  in point (127), point (a) is replaced by the following:"

“(a) the institutions fall within the same institutional protection scheme as referred to in Article 113(7) or are permanently affiliated with a network to a central body;”;

"

(xiv)  point (128) is replaced by the following:"

“(128) ‘distributable items’ means the amount of the profits at the end of the last financial year plus any profits brought forward and reserves available for that purpose, before distributions to holders of own funds instruments, less any losses brought forward, any profits which are non-distributable pursuant to Union or national law or the institution's by-laws and any sums placed in non-distributable reserves in accordance with national law or the statutes of the institution, in each case with respect to the specific category of own funds instruments to which Union or national law, institutions' by-laws, or statutes relate; such profits, losses and reserves being determined on the basis of the individual accounts of the institution and not on the basis of the consolidated accounts;”;

"

(xv)  the following points are added:"

"(130) 'resolution authority' means a resolution authority as defined in point (18) of Article 2(1) of Directive 2014/59/EU;

   (131) 'resolution entity' means a resolution entity as defined in point (83a) of Article 2(1) of Directive 2014/59/EU;
   (132) 'resolution group' means a resolution group as defined in point (83b) of Article 2(1) of Directive 2014/59/EU;
   (133) 'global systemically important institution' or "G-SII" means a G-SII that has been identified in accordance with Article 131(1) and (2) of Directive 2013/36/EU;
   (134) 'non-EU global systemically important institution' or "non-EU G-SII" means a global systemically important banking group or a bank (G-SIBs) that is not a G-SII and that is included in the list of G-SIBs published by the Financial Stability Board, as regularly updated;
   (135) 'material subsidiary' means a subsidiary that on an individual or consolidated basis meets any of the following conditions:
   (a) the subsidiary holds more than 5 % of the consolidated risk-weighted assets of its original parent undertaking;
   (b) the subsidiary generates more than 5 % of the total operating income of its original parent undertaking;
   (c) the total exposure measure, referred to in Article 429(4) of this Regulation, of the subsidiary is more than 5 % of the consolidated total exposure measure of its original parent undertaking;

for the purpose of determining the material subsidiary, where Article 21b(2) of Directive 2013/36/EU applies, the two intermediate EU parent undertakings shall count as a single subsidiary on the basis of their consolidated situation;

   (136) 'G-SII entity' means an entity with legal personality that is a G-SII or is part of a G-SII or of a non-EU G-SII;
   (137) 'bail-in tool' means a bail-in tool as defined in point (57) of Article 2(1) of Directive 2014/59/EU;
   (138) 'group' means a group of undertakings of which at least one is an institution and which consists of a parent undertaking and its subsidiaries, or 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*;
   (139) 'securities financing transaction' means a repurchase transaction, a securities or commodities lending or borrowing transaction, or a margin lending transaction;

   (140) 'initial margin' or 'IM' means any collateral, other than variation margin, collected from or posted to an entity to cover the current and potential future exposure of a transaction or of a portfolio of transactions in the period needed to liquidate those transactions, or to re-hedge their market risk, following the default of the counterparty to the transaction or portfolio of transactions;
   (141) 'market risk' means the risk of losses arising from movements in market prices, including in foreign exchange rates or commodity prices;
   (142) 'foreign exchange risk' means the risk of losses arising from movements in foreign exchange rates;
   (143) 'commodity risk' means the risk of losses arising from movements in commodity prices;
   (144) 'trading desk' means a well-identified group of dealers set up by the institution to jointly manage a portfolio of trading book positions in accordance with a well-defined and consistent business strategy and operating under the same risk management structure;
   (145) "small and non-complex institution" means an institution that meets all the following conditions:
   (a) it is not a large institution;
   (b) the total value of its assets on an individual basis or, where applicable, on a consolidated basis in accordance with this Regulation and Directive 2013/36/EU is on average equal to or less than the threshold of EUR 5 billion over the four-year period immediately preceding the current annual reporting period; Member States may lower that threshold;
   (c) it is not subject to any obligations, or is subject to simplified obligations, in relation to recovery and resolution planning in accordance with Article 4 of Directive 2014/59/EU;
   (d) its trading book business is classified as small within the meaning of Article 94(1);
   (e) the total value of its derivative positions held with trading intent does not exceed 2 % of its total on- and off-balance-sheet assets and the total value of its overall derivative positions does not exceed 5 %, both calculated in accordance with Article 273a(3);
   (f) more than 75 % of both the institution's consolidated total assets and liabilities, excluding in both cases the intragroup exposures, relate to activities with counterparties located in the European Economic Area;
   (g) the institution does not use internal models to meet the prudential requirements in accordance with this Regulation except for subsidiaries using internal models developed at the group level, provided that the group is subject to the disclosure requirements laid down in Article 433a or 433c on a consolidated basis;
   (h) the institution has not communicated to the competent authority an objection to being classified as a small and non-complex institution;
   (i) the competent authority has not decided that the institution is not to be considered a small and non-complex institution on the basis of an analysis of its size, interconnectedness, complexity or risk profile;
   (146) ‘large institution’ means an institution that meets any of the following conditions:
   (a) it is a G-SII;
   (b) it has been identified as an other systemically important institution (O-SII) in accordance with Article 131(1) and (3) of Directive 2013/36/EU;
   (c) it is, in the Member State in which it is established, one of the three largest institutions in terms of total value of assets;
   (d) the total value of its assets on an individual basis or, where applicable, on the basis of its consolidated situation in accordance with this Regulation and Directive 2013/36/EU is equal to or greater than EUR 30 billion;
   (147) ‘large subsidiary’ means a subsidiary that qualifies as a large institution;
   (148) ‘non-listed institution’ means an institution that has not issued securities that are admitted to trading on a regulated market of any Member State, within the meaning of point (21) of Article 4(1) of Directive 2014/65/EU;
   (149) 'financial report' means, for the purposes of Part Eight, a financial report within the meaning of Articles 4 and 5 of Directive 2004/109/EC of the European Parliament and of the Council**.

__________________

* 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 and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).

** Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, p. 38).";

"

(b)  the following paragraph is added:"

"4. EBA shall develop draft regulatory technical standards specifying in which circumstances the conditions set out in ▌ point (39) of paragraph 1 are met.

EBA shall submit those draft regulatory technical standards to the Commission by … [one year after the date of entry into force of this amending Regulation].

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 Articles 10 to 14 of Regulation (EU) No 1093/2010.";

"

(3)  Article 6 is amended as follows:

(a)  paragraph 1 is replaced by the following:"

"1. Institutions shall comply with the obligations laid down in Parts Two, Three, Four, Seven, Seven A and Eight of this Regulation and in Chapter 2 of Regulation (EU) 2017/2402 on an individual basis, with the exception of point (d) of Article 430(1) of this Regulation.";

"

(b)  the following paragraph is inserted:"

"1a. By way of derogation from paragraph 1 of this Article, only institutions identified as resolution entities that are also G-SIIs or that are part of a G-SII, and that do not have subsidiaries shall comply with the requirement laid down in Article 92a on an individual basis.

Material subsidiaries of a non-EU G-SII ▌ shall comply with Article 92b on an individual basis, where they meet all the following conditions:

   (a) they are not resolution entities;
   (b) they do not have subsidiaries;
   (c) they are not the subsidiaries of an EU parent institution.";

"

(c)  paragraphs 3, 4 and 5 are replaced by the following:"

"3. No institution which is either a parent undertaking or a subsidiary, and no institution included in the consolidation pursuant to Article 18, shall be required to comply with the obligations laid down in Part Eight on an individual basis.

By way of derogation from the first subparagraph of this paragraph, the institutions referred to in paragraph 1a of this Article shall comply with Article 437a and point (h) of Article 447 on an individual basis.

   4. Credit institutions, and 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, 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 *, provided that they do not perform any significant maturity transformation; 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, which are listed in points (a) to (e) of 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 transformation.

Pending the report from the Commission in accordance with Article 508(3), competent authorities may exempt investment firms from complying with the obligations laid down in Part Six and point (d) of Article 430(1) taking into account the nature, scale and complexity of their activities.

   5. Investment firms referred to in Articles 95(1) and 96(1) of this Regulation, 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.

_______________________

* Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1).;

"

(4)  Article 8 is amended as follows:

(a)  in paragraph 1, point (b) is replaced by the following:"

"(b) the parent institution on a consolidated basis or the subsidiary institution on a sub-consolidated basis monitors and has oversight at all times over the liquidity positions of all institutions within the group or sub-group, that are subject to the waiver, monitors and has oversight at all times over the funding positions of all institutions within the group or sub-group where the net stable funding ratio (NSFR) requirement set out in Title IV of Part Six is waived, ▌ and ensures a sufficient level of liquidity, and of stable funding where the NSFR requirement set out in Title IV of Part Six is waived, for all of those institutions;";

"

(b)  in paragraph 3, points (b) and (c) are replaced by the following:"

"(b) the distribution of amounts, location and ownership of the required liquid assets to be held within the single liquidity sub-group, where the liquidity coverage ratio (LCR) requirement as laid down in the delegated act referred to in Article 460(1) is waived, and the distribution of amounts and location of available stable funding within the single liquidity sub-group, where the NSFR requirement set out in Title IV of Part Six is waived;

   (c) the determination of minimum amounts of liquid assets to be held by institutions for which the application of the LCR requirement as laid down in the delegated act referred to in Article 460(1) is waived and the determination of minimum amounts of available stable funding to be held by institutions for which the application of the NSFR requirement set out in Title IV of Part Six is waived;";

"

(c)  the following paragraph is added:"

"6. Where, in accordance with this Article, a competent authority waives, in part or in full, the application of Part Six for an institution, it may also waive the application of the associated liquidity reporting requirements under point (d) of Article 430(1) for that institution.";

"

(5)  in Article 10(1), the introductory phrase of the first subparagraph is replaced by the following:"

"1. Competent authorities may, in accordance with national law, partially or fully waive the application of the requirements set out in Parts Two to Eight of this Regulation and Chapter 2 of Regulation (EU) 2017/2402 to one or more credit institutions situated in the same Member State and which are permanently affiliated to a central body which supervises them and which is established in the same Member State, if the following conditions are met:";

"

(6)  Article 11 is amended as follows:

(a)  paragraphs 1 and 2 are replaced by the following:"

"1. Parent institutions in a Member State shall comply, to the extent and in the manner set out in Article 18, with the obligations laid down in Parts Two, Three, Four, Seven and Seven A on the basis of their consolidated situation, with the exception of point (d) of Article 430(1). The parent undertakings and their subsidiaries that are subject to this Regulation shall set up a proper organisational structure and appropriate internal control mechanisms in order to ensure that the data required for consolidation are duly processed and forwarded. In particular, they shall ensure that subsidiaries not subject to this Regulation implement arrangements, processes and mechanisms to ensure proper consolidation.

   2. For the purpose of ensuring that the requirements of this Regulation are applied on a consolidated basis, the terms 'institution', 'parent institution in a Member State', 'EU parent institution' and 'parent undertaking', as the case may be, shall also refer to:
   (a) a financial holding company or mixed financial holding company approved in accordance with Article 21a of Directive 2013/36/EU;
   (b) a designated institution controlled by a parent financial holding company or parent mixed financial holding company where such a parent is not subject to approval in accordance with Article 21a(4) of Directive 2013/36/EU;
   (c) a financial holding company, mixed financial holding company or institution designated in accordance with point (d) of Article 21a(6) of Directive 2013/36/EU.

The consolidated situation of an undertaking referred to in point (b) of the first subparagraph of this paragraph shall be the consolidated situation of the parent financial holding company or the parent mixed financial holding company that is not subject to approval in accordance with Article 21a(4) of Directive 2013/36/EU. The consolidated situation of an undertaking referred to in point (c) of the first subparagraph of this paragraph shall be the consolidated situation of its parent financial holding company or parent mixed financial holding company.”;

"

(b)  paragraph 3 is deleted;

(c)  the following paragraph is inserted:"

“3a. By way of derogation from paragraph 1 of this Article, only parent institutions identified as resolution entities that are G-SIIs, part of a G-SII or part of a non-EU G-SII shall comply with Article 92a of this Regulation on a consolidated basis, to the extent and in the manner set out in Article 18 of this Regulation.

Only EU parent undertakings that are a material subsidiary of a non-EU G-SII and are not resolution entities shall comply with Article 92b of this Regulation on a consolidated basis to the extent and in the manner set out in Article 18 of this Regulation. Where Article 21b(2) of Directive 2013/36/EU applies, the two intermediate EU parent undertakings jointly identified as a material subsidiary shall each comply with Article 92b of this Regulation on the basis of their consolidated situation.”;

"

(d)  paragraphs 4 and 5 are 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. Pending the report from the Commission referred to in Article 508(2) of this Regulation, and where the group comprises only investment firms, competent authorities may exempt the EU parent institutions from compliance with Part Six and point (d) of Article 430(1) of this Regulation on a consolidated basis, taking into account the nature, scale and complexity of the investment firm's activities.

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) on a consolidated basis or on the sub-consolidated basis of the liquidity sub-group.

   5. Where Article 10 of this Regulation applies, the central body referred to in that Article shall comply with the requirements of Parts Two to Eight of this Regulation and Chapter 2 of Regulation (EU) 2017/2402 on the basis of the consolidated situation of the whole as constituted by the central body together with its affiliated institutions.
   6. In addition to the requirements in paragraphs 1 to 5 of this Article, and without prejudice to other provisions of this Regulation and Directive 2013/36/EU, when it is justified for supervisory purposes by the specificities of the risk or of the capital structure of an institution or where Member States adopt national laws requiring the structural separation of activities within a banking group, competent authorities may require an institution to comply with the obligations laid down in Parts Two to Eight of this Regulation and in Title VII of Directive 2013/36/EU on a sub-consolidated basis.

The application of the approach set out in the first subparagraph shall be without prejudice to effective supervision on a consolidated basis and shall neither entail disproportionate adverse effects on the whole or parts of the financial system in other Member States or in the Union as a whole nor form or create an obstacle to the functioning of the internal market.”;

"

(7)  Article 12 is deleted;

(8)  the following article is inserted:"

“Article 12a

Consolidated calculation for G-SIIs with multiple resolution entities

Where at least two G-SII entities belonging to the same G-SII are resolution entities, the EU parent institution of that G-SII shall calculate the amount of own funds and eligible liabilities referred to in point (a) of Article 92a(1) of this Regulation. That calculation shall be undertaken on the basis of the consolidated situation of the EU parent institution as if it were the only resolution entity of the G-SII.

Where the amount calculated in accordance with the first paragraph of this Article is lower than the sum of the amounts of own funds and eligible liabilities referred to in point (a) of Article 92a(1) of this Regulation of all resolution entities belonging to that G-SII, the resolution authorities shall act in accordance with Articles 45d(3) and 45h(2) of Directive 2014/59/EU.

Where the amount calculated in accordance with the first paragraph of this Article is higher than the sum of the amounts of own funds and eligible liabilities referred to in point (a) of Article 92a(1) of this Regulation of all resolution entities belonging to that G-SII, the resolution authorities may act in accordance with Articles 45d(3) and 45h(2) of Directive 2014/59/EU.”;

"

(9)  Articles 13 and 14 are replaced by the following:"

Article 13

Application of disclosure requirements on a consolidated basis

   1. EU parent institutions shall comply with Part Eight on the basis of their consolidated situation.

Large subsidiaries of EU parent institutions shall disclose the information specified in Articles 437, 438, 440, 442, 450, 451, 451a ▌ and 453 on an individual basis or, where applicable in accordance with this Regulation and Directive 2013/36/EU, on a sub-consolidated basis.

   2. Institutions identified as resolution entities that are G-SIIs or that are part of a G-SII shall comply with Article 437a and point (h) of Article 447 on the basis of the consolidated ▌ situation of their resolution group.
   3. The first subparagraph of paragraph 1 shall not apply to EU parent institutions, EU parent financial holding companies, EU parent mixed financial holding companies or resolution entities where they are included in equivalent disclosures on a consolidated basis provided by a parent undertaking established in a third country.

The second subparagraph of paragraph 1 shall apply to subsidiaries of parent undertakings established in a third country where those subsidiaries qualify as large subsidiaries.

   4. Where Article 10 applies, the central body referred to in that Article shall comply with Part Eight on the basis of the consolidated situation of the central body. Article 18(1) shall apply to the central body and the affiliated institutions shall be treated as subsidiaries of the central body.

Article 14

Application of requirements of Article 5 of Regulation (EU) 2017/2402 on a consolidated basis

   1. Parent undertakings and their subsidiaries that are subject to this Regulation shall be required to meet the obligations laid down in Article 5 of Regulation (EU) 2017/2402 on a consolidated or sub-consolidated basis, to ensure that their arrangements, processes and mechanisms required by those provisions are consistent and well-integrated and that any data and information relevant to the purpose of supervision can be produced. In particular, they shall ensure that subsidiaries that are not subject to this Regulation implement arrangements, processes and mechanisms to ensure compliance with those provisions.
   2. Institutions shall apply an additional risk weight in accordance with Article 270a of this Regulation when applying Article 92 of this Regulation on a consolidated or sub-consolidated basis if the requirements laid down in Article 5 of Regulation (EU) 2017/2402 are breached at the level of an entity established in a third country included in the consolidation in accordance with Article 18 of this Regulation if the breach is material in relation to the overall risk profile of the group.”;

"

(10)  in Article 15(1), the introductory phrase of the first subparagraph is replaced by the following:"

"1. The consolidating supervisor may waive, on a case-by-case basis, the application of Part Three, the associated reporting requirements in Part Seven A of this Regulation, and Chapter 4 of Title VII of Directive 2013/36/EU, with the exception of point (d) of Article 430(1) of this Regulation on a consolidated basis, provided that the following conditions exist:";

"

(11)  Article 16 is replaced by the following:"

“Article 16

Derogation from the application of the leverage ratio requirements on a consolidated basis for groups of investment firms

Where all entities in a group of investment firms, including the parent entity, are investment firms that are exempt from the application of the requirements laid down in Part Seven on an individual basis in accordance with Article 6(5), the parent investment firm may choose not to apply the requirements laid down in Part Seven and the associated leverage ratio reporting requirements in Part Seven A on a consolidated basis.”;

"

(12)  Article 18 is replaced by the following:"

"Article 18

Methods of prudential consolidation

   1. Institutions, financial holding companies and mixed financial holding companies that are required to comply with the requirements referred to in Section 1 of this Chapter on the basis of their consolidated situation shall carry out a full consolidation of all institutions and financial institutions that are their subsidiaries. Paragraphs 3 to 6 and paragraph 9 of this Article shall not apply where Part Six and point (d) of Article 430(1) apply on the basis of the consolidated situation of an institution, financial holding company or mixed financial holding company or on the sub-consolidated situation of a liquidity sub-group as set out in Articles 8 and 10.

For the purposes of Article 11(3a), institutions that are required to comply with the requirements referred to in Article 92a or 92b on a consolidated basis shall carry out a full consolidation of all institutions and financial institutions that are their subsidiaries in the relevant resolution groups.

   2. Ancillary services undertakings shall be included in consolidation in the cases, and in accordance with the methods, laid down in this Article.
   3. Where undertakings are related within the meaning of Article 22(7) of Directive 2013/34/EU, competent authorities shall determine how consolidation is to be carried out.
   4. The consolidating supervisor shall require the proportional consolidation according to the share of capital held of participations in institutions and financial institutions managed by an undertaking included in the consolidation together with one or more undertakings not included in the consolidation, where the liability of those undertakings is limited to the share of the capital they hold.
   5. In the case of participations or capital ties other than those referred to in paragraphs 1 and 4, competent authorities shall determine whether and how consolidation is to be carried out. In particular, they may permit or require the use of the equity method. That method shall not, however, constitute inclusion of the undertakings concerned in supervision on a consolidated basis.
   6. Competent authorities shall determine whether and how consolidation is to be carried out in the following cases:
   (a) where, in the opinion of the competent authorities, an institution exercises a significant influence over one or more institutions or financial institutions, but without holding a participation or other capital ties in those institutions; and
   (b) where two or more institutions or financial institutions are placed under single management other than pursuant to a contract, clauses of their memoranda or articles of association.

In particular, competent authorities may permit ▌ or require the use of ▌ the method provided for in Article 22(7), (8) and (9) of Directive 2013/34/EU. That method shall not, however, constitute inclusion of the undertakings concerned in consolidated supervision.

   7. Where an institution has a subsidiary which is an undertaking other than an institution, a financial institution or an ancillary services undertaking or holds a participation in such an undertaking, it shall apply to that subsidiary or participation the equity method. That method shall not, however, constitute inclusion of the undertakings concerned in supervision on a consolidated basis.

By way of derogation from the first subparagraph, competent authorities may allow or require institutions to apply a different method to such subsidiaries or participations, including the method required by the applicable accounting framework, provided that:

   (a) the institution does not already apply the equity method on … [18 months after the date of entry into force of this amending Regulation];
   (b) it would be unduly burdensome to apply the equity method or the equity method does not adequately reflect the risks that the undertaking referred to in the first subparagraph poses to the institution; and
   (c) the method applied does not result in full or proportional consolidation of that undertaking.
   8. Competent authorities may require full or proportional consolidation of a subsidiary or an undertaking in which an institution holds a participation where that subsidiary or undertaking is not an institution, financial institution or ancillary services undertaking and where all the following conditions are met:
   (a) the undertaking is not an insurance undertaking, a third-country insurance undertaking, a reinsurance undertaking, a third-country reinsurance undertaking, an insurance holding company or an undertaking excluded from the scope of Directive 2009/138/EC in accordance with Article 4 of that Directive;
   (b) there is a substantial risk that the institution decides to provide financial support to that undertaking in stressed conditions, in the absence of, or in excess of any contractual obligations to provide such support.
   9. EBA shall develop draft regulatory technical standards to specify conditions in accordance with which consolidation shall be carried out in the cases referred to in paragraphs 3 to 6 and paragraph 8.

EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2020.

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 Articles 10 to 14 of Regulation (EU) No 1093/2010.;

"

(13)  Article 22 is replaced by the following"

"Article 22

Sub-consolidation in case of entities in third countries

   1. Subsidiary institutions shall apply the requirements laid down in Articles 89, 90 and 91 and Parts Three, Four and Seven and the associated reporting requirements laid down in Part Seven A on the basis of their sub-consolidated situation if those institutions have an institution or a financial institution as a subsidiary in a third country, or hold a participation in such an undertaking.
   2. By way of derogation from paragraph 1 of this Article, subsidiary institutions may choose not to apply the requirements laid down in Articles 89, 90 and 91 and Parts Three, Four and Seven and the associated reporting requirements laid down in Part Seven A on the basis of their sub-consolidated situation where the total assets and off-balance-sheet items of their subsidiaries and participations in third countries are less than 10 % of the total amount of the assets and off-balance-sheet items of the subsidiary institution.";

"

(14)  the title of Part Two is replaced by the following:"

"OWN FUNDS AND ELIGIBLE LIABILITIES";

"

(15)  in Article 26, paragraph 3 is replaced by the following:"

"3. Competent authorities shall evaluate whether issuances of capital instruments meet the criteria set out in Article 28 or, where applicable, Article 29. Institutions shall classify issuances of capital instruments as Common Equity Tier 1 instruments only after permission is granted by the competent authorities.

By way of derogation from the first subparagraph, institutions may classify as Common Equity Tier 1 instruments subsequent issuances of a form of Common Equity Tier 1 instruments for which they have already received that permission, provided that both of the following conditions are met:

   (a) the provisions governing those subsequent issuances are substantially the same as the provisions governing those issuances for which the institutions have already received permission;
   (b) institutions have notified those subsequent issuances to the competent authorities sufficiently in advance of their classification as Common Equity Tier 1 instruments.

Competent authorities shall consult EBA before granting permission for new forms of capital instruments to be classified as Common Equity Tier 1 instruments. Competent authorities shall have due regard to EBA's opinion and, where they decide to deviate from it, shall write to EBA within three months from the date of receipt of EBA's opinion setting out the rationale for deviating from the relevant opinion. This subparagraph does not apply to the capital instruments referred to in Article 31.

On the basis of information collected from competent authorities, EBA shall establish, maintain and publish a list of all forms of capital instruments in each Member State that qualify as Common Equity Tier 1 instruments. In accordance with Article 35 of Regulation (EU) No 1093/2010, EBA may collect any information in connection with Common Equity Tier 1 instruments that it considers necessary to establish compliance with the criteria set out in Article 28 or, where applicable, Article 29 of this Regulation and for the purpose of maintaining and updating the list referred to in this subparagraph.

Following the review process set out in Article 80 and where there is sufficient evidence that the relevant capital instruments do not meet or have ceased to meet the criteria set out in Article 28 or, where applicable, Article 29, EBA may decide not to add those instruments to the list referred to in the fourth subparagraph or remove them from that list, as the case may be. EBA shall make an announcement to that effect that shall also refer to the relevant competent authority's position on the matter. This subparagraph does not apply to the capital instruments referred to in Article 31.";

"

(16)  Article 28 is amended as follows:

(a)  paragraph 1 is amended as follows:

(i)  point (b) is replaced by the following:"

"(b) the instruments are fully paid up and the acquisition of ownership of those instruments is not funded directly or indirectly by the institution;";

"

(ii)  the following subparagraph is added:"

"For the purposes of point (b) of the first subparagraph, only the part of a capital instrument that is fully paid up shall be eligible to qualify as a Common Equity Tier 1 instrument.";

"

(b)  in paragraph 3, the following subparagraphs are added:"

"The condition set out in point (h)(v) of the first subparagraph of paragraph 1 shall be considered to be met notwithstanding a subsidiary being subject to a profit and loss transfer agreement with its parent undertaking, according to which the subsidiary is obliged to transfer, following the preparation of its annual financial statements, its annual result to the parent undertaking, where all the following conditions are met:

   (a) the parent undertaking owns 90 % or more of the voting rights and capital of the subsidiary;
   (b) the parent undertaking and the subsidiary are located in the same Member State;
   (c) the agreement was concluded for legitimate taxation purposes;
   (d) in preparing the annual financial statement, the subsidiary has discretion to decrease the amount of distributions by allocating a part or all of its profits to its own reserves or funds for general banking risk before making any payment to its parent undertaking;
   (e) the parent undertaking is obliged under the agreement to fully compensate the subsidiary for all losses of the subsidiary;
   (f) the agreement is subject to a notice period according to which the agreement can be terminated only by the end of an accounting year, with such termination taking effect no earlier than the beginning of the following accounting year, leaving the parent undertaking’s obligation to fully compensate the subsidiary for all losses incurred during the current accounting year unchanged.

Where an institution has entered into a profit and loss transfer agreement, it shall notify the competent authority without delay and provide the competent authority with a copy of the agreement. The institution shall also notify the competent authority without delay of any changes to the profit and loss transfer agreement and the termination thereof. An institution shall not enter into more than one profit and loss transfer agreement.";

"

(17)  in Article 33(1), point (c) is replaced by the following:"

"(c) fair value gains and losses on derivative liabilities of the institution that result from changes in the own credit risk of the institution.";

"

(18)  Article 36 is amended as follows:

(a)  paragraph 1 is amended as follows:

(i)  point (b) is replaced by the following:"

“(b) intangible assets with the exception of prudently valued software assets the value of which is not negatively affected by resolution, insolvency or liquidation of the institution;";

"

(ii)  the following point is added:"

"(n) for a minimum value commitment referred to in Article 132c(2), any amount by which the current market value of the units or shares in CIUs underlying the minimum value commitment falls short of the present value of the minimum value commitment and for which the institution has not already recognised a reduction of Common Equity Tier 1 items.”;

"

(b)  the following paragraph is added:"

"4. EBA shall develop draft regulatory technical standards to specify the application of the deductions referred to in point (b) of paragraph 1, including the materiality of negative effects on the value which do not cause prudential concerns.

EBA shall submit those draft regulatory technical standards to the Commission by … [12 months after the date of entry into force of this amending Regulation].

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 Articles 10 to 14 of Regulation (EU) No 1093/2010.”;

"

(19)  in Article 37, the following point is added:"

"(c) the amount to be deducted shall be reduced by the amount of the accounting revaluation of the subsidiaries' intangible assets derived from the consolidation of subsidiaries attributable to persons other than the undertakings included in the consolidation pursuant to Chapter 2 of Title II of Part One.";

"

(20)  in Article 39(2), in the first subparagraph the introductory phrase is replaced by the following:"

"Deferred tax assets that do not rely on future profitability shall be limited to deferred tax assets which were created before 23 November 2016 and which arise from temporary differences, where all the following conditions are met:";

"

(21)  in Article 45, point (a)(i) is replaced by the following:"

"(i) the maturity date of the short position is either the same as, or later than the maturity date ▌ of the long position or the residual maturity of the short position is at least one year;";

"

(22)  Article 49 is amended as follows:▌

(a)  in paragraph 2, the following subparagraph is added:"

"This paragraph shall not apply when calculating own funds for the purposes of the requirements in Articles 92a and 92b, which shall be calculated in accordance with the deduction framework set out in Article 72e(4).";

"

(b)  paragraph 3 is amended as follows:

(i)  in point (a)(iv), the last sentence is replaced by the following:"

"The consolidated balance sheet or the extended aggregated calculation shall be reported to the competent authorities with the frequency set out in the implementing technical standards referred to in Article 430(7)";

"

(ii)  in point (a)(v), the first sentence is replaced by the following:"

"(v) the institutions included in an institutional protection scheme meet together on a consolidated or extended aggregated basis the requirements laid down in Article 92 and carry out reporting of compliance with those requirements in accordance with Article 430.";

"

(23)  Article 52(1) is amended as follows:

(a)  point (a) is replaced by the following:"

"(a) the instruments are directly issued by an institution and fully paid up";

"

(b)  the introductory phrase of point (b) is replaced by the following:"

"(b) the instruments are not owned by any of the following:";

"

(c)  point (c) is replaced by the following:"

"(c) the acquisition of ownership of the instruments is not funded directly or indirectly by the institution;";

"

(d)  point (h) is replaced by the following:"

"(h) where the instruments include one or more early redemption options including call options, the options are exercisable at the sole discretion of the issuer;";

"

(e)  point (j) is replaced by the following:"

"(j) the provisions governing the instruments do not indicate explicitly or implicitly that the instruments would be called, redeemed or repurchased, as applicable, by the institution other than in the case of the insolvency or liquidation of the institution and the institution does not otherwise provide such an indication;";

"

(f)  point (p) is replaced by the following:"

“(p) where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the law or contractual provisions governing the instruments require that, upon a decision by the resolution authority to exercise the write-down and conversion powers referred to in Article 59 of that Directive, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted to Common Equity Tier 1 instruments;

where the issuer is established in a third country and has not been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union, the law or contractual provisions governing the instruments require that, upon a decision by the relevant third-country authority, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted into Common Equity Tier 1 instruments;";

"

(g)  ▌ the following points ▌ are added:"

“(q) where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the instruments may only be issued under, or be otherwise subject to the laws of a third country where, under those laws, the exercise of the write-down and conversion powers referred to in Article 59 of that Directive is effective and enforceable on the basis of statutory provisions or legally enforceable contractual provisions that recognise resolution or other write-down or conversion actions;

   (r) the instruments are not subject to ▌ set-off or netting arrangements ▌ that would undermine their capacity to absorb losses.";

"

(h)  the following subparagraph is added:"

"For the purposes of point (a) of the first subparagraph, only the part of a capital instrument that is fully paid up shall be eligible to qualify as an Additional Tier 1 instrument.";

"

(24)  in Article 54(1), the following point is added:"

“(e) where the Additional Tier 1 instruments have been issued by a subsidiary undertaking established in a third country, the 5,125 % or higher trigger referred to in point (a) shall be calculated in accordance with the national law of that third country or contractual provisions governing the instruments, provided that the competent authority, after consulting EBA, is satisfied that those provisions are at least equivalent to the requirements set out in this Article.”;

"

(25)  in Article 59, point (a)(i) is replaced by the following:"

"(i) the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year;";

"

(26)  in Article 62, point (a) is replaced by the following:"

"(a) capital instruments ▌ where the conditions set out in Article 63 are met, and to the extent specified in Article 64;";

"

(27)  Article 63 is amended as follows:

(a)  the introductory phrase is replaced by the following:"

"Capital instruments shall qualify as Tier 2 instruments, provided that the following conditions are met:";

"

(b)  point (a) is replaced by the following:"

"(a) the instruments are directly issued ▌ by an institution and fully paid up;";

"

(c)  in point (b), the introductory phrase is replaced by the following:"

"(b) the instruments are not owned by any of the following:";

"

(d)  points (c) and (d) are replaced by the following:"

"(c) the acquisition of ownership of the instruments is not funded directly or indirectly by the institution;

   (d) the claim on the principal amount of the instruments under the provisions governing the instruments ranks below any claim from eligible liabilities instruments;;

"

(e)  in point (e), the introductory phrase is replaced by the following:"

"(e) the instruments are not secured or are not subject to a guarantee that enhances the seniority of the claim by any of the following:";

"

(f)  points (f) to (n) are replaced by the following:"

"(f) the instruments are not subject to any arrangement that otherwise enhances the seniority of the claim under the instruments;

   (g) the instruments have an original maturity of at least five years;
   (h) the provisions governing the instruments do not include any incentive for their principal amount to be redeemed or repaid, as applicable by the institution prior to their maturity;
   (i) where the instruments include one or more early repayment options, including call options, the options are exercisable at the sole discretion of the issuer;
   (j) the instruments may be called, redeemed, repaid or repurchased early only where the conditions set out in Article 77 are met, and not before five years after the date of issuance, except where the conditions set out in Article 78(4) are met;
   (k) the provisions governing the instruments do not indicate explicitly or implicitly that the instruments would be called, redeemed, repaid or repurchased early, as applicable, by the institution other than in the case of the insolvency or liquidation of the institution and the institution does not otherwise provide such an indication;
   (l) the provisions governing the instruments do not give the holder the right to accelerate the future scheduled payment of interest or principal, other than in the case of the insolvency or liquidation of the institution;
   (m) the level of interest or dividends payments, as applicable, due on the instruments will not be amended on the basis of the credit standing of the institution or its parent undertaking;
   (n) where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the law or contractual provisions governing the instruments require that, upon a decision by the resolution authority to exercise the write-down and conversion powers referred to in Article 59 of that Directive, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted to Common Equity Tier 1 instruments;

where the issuer is established in a third country and has not been designated in accordance with Article 12 of Directive 2014/59/EU as a part of a resolution group the resolution entity of which is established in the Union, the law or contractual provisions governing the instruments require that, upon a decision by the relevant third-country authority, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted into Common Equity Tier 1 instruments;";

"

(g)  the following points are added:"

"(o) where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the instruments may only be issued under, or be otherwise subject to the laws of a third country where, under those laws, the exercise of the write-down and conversion powers referred to in Article 59 of that Directive is effective and enforceable on the basis of statutory provisions or legally enforceable contractual provisions that recognise resolution or other write-down or conversion actions;

   (p) the instruments are not subject to ▌ set-off or netting arrangements ▌that would undermine their capacity to absorb losses.";

"

(h)  the following paragraph is added:"

"For the purposes of point (a) of the first paragraph, only the part of the capital instrument that is fully paid up shall be eligible to qualify as a Tier 2 instrument.";

"

(28)  Article 64 is replaced by the following:"

Article 64

Amortisation of Tier 2 instruments

   1. The full amount of Tier 2 instruments with a residual maturity of more than five years shall qualify as Tier 2 items.
   2. The extent to which Tier 2 instruments qualify as Tier 2 items during the final five years of maturity of the instruments is calculated by multiplying the result derived from the calculation referred to in point (a) by the amount referred to in point (b) as follows:
   (a) the carrying amount of the instruments ▌ on the first day of the final five-year period of their contractual maturity divided by the number of days in that period;
   (b) the number of remaining days of contractual maturity of the instruments ▌.";

"

(29)  in Article 66, the following point is added:"

(e) the amount of items required to be deducted from eligible liabilities items pursuant to Article 72e that exceeds the eligible liabilities items of the institution.;

"

(30)  in Article 69, point (a)(i) is replaced by the following:"

"(i) the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year;";

"

(31)  the following chapter is inserted after Article 72:"

CHAPTER 5a

Eligible liabilities

Section 1

Eligible liabilities items and instruments

Article 72a

Eligible liabilities items

   1. Eligible liabilities items shall consist of the following, unless they fall into any of the categories of excluded liabilities laid down in paragraph 2 of this Article, and to the extent specified in Article 72c:
   (a) eligible liabilities instruments where the conditions set out in Article 72b are met, to the extent that they do not qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 items;
   (b) Tier 2 instruments with a residual maturity of at least one year, to the extent that they do not qualify as Tier 2 items in accordance with Article 64.
   2. The following liabilities shall be excluded from eligible liabilities items:
   (a) covered deposits;
   (b) sight deposits and short term deposits with an original maturity of less than one year;
   (c) the part of eligible deposits from natural persons and micro, small and medium-sized enterprises which exceeds the coverage level referred to in Article 6 of Directive 2014/49/EU of the European Parliament and of the Council*;
   (d) deposits that would be eligible deposits from natural persons, micro, small and medium–sized enterprises if they were not made through branches located outside the Union of institutions established in the Union;
   (e) secured liabilities, including covered bonds and liabilities in the form of financial instruments used for hedging purposes that form an integral part of the cover pool and that in accordance with national law are secured in a manner similar to covered bonds, provided that all secured assets relating to a covered bond cover pool remain unaffected, segregated and with enough funding and excluding any part of a secured liability or a liability for which collateral has been pledged that exceeds the value of the assets, pledge, lien or collateral against which it is secured;
   (f) any liability that arises by virtue of the holding of client assets or client money including client assets or client money held on behalf of collective investment undertakings, provided that such a client is protected under the applicable insolvency law;
   (g) any liability that arises by virtue of a fiduciary relationship between the resolution entity or any of its subsidiaries (as fiduciary) and another person (as beneficiary), provided that such a beneficiary is protected under the applicable insolvency or civil law;
   (h) liabilities to institutions, excluding liabilities to entities that are part of the same group, with an original maturity of less than seven days;
   (i) liabilities with a remaining maturity of less than seven days, owed to:
   (i) systems or system operators designated in accordance with Directive 98/26/EC of the European Parliament and of the Council**;
   (ii) participants in a system designated in accordance with Directive 98/26/EC and arising from the participation in such a system; or
   (iii) third-country CCPs recognised in accordance with Article 25 of Regulation (EU) No 648/2012;
   (j) a liability to any of the following:
   (i) an employee ▌ in relation to accrued salary, pension benefits or other fixed remuneration, except for the variable component of the remuneration that is not regulated by a collective bargaining agreement, and except for the variable component of the remuneration of material risk takers as referred to in Article 92(2) of Directive 2013/36/EU;
   (ii) a commercial or trade creditor ▌ where the liability arises from the provision to the institution or the parent undertaking of goods or services that are critical to the daily functioning of the institution's or parent undertaking's operations, including IT services, utilities and the rental, servicing and upkeep of premises;
   (iii) tax and social security authorities, provided that those liabilities are preferred under the applicable law;
   (iv) deposit guarantee schemes ▌ where the liability arises from contributions due in accordance with Directive 2014/49/EU;
   (k) liabilities arising from derivatives;
   (l) liabilities arising from debt instruments with embedded derivatives.

For the purposes of point (l) of the first subparagraph, debt instruments containing early redemption options exercisable at the discretion of the issuer or of the holder, and debt instruments with variable interests derived from a broadly used reference rate such as Euribor or Libor, shall not be considered as debt instruments with embedded derivatives solely because of such features.

Article 72b

Eligible liabilities instruments

   1. Liabilities shall qualify as eligible liabilities instruments, ▌ provided that they comply with the conditions set out in this Article and only to the extent specified in this Article.
   2. Liabilities shall qualify as eligible liabilities instruments, provided that all the following conditions are met:
   (a) the liabilities are directly issued or raised, as applicable, by an institution and are fully paid up;
   (b) the liabilities are not owned by any of the following:
   (i) the institution or an entity included in the same resolution group;
   (ii) an undertaking in which the institution has a direct or indirect participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of that undertaking;
   (c) the acquisition of ownership of the liabilities is not funded directly or indirectly by the resolution entity;
   (d) the claim on the principal amount of the liabilities under the provisions governing the instruments is wholly subordinated to claims arising from the excluded liabilities referred to in Article 72a(2); that subordination requirement shall be considered to be met in any of the following situations:
   (i) the contractual provisions governing the liabilities specify that in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim on the principal amount of the instruments ranks below claims arising from any of the excluded liabilities referred to in Article 72a(2) of this Regulation;
   (ii) the applicable law ▌ specifies that in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim on the principal amount of the instruments ranks below claims arising from any of the excluded liabilities referred to in Article 72a(2) of this Regulation;
   (iii) the instruments are issued by a resolution entity which does not have on its balance sheet any excluded liabilities as referred to in Article 72a(2) of this Regulation that rank pari passu or junior to eligible liabilities instruments;
   (e) the liabilities are neither secured, nor subject to a guarantee or any other arrangement that enhances the seniority of the claim by any of the following:
   (i) the institution or its subsidiaries;
   (ii) the parent undertaking of the institution or its subsidiaries;
   (iii) any undertaking that has close links with entities referred to in points (i) and (ii);
   (f) the liabilities are not subject to ▌ set-off or netting arrangements ▌ that would undermine their capacity to absorb losses in resolution;
   (g) the provisions governing the liabilities do not include any incentive for their principal amount to be called, redeemed, repurchased prior to their maturity or repaid early by the institution, as applicable, except in the cases referred to in Article 72c(3);
   (h) the liabilities are not redeemable by the holders of the instruments prior to their maturity, except in the cases referred to in Article 72c(2);
   (i) subject to Article 72c(3) and (4), where the liabilities include one or more ▌ early repayment options, including call options, the options are exercisable at the sole discretion of the issuer, except in the cases referred to in Article 72c(2);
   (j) the liabilities may only be called, redeemed, repaid or repurchased early where the conditions set out in Articles 77 and 78a are met;
   (k) the provisions governing the liabilities do not indicate explicitly or implicitly that the liabilities would ▌ be called, redeemed, repaid or repurchased early, as applicable by the resolution entity other than in the case of the insolvency or liquidation of the institution and the institution does not otherwise provide such an indication;
   (l) the provisions governing the liabilities do not give the holder the right to accelerate the future scheduled payment of interest or principal, other than in the case of the insolvency or liquidation of the resolution entity;
   (m) the level of interest or dividend payments, as applicable, due on the liabilities is not ▌ amended on the basis of the credit standing of the resolution entity or its parent undertaking;
   (n) for instruments issued after … [two years after the date of entry into force of this amending Regulation] the relevant contractual documentation and, where applicable, the prospectus related to the issuance explicitly refer to the possible exercise of the write-down and conversion powers in accordance with Article 48 of Directive 2014/59/EU. ▌

For the purposes of point (a) of the first subparagraph, only the parts of liabilities that are fully paid up shall be eligible to qualify as eligible liabilities instruments.

For the purposes of point (d) of the first subparagraph of this Article, where some of the excluded liabilities referred to in Article 72a(2) are subordinated to ordinary unsecured claims under national insolvency law, inter alia, due to being held by a creditor who has close links with the debtor, by being or having been a shareholder, in a control or group relationship, a member of the management body or related to any of those persons, subordination shall not be assessed by reference to claims arising from such excluded liabilities.

   3. In addition to the liabilities referred to in paragraph 2 of this Article, the resolution authority may permit liabilities to qualify as eligible liabilities instruments up to an aggregate amount that does not exceed 3,5 % of the total risk exposure amount calculated in accordance with Article 92(3) and (4), provided that:
   (a) all the conditions set out in paragraph 2 except for the condition set out in point (d) of the first subparagraph of paragraph 2 are met;
   (b) the liabilities rank pari passu with the lowest ranking excluded liabilities referred to in Article 72a(2) with the exception of the excluded liabilities that are subordinated to ordinary unsecured claims under national insolvency law referred to in the third subparagraph of paragraph 2 of this Article; and
   (c) the inclusion of those liabilities in eligible liabilities items would not give rise to a material risk of a successful legal challenge or of valid compensation claims as assessed by the resolution authority in relation to the principles referred to in point (g) of Article 34(1) and Article 75 of Directive 2014/59/EU.

   4. The resolution authority may permit liabilities to qualify as eligible liabilities instruments in addition to the liabilities referred to in paragraph 2, provided that:
   (a) ▌the institution is not permitted to include in eligible liabilities items liabilities referred to in ▌paragraph 3 ▌;
   (b) all the conditions set out in paragraph 2, except for the condition set out in point (d) of the first subparagraph of paragraph 2, are met;
   (c) the liabilities rank pari passu or are senior to the lowest ranking excluded liabilities referred to in Article 72a(2), with the exception of the excluded liabilities subordinated to ordinary unsecured claims under national insolvency law referred to in the third subparagraph of paragraph 2 of this Article;
   (d) on the balance sheet of the institution, the amount of the excluded liabilities referred to in Article 72a(2) which rank pari passu or below those liabilities in insolvency does not exceed 5 % of the amount of the own funds and eligible liabilities of the institution;
   (e) the inclusion of those liabilities in eligible liabilities items would not give rise to a material risk of a successful legal challenge or of valid compensation claims as assessed by the resolution authority in relation to the principles referred to in point (g) of Article 34(1) and ▌ Article 75 of Directive 2014/59/EU.
   5. The resolution authority may only permit an institution ▌ to include ▌ liabilities referred to either in paragraph 3 or 4 as eligible liabilities items.

   6. The ▌ resolution authority shall consult the competent authority when examining whether the conditions set out in this Article are fulfilled.
   7. EBA shall develop draft regulatory technical standards to specify:
   (a) the applicable forms and nature of indirect funding of eligible liabilities instruments;
   (b) the form and nature of incentives to redeem for the purposes of the condition set out in point (g) of the first subparagraph of paragraph 2 of this Article and Article 72c(3).

Those draft regulatory technical standards shall be fully aligned with the delegated act referred to in point (a) of Article 28(5) and in point (a) of Article 52(2).

EBA shall submit those draft regulatory technical standards to the Commission by … [six months after the date of entry into force of this amending Regulation].

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 Articles 10 to 14 of Regulation (EU) No 1093/2010.

Article 72c

Amortisation of eligible liabilities instruments

   1. Eligible liabilities instruments with a residual maturity of at least one year shall fully qualify as eligible liabilities items.

Eligible liabilities instruments with a residual maturity of less than one year shall not qualify as eligible liabilities items.

   2. For the purposes of paragraph 1, where a eligible liabilities instrument includes a holder redemption option exercisable prior to the original stated maturity of the instrument, the maturity of the instrument shall be defined as the earliest possible date on which the holder can exercise the redemption option and request redemption or repayment of the instrument.
   3. For the purposes of paragraph 1, where an eligible liabilities instrument includes an incentive for the issuer to call, redeem, repay or repurchase the instrument prior to the original stated maturity of the instrument, the maturity of the instrument shall be defined as the earliest possible date on which the issuer can exercise that option and request redemption or repayment of the instrument.
   4. For the purposes of paragraph 1, where an eligible liabilities instrument includes early redemption options that are exercisable at the sole discretion of the issuer prior to the original stated maturity of the instrument, but where the provisions governing the instrument do not include any incentive for the instrument to be called, redeemed, repaid or repurchased prior to its maturity and do not include any option for redemption or repayment at the discretion of the holders, the maturity of the instrument shall be defined as the original stated maturity.

Article 72d

Consequences of the eligibility conditions ceasing to be met

Where, in the case of an eligible liabilities instrument, the applicable conditions set out in Article 72b cease to be met, the liabilities shall immediately cease to qualify as eligible liabilities instruments.

Liabilities referred to in Article 72b(2) may continue to count as eligible liabilities instruments as long as they qualify as eligible liabilities instruments under Article 72b(3) or (4).

Section 2

Deductions from eligible liabilities items

Article 72e

Deductions from eligible liabilities items

   1. Institutions that are subject to Article 92a shall deduct the following from eligible liabilities items:
   (a) direct, indirect and synthetic holdings by the institution of own eligible liabilities instruments, including own liabilities that that institution could be obliged to purchase as a result of existing contractual obligations;
   (b) direct, indirect and synthetic holdings by the institution of eligible liabilities instruments of G-SII entities with which the institution has reciprocal cross holdings that the competent authority considers to have been designed to artificially inflate the loss absorption and recapitalisation capacity of the resolution entity;
   (c) the applicable amount determined in accordance with Article 72i of direct, indirect and synthetic holdings of eligible liabilities instruments of G-SII entities, where the institution does not have a significant investment in those entities;
   (d) direct, indirect and synthetic holdings by the institution of eligible liabilities instruments of G-SII entities, where the institution has a significant investment in those entities, excluding underwriting positions held for five business days or fewer.
   2. For the purposes of this Section, all instruments ranking pari passu with eligible liabilities instruments shall be treated as eligible liabilities instruments, with the exception of instruments ranking pari passu with instruments recognised as eligible liabilities pursuant to Article 72b(3) and (4).
   3. For the purposes of this Section, institutions may calculate the amount of holdings of the eligible liabilities instruments referred to in Article 72b(3) as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000002.png

where:

h = the amount of holdings of the eligible liabilities instruments referred to in Article 72b(3);

i = the index denoting the issuing institution;

Hi = the total amount of holdings of eligible liabilities of the issuing institution i referred to in Article 72b(3);

li = the amount of liabilities included in eligible liabilities items by the issuing institution i within the limits specified in Article 72b(3) according to the latest disclosures by the issuing institution; and

Li = the total amount of the outstanding liabilities of the issuing institution i referred to in Article 72b(3) according to the latest disclosures by the issuer.

   4. Where an EU parent institution or a parent institution in a Member State that is subject to Article 92a has direct, indirect or synthetic holdings of own funds instruments or eligible liabilities instruments of one or more subsidiaries which do not belong to the same resolution group as that parent institution, the resolution authority of that parent institution, after duly considering the opinion of the resolution authorities of any subsidiaries concerned, may permit the parent institution to deduct such holdings by deducting a lower amount specified by the resolution authority of that parent institution. That adjusted amount shall be at least equal to the amount (m) calculated as follows:

𝑚𝑖=max{0;𝑂𝑃𝑖+𝐿𝑃𝑖−𝑚𝑎𝑥{0;𝛽∙[𝑂𝑖+𝐿𝑖−𝑟𝑖∙a𝑅𝑊𝐴𝑖]}}

where:

i = the index denoting the subsidiary;

OPi = the amount of own funds instruments issued by subsidiary i and held by the parent institution;

LPi = the amount of eligible liabilities items issued by subsidiary i and held by the parent institution;

𝛽 = percentage of own funds instruments and eligible liabilities items issued by subsidiary i ▌ and held by the parent undertaking;

Oi = the amount of own funds of subsidiary i, not taking into account the deduction calculated in accordance with this paragraph;

Li = the amount of eligible liabilities of subsidiary i, not taking into account the deduction calculated in accordance with this paragraph;

ri = the ratio applicable to subsidiary i at the level of its resolution group in accordance with point (a) of Article 92a(1) of this Regulation and Article 45d of Directive 2014/59/EU; and

aRWAi = the total risk exposure amount of the G-SII entity i calculated in accordance with Article 92(3) and (4), taking into account the adjustments set out in Article 12.

Where the parent institution is allowed to deduct the adjusted amount in accordance with the first subparagraph, the difference between the amount of holdings of own funds instruments and eligible liabilities instruments referred to in the first subparagraph and that adjusted amount shall be deducted by the subsidiary ▌.

Article 72f

Deduction of holdings of own eligible liabilities instruments

For the purposes of point (a) of Article 72e(1), institutions shall calculate holdings on the basis of the gross long positions subject to the following exceptions:

   (a) institutions may calculate the amount of holdings on the basis of the net long position, provided that both the following conditions are met:
   (i) the long and short positions are in the same underlying exposure and the short positions involve no counterparty risk;
   (ii) either both the long and the short positions are held in the trading book or both are held in the non-trading book;
   (b) institutions shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to own eligible liabilities instruments in those indices;
   (c) institutions may net gross long positions in own eligible liabilities instruments resulting from holdings of index securities against short positions in own eligible liabilities instruments resulting from short positions in underlying indices, including where those short positions involve counterparty risk, provided that both the following conditions are met:
   (i) the long and short positions are in the same underlying indices;
   (ii) either both the long and the short positions are held in the trading book or both are held in the non-trading book.

Article 72g

Deduction base for eligible liabilities items

For the purposes of points (b), (c) and (d) of Article 72e(1), institutions shall deduct the gross long positions subject to the exceptions laid down in Articles 72h and 72i.

Article 72h

Deduction of holdings of eligible liabilities of other G-SII entities

Institutions not making use of the exception set out in Article 72j ▌ shall make the deductions referred to in points (c) and (d) of Article 72e(1) in accordance with the following:

   (a) they may calculate direct, indirect and synthetic holdings of eligible liabilities instruments on the basis of the net long position in the same underlying exposure, provided that both the following conditions are met:
   (i) the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year ▌;
   (ii) either both the long position and the short position are held in the trading book or both are held in the non-trading book;
   (b) they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by looking through to the underlying exposure to the eligible liabilities instruments in those indices.

Article 72i

Deduction of eligible liabilities where the institution does not have a significant investment in G-SII entities

   1. For the purposes of point (c) of Article 72e(1), institutions shall calculate the applicable amount to be deducted by multiplying the amount referred to in point (a) of this paragraph by the factor derived from the calculation referred to in point (b) of this paragraph:
   (a) the aggregate amount by which the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1, Tier 2 instruments of financial sector entities and eligible liabilities instruments of G-SII entities in none of which the institution has a significant investment exceeds 10 % of the Common Equity Tier 1 items of the institution after applying the following:
   (i) Articles 32 to 35;
   (ii) points (a) to (g), points (k)(ii) to (k)(v) and point (l) of Article 36(1), excluding the amount to be deducted for deferred tax assets that rely on future profitability and arise from temporary differences;
   (iii) Articles 44 and 45;
   (b) the amount of direct, indirect and synthetic holdings by the institution of the eligible liabilities instruments of G-SII entities in which the institution does not have a significant investment divided by the aggregate amount of the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1, Tier 2 instruments of financial sector entities and eligible liabilities instruments of G-SII entities in none of which the resolution entity has a significant investment.
   2. Institutions shall exclude underwriting positions held for five business days or fewer from the amounts referred to in point (a) of paragraph 1 and from the calculation of the factor in accordance with point (b) of paragraph 1.
   3. The amount to be deducted pursuant to paragraph 1 shall be apportioned across each eligible liabilities instrument of a G-SII entity held by the institution. Institutions shall determine the amount of each eligible liabilities instrument that is deducted pursuant to paragraph 1 by multiplying the amount specified in point (a) of this paragraph by the proportion specified in point (b) of this paragraph:
   (a) the amount of holdings required to be deducted pursuant to paragraph 1;
   (b) the proportion of the aggregate amount of direct, indirect and synthetic holdings by the institution of the eligible liabilities instruments of G-SII entities in which the institution does not have a significant investment represented by each eligible liabilities instrument held by the institution.
   4. The amount of holdings referred to in point (c) of Article 72e(1) that is equal to or less than 10 % of the Common Equity Tier 1 items of the institution after applying the provisions laid down in points (a)(i), (a)(ii) and (a)(iii) of paragraph 1 of this Article shall not be deducted and shall be subject to the applicable risk weights in accordance with Chapter 2 or 3 of Title II of Part Three and the requirements laid down in Title IV of Part Three, as applicable.
   5. Institutions shall determine the amount of each eligible liabilities instrument that is risk weighted pursuant to paragraph 4 by multiplying the amount of holdings required to be risk weighted pursuant to paragraph 4 by the proportion resulting from the calculation specified in point (b) of paragraph 3.

Article 72j

Trading book exception from deductions from eligible liabilities items

   1. Institutions may decide not to deduct a designated part of their direct, indirect and synthetic holdings of eligible liabilities instruments, that in aggregate and measured on a gross long basis is equal to or less than 5 % of the Common Equity Tier 1 items of the institution after applying Articles 32 to 36, provided that all the following conditions are met:
   (a) the holdings are in the trading book;
   (b) the eligible liabilities instruments are held for no longer than 30 business days.
   2. The amounts of the items that are not deducted pursuant to paragraph 1 shall be subject to own funds requirements for items in the trading book.
   3. Where, in the case of holdings not deducted in accordance with paragraph 1, the conditions set out in that paragraph cease to be met, the holdings shall be deducted in accordance with Article 72g without applying the exceptions laid down in Articles 72h and 72i.

Section 3

Own funds and eligible liabilities

Article 72k

Eligible liabilities

The eligible liabilities of an institution shall consist of the eligible liabilities items of the institution after the deductions referred to in Article 72e.

Article 72l

Own funds and eligible liabilities

The own funds and eligible liabilities of an institution shall consist of the sum of its own funds and its eligible liabilities.

__________________

* Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ L 173, 12.6.2014, p. 149).

** Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (OJ L 166, 11.6.1998, p. 45).";

"

(32)  in Title I of Part Two, the title of Chapter 6 is replaced by the following:"

General requirements for own funds and eligible liabilities”;

"

(33)  Article 73 is amended as follows:

(a)  the title is replaced by the following:"

Distributions on instruments;

"

(b)  paragraphs 1 to 4 are replaced by the following:"

1. Capital instruments and liabilities for which an institution has the sole discretion to decide to pay distributions in a form other than cash or own funds instruments shall not be eligible to qualify as Common Equity Tier 1, Additional Tier 1, Tier 2 or eligible liabilities instruments, unless the institution has received the prior permission of the competent authority.

   2. Competent authorities shall grant the prior permission referred to in paragraph 1 only where they consider all the following conditions to be met:
   (a) the ability of the institution to cancel payments under the instrument would not be adversely affected by the discretion referred to in paragraph 1, or by the form in which distributions could be made;
   (b) the ability of the capital instrument or of the liability to absorb losses would not be adversely affected by the discretion referred to in paragraph 1, or by the form in which distributions could be made;
   (c) the quality of the capital instrument or liability would not otherwise be reduced by the discretion referred to in paragraph 1, or by the form in which distributions could be made.

The competent authority shall consult the resolution authority regarding an institutions compliance with those conditions before granting the prior permission referred to in paragraph 1.

   3. Capital instruments and liabilities for which a legal person other than the institution issuing them has the discretion to decide or require that the payment of distributions on those instruments or liabilities shall be made in a form other than cash or own funds instruments shall not be eligible to qualify as Common Equity Tier 1, Additional Tier 1, Tier 2 or eligible liabilities instruments.
   4. Institutions may use a broad market index as one of the bases for determining the level of distributions on Additional Tier 1, Tier 2 and eligible liabilities instruments.;

"

(c)  paragraph 6 is replaced by the following:"

6. Institutions shall report and disclose the broad market indices on which their capital instruments and eligible liabilities instruments rely.;

"

(34)  in Article 75, the introductory phrase is replaced by the following:"

"The maturity requirements for short positions referred to in point (a) of Article 45, point (a) of Article 59, point (a) of Article 69 and point (a) of Article 72h shall be considered to be met in respect of positions held where all the following conditions are met:";

"

(35)  in Article 76, paragraphs 1, 2 and 3 are replaced by the following:"

"1. For the purposes of point (a) of Article 42, point (a) of Article 45, point (a) of Article 57, point (a) of Article 59, point (a) of Article 67, point (a) of Article 69 and point (a) of Article 72h, institutions may reduce the amount of a long position in a capital instrument by the portion of an index that is made up of the same underlying exposure that is being hedged, provided that all the following conditions are met:

   (a) either both the long position being hedged and the short position in an index used to hedge that long position are held in the trading book or both are held in the non-trading book;
   (b) the positions referred to in point (a) are held at fair value on the balance sheet of the institution;
   (c) the short position referred to in point (a) qualifies as an effective hedge under the internal control processes of the institution;
   (d) the competent authorities assess the adequacy of the internal control processes referred to in point (c) on at least an annual basis and are satisfied with their continuing appropriateness.
   2. Where the competent authority has granted its prior permission, an institution may use a conservative estimate of the underlying exposure of the institution to instruments included in indices as an alternative to an institution calculating its exposure to the items referred to in one or more of the following points:
   (a) own Common Equity Tier 1, Additional Tier 1, Tier 2 and eligible liabilities instruments included in indices;
   (b) Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of financial sector entities, included in indices;
   (c) eligible liabilities instruments of institutions, included in indices.
   3. Competent authorities shall grant the prior permission referred to in paragraph 2 only where the institution has demonstrated to their satisfaction that it would be operationally burdensome for the institution to monitor its underlying exposure to the items referred to in one or more of the points of paragraph 2, as applicable.";

"

(36)  Article 77 is replaced by the following:"

Article 77

Conditions for reducing own funds and eligible liabilities

   1. An institution shall obtain the prior permission of the competent authority to do any of the following:
   (a) reduce, redeem or repurchase Common Equity Tier 1 instruments issued by the institution in a manner that is permitted under applicable national law;
   (b) reduce, distribute or reclassify as another own funds item the share premium accounts related to own funds instruments;
   (c) effect the call, redemption, repayment or repurchase of Additional Tier 1 or Tier 2 instruments prior to the date of their contractual maturity.
   2. An institution shall obtain the prior permission of the resolution authority to effect the call, redemption, repayment or repurchase of eligible liabilities instruments that are not covered by paragraph 1, prior to the date of their contractual maturity.";

"

(37)  Article 78 is replaced by the following:"

"Article 78

Supervisory permission to reduce own funds ▌

   1. The competent authority shall grant permission for an institution to reduce, call, redeem, repay or repurchase Common Equity Tier 1, Additional Tier 1 or Tier 2 ▌ instruments, or to reduce, distribute or reclassify related share premium accounts, where either of the following conditions is met:
   (a) before or at the same time as any of the actions referred to in Article 77(1), the institution replaces the instruments or the related share premium accounts referred to in Article 77(1) with own funds ▌ instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution;
   (b) the institution has demonstrated to the satisfaction of the competent authority that the own funds and eligible liabilities of the institution would, following the action referred to in Article 77(1) of this Regulation, exceed the requirements laid down in this Regulation and in ▌ Directives 2013/36/EU and 2014/59/EU by a margin that the competent authority considers necessary.

Where an institution provides sufficient safeguards as to its capacity to operate with own funds above the amounts required in this Regulation and in Directive 2013/36/EU ▌, the competent authority ▌ may grant that institution a general prior permission to take any of the actions set out in Article 77(1) of this Regulation, subject to criteria that ensure that any such future action will be in accordance with the conditions set out in points (a) and (b) of this paragraph. That general prior permission shall be granted only for a specified period, which shall not exceed one year, after which it may be renewed. The general prior permission shall be granted for a certain predetermined amount, which shall be set by the competent authority. In the case of Common Equity Tier 1 instruments, that predetermined amount shall not exceed 3 % of the relevant issue and shall not exceed 10 % of the amount by which Common Equity Tier 1 capital exceeds the sum of the Common Equity Tier 1 capital requirements laid down in this Regulation, in Directives 2013/36/EU and 2014/59/EU by a margin that the competent authority considers necessary. In the case of Additional Tier 1 or Tier 2 instruments, that predetermined amount shall not exceed 10 % of the relevant issue and shall not exceed 3 % of the total amount of outstanding Additional Tier 1 or Tier 2 instruments, as applicable. ▌

Competent authorities shall withdraw the general prior permission where an institution breaches any of the criteria provided for the purposes of that permission.

   2. When assessing the sustainability of the replacement instruments for the income capacity of the institution referred to in point (a) of paragraph 1, competent authorities shall consider the extent to which those replacement capital instruments ▌would be more costly for the institution than those capital instruments or share premium accounts they would replace.
   3. Where an institution takes an action referred to in point (a) of Article 77(1) and the refusal of redemption of Common Equity Tier 1 instruments referred to in Article 27 is prohibited by applicable national law, the competent authority may waive the conditions set out in paragraph 1 of this Article, provided that the competent authority requires the institution to limit the redemption of such instruments on an appropriate basis.
   4. Competent authorities may permit institutions to call, redeem, repay or repurchase Additional Tier 1 or Tier 2 instruments or related share premium accounts during the five years following their date of issuance where the conditions set out in paragraph 1 and one of the following conditions is met:
   (a) there is a change in the regulatory classification of those instruments that would be likely to result in their exclusion from own funds or reclassification as own funds of lower quality, and both the following conditions are met:
   (i) the competent authority considers such a change to be sufficiently certain;
   (ii) the institution demonstrates to the satisfaction of the competent authority that the regulatory reclassification of those instruments was not reasonably foreseeable at the time of their issuance;
   (b) there is a change in the applicable tax treatment of those instruments which the institution demonstrates to the satisfaction of the competent authority is material and was not reasonably foreseeable at the time of their issuance;
   (c) the instruments and related share premium accounts are grandfathered under Article 494b;
   (d) before or at the same time as the action referred to in Article 77(1), the institution replaces the instruments or related share premium accounts referred to in Article 77(1) with own funds ▌ instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution and the competent authority has permitted that action on the basis of the determination that it would be beneficial from a prudential point of view and justified by exceptional circumstances;
   (e) the Additional Tier 1 or Tier 2 instruments are repurchased for market making purposes.

   5. EBA shall develop draft regulatory technical standards to specify the following:
   (a) the meaning of 'sustainable for the income capacity of the institution';
   (b) the appropriate bases of limitation of redemption referred to in paragraph 3;
   (c) the process including the limits and procedures for granting approval in advance by competent authorities for an action listed in Article 77(1), and data requirements for an application by an institution for the permission of the competent authority to carry out an action listed therein, including the process to be applied in the case of redemption of shares issued to members of cooperative societies, and the time period for processing such an application.

EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.

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.";

"

(38)  the following article is inserted:"

"Article 78a

Permission to reduce eligible liabilities instruments

   1. The resolution authority shall grant permission for an institution to call, redeem, repay or repurchase eligible liabilities instruments where one of the following conditions is met:
   (a) before or at the same time as any of the actions referred to in Article 77(2), the institution replaces the eligible liabilities instruments with own funds or eligible liabilities instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution;
   (b) the institution has demonstrated to the satisfaction of the resolution authority that the own funds and eligible liabilities of the institution would, following the action referred to in Article 77(2) of this Regulation, exceed the requirements for own funds and eligible liabilities laid down in this Regulation and in Directives 2013/36/EU and 2014/59/EU by a margin that the resolution authority, in agreement with the competent authority, considers necessary;
   (c) the institution has demonstrated to the satisfaction of the resolution authority that the partial or full replacement of the eligible liabilities with own funds instruments is necessary to ensure compliance with the own funds requirements laid down in this Regulation and in Directive 2013/36/EU for continuing authorisation.

Where an institution provides sufficient safeguards as to its capacity to operate with own funds and eligible liabilities above the amount of the requirements laid down in this Regulation and in Directives 2013/36/EU and 2014/59/EU, the resolution authority, after consulting the competent authority, may grant that institution a general prior permission to effect calls, redemptions, repayments or repurchases of eligible liabilities instruments, subject to criteria that ensure that any such future action will be in accordance with the conditions set out in points (a) and (b) of this paragraph. That general prior permission shall be granted only for a specified period, which shall not exceed one year, after which it may be renewed. The general prior permission shall be granted for a certain predetermined amount, which shall be set by the resolution authority. Resolution authorities shall inform the competent authorities about any general prior permission granted.

The resolution authority shall withdraw the general prior permission where an institution breaches any of the criteria provided for the purposes of that permission.

   2. When assessing the sustainability of the replacement instruments for the income capacity of the institution referred to in point (a) of paragraph 1, resolution authorities shall consider the extent to which those replacement capital instruments or replacement eligible liabilities would be more costly for the institution than those they would replace.
   3. EBA shall develop draft regulatory technical standards to specify the following:
   (a) the process of cooperation between the competent authority and the resolution authority;
   (b) the procedure, including the time limits and information requirements, for granting the permission in accordance with the first subparagraph of paragraph 1;
   (c) the procedure, including the time limits and information requirements, for granting the general prior permission in accordance with the second subparagraph of paragraph 1;
   (d) the meaning of 'sustainable for the income capacity of the institution'.

For the purposes of point (d) of the first subparagraph of this paragraph, the draft regulatory technical standards shall be fully aligned with the delegated act referred to in Article 78.

EBA shall submit those draft regulatory technical standards to the Commission by … [six months after the date of entry into force of this amending Regulation].

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 Articles 10 to 14 of Regulation (EU) No 1093/2010.";

"

(39)  Article 79 is amended as follows:

(a)  the title is replaced by the following:"

Temporary waiver from deduction from own funds and eligible liabilities;

"

(b)  paragraph 1 is replaced by the following:"

"1. Where an institution holds capital instruments or liabilities ▌that qualify as own funds instruments in a financial sector entity or as eligible liabilities instruments in an institution and where the competent authority considers those holdings to be for the purposes of a financial assistance operation designed to reorganise and restore the viability of that entity or that institution, the competent authority may waive on a temporary basis the provisions on deduction that would otherwise apply to those instruments.";

"

(40)  the following article is inserted:"

"Article 79a

Assessment of compliance with the conditions for own funds and eligible liabilities instruments

Institutions shall have regard to the substantial features of instruments and not only their legal form when assessing compliance with the requirements laid down in Part Two. The assessment of the substantial features of an instrument shall take into account all arrangements related to the instruments, even where those are not explicitly set out in the terms and conditions of the instruments themselves, for the purpose of determining that the combined economic effects of such arrangements are compliant with the objective of the relevant provisions.";

"

(41)  Article 80 is amended as follows:

(a)  the title is replaced by the following:"

Continuing review of the quality of own funds and eligible liabilities instruments;

"

(b)  paragraph 1 is replaced by the following:"

1. EBA shall monitor the quality of own funds and eligible liabilities instruments issued by institutions across the Union and shall notify the Commission immediately where there is significant evidence that those instruments do not meet the respective eligibility criteria set out in this Regulation.

Competent authorities shall, without delay and upon request by EBA, forward all information to EBA that EBA considers relevant concerning new capital instruments or new types of liabilities issued in order to enable EBA to monitor the quality of own funds and eligible liabilities instruments issued by institutions across the Union.;

"

(c)  in paragraph 3, the introductory phrase is replaced by the following:"

3. EBA shall provide technical advice to the Commission on any significant changes it considers to be required to the definition of own funds and eligible liabilities as a result of any of the following:;

"

(42)  in Article 81, paragraph 1 is replaced by the following:"

"1. Minority interests shall comprise the sum of Common Equity Tier 1 items of a subsidiary where the following conditions are met:

   (a) the subsidiary is one of the following:
   (i) an institution;
   (ii) an undertaking that is subject by virtue of applicable national law to the requirements of this Regulation and Directive 2013/36/EU;
   (iii) an intermediate financial holding company in a third country that is subject to prudential requirements as stringent as those applied to credit institutions of that third country and where the Commission has decided in accordance with Article 107(4) that those prudential requirements are at least equivalent to those of this Regulation;
   (b) the subsidiary is included fully in the consolidation pursuant to Chapter 2 of Title II of Part One;
   (c) the Common Equity Tier 1 items, referred to in the introductory part of this paragraph, are owned by persons other than the undertakings included in the consolidation pursuant to Chapter 2 of Title II of Part One.";

"

(43)  Article 82 is replaced by the following:"

Article 82

Qualifying Additional Tier 1, Tier 1, Tier 2 capital and qualifying own funds

Qualifying Additional Tier 1, Tier 1, Tier 2 capital and qualifying own funds shall comprise the minority interest, Additional Tier 1 or Tier 2 instruments, as applicable, plus the related retained earnings and share premium accounts, of a subsidiary where the following conditions are met:

   (a) the subsidiary is either of the following:
   (i) an institution;
   (ii) an undertaking that is subject by virtue of the applicable national law to the requirements of this Regulation and Directive 2013/36/EU;
   (iii) an intermediate financial holding company in a third country that is subject to prudential requirements as stringent as those applied to credit institutions of that third country and where the Commission has decided in accordance with Article 107(4) that those prudential requirements are at least equivalent to those of this Regulation;
   (b) the subsidiary is included fully in the scope of consolidation pursuant to Chapter 2 of Title II of Part One;
   (c) those instruments are owned by persons other than the undertakings included in the consolidation pursuant to Chapter 2 of Title II of Part One.;

"

(44)  in Article 83(1), the introductory phrase is replaced by the following:"

1. Additional Tier 1 and Tier 2 instruments issued by a special purpose entity, and the related share premium accounts, are included until 31 December 2021 in qualifying Additional Tier 1, Tier 1 or Tier 2 capital or qualifying own funds, as applicable, only where the following conditions are met:;

"

(45)  the following article is inserted:"

“Article 88a

Qualifying eligible liabilities instruments

Liabilities issued by a subsidiary established in the Union that belongs to the same resolution group as the resolution entity shall qualify for inclusion in the consolidated eligible liabilities instruments of an institution subject to Article 92a, provided that all the following conditions are met:

   (a) they are issued in accordance with point (a) of Article 45f(2) of Directive 2014/59/EU;
   (b) they are bought by an existing shareholder that is not part of the same resolution group as long as the exercise of the write-down or conversion powers in accordance with Articles 59 to 62 of Directive 2014/59/EU does not affect the control of the subsidiary by the resolution entity;
   (c) they do not exceed the amount determined by subtracting the amount referred to in point (i) from the amount referred to in point (ii):
   (i) the sum of the liabilities issued to and bought by the resolution entity either directly or indirectly through other entities in the same resolution group and the amount of own funds instruments issued in accordance with point (b) of Article 45f(2) of Directive 2014/59/EU;
   (ii) the amount required in accordance with Article 45f(1) of Directive 2014/59/EU.";

"

(46)  Article 92 is amended as follows:

(a)  in paragraph 1, the following point is added:"

“(d) a leverage ratio of 3 %;

"

(b)   the following paragraph is inserted:"

"1a. In addition to the requirement laid down in point (d) paragraph 1 of this Article, a G-SII shall maintain a leverage ratio buffer equal to the G-SIIs total exposure measure referred to in Article 429(4) of this Regulation multiplied by 50 % of the G-SII buffer rate applicable to the G-SII in accordance with Article 131 of Directive 2013/36/EU.

A G-SII shall meet the leverage ratio buffer requirement with Tier 1 capital only. Tier 1 capital that is used to meet the leverage ratio buffer requirement shall not be used towards meeting any of the leverage based requirements set out in this Regulation and in Directive 2013/36/EU, unless explicitly otherwise provided therein.

Where a G-SII does not meet the leverage ratio buffer requirement, it shall be subject to the capital conservation requirement in accordance with Article 141b of Directive 2013/36/EU.

Where a G-SII does not meet at the same time the leverage ratio buffer requirement and the combined buffer requirement as defined in point (6) of Article 128 of Directive 2013/36/EU, it shall be subject to the higher of the capital conservation requirements in accordance with Articles 141 and 141b of that Directive.";

"

(c)  paragraph 3 is amended as follows:

(i)  points (b) and (c) ▌ are replaced by the following:"

(b) the own funds requirements for the trading-book business of an institution for the following:

   (i) market risk as determined in accordance with Title IV of this Part, excluding the approaches set out in Chapter 1a and Chapter 1b of that Title;
   (ii) large exposures exceeding the limits specified in Articles 395 to 401, to the extent that an institution is permitted to exceed those limits, as determined in accordance with Part Four;
   (c) the own funds requirements for market risk as determined in Title IV of this Part, excluding the approaches set out in Chapter 1a and Chapter 1b of that Title, for all business activities that are subject to foreign exchange risk or commodity risk;";

"

(ii)  the following point is inserted:"

"(ca) the own funds requirements calculated in accordance with Title V of this Part, with the exception of Article 379 for settlement risk.";

"

(47)  the following articles are inserted:"

Article 92a

Requirements for own funds and eligible liabilities for G-SIIs

   1. Subject to Articles 93 and 94 and to the exceptions set out in paragraph 2 of this Article, institutions identified as resolution entities and that are a G-SII or part of a G-SII shall at all times satisfy the following requirements for own funds and eligible liabilities:
   (a) a risk-based ratio of 18 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total risk exposure amount calculated in accordance with ▌ Article 92(3) and (4);
   (b) a non-risk-based ratio of 6,75 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total exposure measure referred to in Article 429(4).
   2. The requirements laid down in paragraph 1 shall not apply in the following cases:
   (a) within the three years following the date on which the institution or the group of which the institution is part has been identified as a G-SII;
   (b) within the two years following the date on which the resolution authority has applied the bail-in tool in accordance with Directive 2014/59/EU;
   (c) within the two years following the date on which the resolution entity has put in place an alternative private sector measure referred to in point (b) of Article 32(1) of Directive 2014/59/EU by which capital instruments and other liabilities have been written down or converted into Common Equity Tier 1 items in order to recapitalise the resolution entity without the application of resolution tools.
   3. Where the aggregate resulting from the application of the requirement laid down in point (a) of paragraph 1 of this Article to each resolution entity of the same G-SII exceeds the requirement for own funds and eligible liabilities calculated in accordance with Article 12 of this Regulation, the resolution authority of the EU parent institution may, after having consulted the other relevant resolution authorities, act in accordance with Article 45d(3) or 45h(1) of Directive 2014/59/EU.

Article 92b

Requirement for own funds and eligible liabilities for non-EU G-SIIs

   1. Institutions that are material subsidiaries of non-EU G-SIIs and that are not resolution entities shall at all times satisfy requirements for own funds and eligible liabilities equal to 90 % of the requirements for own funds and eligible liabilities laid down in Article 92a.
   2. For the purpose of complying with paragraph 1, Additional Tier 1, Tier 2 and eligible liabilities instruments shall only be taken into account where those instruments are owned by the ultimate parent undertaking of the non-EU G-SII and have been issued directly or indirectly through other entities within the same group, provided that all such entities are established in the same third country as that ultimate parent undertaking or in a Member State.
   3. An eligible liabilities instrument shall only be taken into account for the purpose of complying with paragraph 1 where it fulfils all the following additional conditions:
   (a) in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim resulting from the liability ranks below claims resulting from liabilities that do not fulfil the conditions set out in paragraph 2 of this Article and that do not qualify as own funds;
   (b) it is subject to the write-down or conversion powers in accordance with Articles 59 to 62 of Directive 2014/59/EU.";

"

(48)  Article 94 is replaced by the following:"

"Article 94

Derogation for small trading book business

   1. By way of derogation from point (b) of Article 92(3), institutions may calculate the own funds requirement for their trading-book business in accordance with paragraph 2 of this Article, provided that the size of the institutions’ on- and off-balance-sheet trading-book business is equal to or less than both of the following thresholds on the basis of an assessment carried out on a monthly basis using the data as of the last day of the month:
   (a) 5 % of the institution's total assets;
   (b) EUR 50 million.
   2. Where both conditions set out in points (a) and (b) of paragraph 1 are met, institutions may calculate the own funds requirement for their trading-book business as follows:
   (a) for the contracts listed in point 1 of Annex II, contracts relating to equities which are referred to in point 3 of that Annex and credit derivatives, institutions may exempt those positions from the own funds requirement referred to in point (b) of Article 92(3);
   (b) for trading book positions other than those referred to in point (a) of this paragraph, institutions may replace the own funds requirement referred to in point (b) of Article 92(3) with the requirement calculated in accordance with point (a) of Article 92(3).
   3. Institutions shall calculate the size of their on- and off-balance-sheet trading book business on the basis of data as of the last day of each month for the purposes of paragraph 1 in accordance with the following requirements:
   (a) all the positions assigned to the trading book in accordance with Article 104 shall be included in the calculation except for the following:
   (i) positions concerning foreign exchange and commodities;
   (ii) positions in credit derivatives that are recognised as internal hedges against non-trading book credit risk exposures or counterparty risk exposures and the credit derivate transactions that perfectly offset the market risk of those internal hedges as referred to in Article 106(3);
   (b) all positions included in the calculation in accordance with point (a) shall be valued at their market value on that given date; where the market value of a position is not available on a given date, institutions shall take a fair value for the position on that date; where the market value and fair value of a position are not available on a given date, institutions shall take the most recent of the market value or fair value for that position;
   (c) the absolute value of long positions shall be summed with the absolute value of short positions.
   4. Where both conditions set out in points (a) and (b) of paragraph 1 of this Article are met, irrespective of the obligations set out in Articles 74 and 83 of Directive 2013/36/EU, Article 102(3) and (4), Articles 103 and 104b of this Regulation shall not apply.
   5. Institutions shall notify the competent authorities when they calculate, or cease to calculate, the own funds requirements of their trading-book business in accordance with ▌ paragraph 2.
   6. An institution that no longer meets one or more of the conditions set out in paragraph 1 shall immediately notify the competent authority thereof.
   7. An institution shall cease to calculate the own funds requirements of its trading-book business in accordance with paragraph 2 within three months of one of the following occurring:
   (a) the institution does not meet ▌ the conditions set out in point (a) or (b) of paragraph 1 for three consecutive months;
   (b) the institution does not meet ▌the conditions set out in point (a) or (b) of paragraph 1 during more than 6 out of the last 12 months.
   8. Where an institution has ceased to calculate the own funds requirements of its trading-book business in accordance with this Article, it shall only be permitted to calculate the own funds requirements of its trading-book business in accordance with this Article where it demonstrates to the competent authority that all the conditions set out in paragraph 1 have been met for an uninterrupted full-year period.
   9. Institutions shall not enter into, buy or sell a trading-book position for the sole purpose of complying with any of the conditions set out in paragraph 1 during the monthly assessment.";

"

(49)  in Title I of Part Three, Chapter 2 is deleted;

(50)  Article 102 is amended as follows:

(a)  paragraphs 2, 3 and 4 are replaced by the following:"

2. Trading intent shall be evidenced on the basis of the strategies, policies and procedures set up by the institution to manage the position or portfolio in accordance with Articles 103, 104 and 104a.

   3. Institutions shall establish and maintain systems and controls to manage their trading book in accordance with Article 103.
   4. For the purposes of the reporting requirements set out in Article 430b(3), trading book positions shall be assigned to trading desks established ▌ in accordance with Article 104b. ▌";

"

(b)  the following paragraphs are added:"

5. Positions in the trading book shall be subject to the requirements for prudent valuation specified in Article 105.

   6. Institutions shall treat internal hedges in accordance with Article 106.;

"

(51)  Article 103 is ▌ replaced by the following:"

"Article 103

Management of the trading book

   1. Institutions shall have in place clearly defined policies and procedures for the overall management of the trading book. Those policies and procedures shall at least address:
   (a) the activities which the institution considers to be trading business and as constituting part of the trading book for own funds requirement purposes;
   (b) the extent to which a position can be marked-to-market daily by reference to an active, liquid two-way market;
   (c) for positions that are marked-to-model, the extent to which the institution can:
   (i) identify all material risks of the position;
   (ii) hedge all material risks of the position with instruments for which an active, liquid two-way market exists;
   (iii) derive reliable estimates for the key assumptions and parameters used in the model;
   (d) the extent to which the institution can, and is required to, generate valuations for the position that can be validated externally in a consistent manner;
   (e) the extent to which legal restrictions or other operational requirements would impede the institution's ability to effect a liquidation or hedge of the position in the short term;
   (f) the extent to which the institution can, and is required to, actively manage the risks of positions within its trading operation;
   (g) the extent to which the institution may reclassify risk or positions between the non-trading and trading books and the requirements for such reclassifications as referred to in Article 104a.

   2. In managing its positions or portfolios of positions in the trading book, the institution shall comply with all the following requirements:

   (a) the institution shall have in place a clearly documented trading strategy for the position or portfolios in the trading book, which shall be approved by senior management and include the expected holding period;

   (b) the institution shall have in place clearly defined policies and procedures for the active management of positions or portfolios in the trading book; those policies and procedures shall include the following:

   (i) which positions or portfolios of positions may be entered into by each trading desk or, as the case may be, by designated dealers;
   (ii) the setting of position limits and monitoring them for appropriateness;
   (iii) ensuring that dealers have the autonomy to enter into and manage the position within agreed limits and according to the approved strategy;
   (iv) ensuring that positions are reported to senior management as an integral part of the institution's risk management process;
   (v) ensuring that positions are actively monitored with reference to market information sources and an assessment is made of the marketability or hedgeability of the position or its component risks, including the assessment, the quality and availability of market inputs to the valuation process, level of market turnover, sizes of positions traded in the market;
   (vi) active anti-fraud procedures and controls;
   (c) the institution shall have in place clearly defined policies and procedures to monitor the positions against the institution's trading strategy, including the monitoring of turnover and positions for which the originally intended holding period has been exceeded.";

"

(52)  in Article 104, paragraph 2 is deleted;

(53)  the following articles are inserted:"

"Article 104a

Reclassification of a position

   1. Institutions shall have in place clearly defined policies for identifying the exceptional circumstances which justify the reclassification of a trading book position as a non-trading book position or, conversely, the reclassification of a non-trading book position as a ▌ trading book position, for the purpose of determining their own funds requirements to the satisfaction of the competent authorities. The institutions shall review those policies at least annually.

EBA shall monitor the range of supervisory practices and shall issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010 by … [five years after the date of entry into force of this amending Regulation] on the meaning of exceptional circumstances for the purposes of paragraph 1 of this Article. Until EBA issues those guidelines, competent authorities shall notify EBA of, and shall provide a rationale for, their decisions on whether or not to permit an institution to reclassify a position as referred to in paragraph 2 of this Article.

   2. Competent authorities shall grant permission to reclassify a trading book position as a non-trading book position or conversely a non-trading book position as a ▌ trading book position for the purpose of determining their own funds requirements only where the institution has provided the competent authorities with written evidence that its decision to reclassify that position is the result of an exceptional circumstance that is consistent with the policies the institution has in place in accordance with paragraph 1 of this Article. For that purpose, the institution shall provide sufficient evidence that the position no longer meets the condition to be classified as a trading book or non-trading book position pursuant to Article 104.

The decision referred to in the first subparagraph shall be approved by the management body.

   3. Where the competent authority has granted permission for the reclassification of a position in accordance with paragraph 2, the institution which received that permission shall:
   (a) publicly disclose, without delay,
   (i) information that its position has been reclassified, and
   (ii) where the effect of that reclassification is a reduction in the institution’s own funds requirements, the size of that reduction; and
   (b) where the effect of that reclassification is a reduction in the institution’s own funds requirements, not recognise that effect until the position matures, unless the institution’s competent authority permits it to recognise that effect at an earlier date.
   4. The institution shall calculate the net change in the amount of its own funds requirements arising from the reclassification of the position as the difference between the own funds requirements immediately after the reclassification and the own funds requirements immediately before the reclassification, each calculated in accordance with Article 92. The calculation shall not take into account the effects of any factors other than the reclassification.
   5. The reclassification of a position in accordance with this Article shall be irrevocable.

Article 104b

Requirements for trading desk

   1. For the purposes of the reporting requirements set out in Article 430b(3), institutions shall establish trading desks and shall assign each of their trading book positions to one of those trading desks. Trading book positions shall be attributed to the same trading desk only where they satisfy the agreed business strategy for the trading desk and are consistently managed and monitored in accordance with paragraph 2 of this Article.
   2. Institutions' trading desks shall at all times meet all the following requirements:
   (a) each trading desk shall have a clear and distinctive business strategy and a risk management structure that is adequate for its business strategy;
   (b) each trading desk shall have a clear organisational structure; positions in a given trading desk shall be managed by designated dealers within the institution; each dealer shall have dedicated functions in the trading desk; each dealer shall be assigned to one trading desk only; ▌
   (c) position limits shall be set within each trading desk according to the business strategy of that trading desk;
   (d) reports on the activities, profitability, risk management and regulatory requirements at the trading desk level shall be produced at least on a weekly basis and communicated to the management body on a regular basis;
   (e) each trading desk shall have a clear annual business plan including a well‑defined remuneration policy on the basis of sound criteria used for performance measurement;
   (f) reports on maturing positions, intra-day trading limit breaches, daily trading limit breaches and actions taken by the institution to address those breaches, as well as assessments of market liquidity, shall be prepared for each trading desk on a monthly basis and made available to the competent authorities.
   3. By way of derogation from point (b) of paragraph 2, an institution may assign a dealer to more than one trading desk, provided that the institution demonstrates to the satisfaction of its competent authority that the assignment has been made due to business or resource considerations and the assignment preserves the other qualitative requirements set out in this Article applicable to dealers and trading desks.
   4. Institutions shall notify the competent authorities of the manner in which they comply with paragraph 2. Competent authorities may require an institution to change the structure or organisation of its trading desks to comply with this Article.";

"

(54)  Article 105 is amended as follows:

(a)  paragraph 1 is replaced by the following:"

"1. All trading book positions and non-trading book positions measured at fair value shall be subject to the standards for prudent valuation specified in this Article. Institutions shall in particular ensure that the prudent valuation of their trading book positions achieves an appropriate degree of certainty having regard to the dynamic nature of trading book positions and non-trading book positions measured at fair value, the demands of prudential soundness and the mode of operation and purpose of capital requirements in respect of trading book positions and non-trading book positions measured at fair value.";

"

(b)  paragraphs 3 and 4 are replaced by the following:"

"3. Institutions shall revalue trading book positions at fair value at least on a daily basis. Changes in the value of those positions shall be reported in the profit and loss account of the institution.

   4. Institutions shall mark their trading book positions and non-trading book positions measured at fair value to market whenever possible, including when applying the relevant capital treatment to those positions.";

"

(c)  paragraph 6 is replaced by the following:"

"6. Where marking to market is not possible, institutions shall conservatively mark to model their positions and portfolios, including when calculating own funds requirements for positions in the trading book and positions measured at fair value in the non-trading book.";

"

(d)  in paragraph 7, the second subparagraph is replaced by the following:"

"For the purposes of point (d) of the first subparagraph, the model shall be developed or approved independently of the trading desks and shall be independently tested, including validation of the mathematics, assumptions and software implementation.";

"

(e)  in paragraph 11, point (a) is replaced by the following:"

"(a) the additional amount of time it would take to hedge out the position or the risks within the position beyond the liquidity horizons that have been assigned to the risk factors of the position in accordance with Article 325bd;";

"

(55)  Article 106 is amended as follows:

(a)  paragraphs 2 and 3 are replaced by the following:"

"2. The requirements set out in paragraph 1 shall apply without prejudice to the requirements applicable to the hedged position in the non-trading book or in the trading book, where relevant.

   3. Where an institution hedges a non-trading book credit risk exposure or counterparty risk exposure using a credit derivative booked in its trading book, that credit derivative position shall be recognised as an internal hedge of the non-trading book credit risk exposure or counterparty risk exposure for the purpose of calculating the risk-weighted exposure amounts referred to in point (a) of Article 92(3) where the institution enters into another credit derivative transaction with an eligible third party protection provider that meets the requirements for unfunded credit protection in the non-trading book and perfectly offsets the market risk of the internal hedge.

Both an internal hedge recognised in accordance with the first subparagraph and the credit derivative entered into with the third party shall be included in the trading book for the purpose of calculating the own funds requirements for market risk.";

"

(b)  the following paragraphs are added:"

"4. Where an institution hedges a non-trading book equity risk exposure using an equity derivative booked in its trading book, that equity derivative position shall be recognised as an internal hedge of the non-trading book equity risk exposure for the purpose of calculating the risk-weighted exposure amounts referred to in point (a) of Article 92(3) where the institution enters into another equity derivative transaction with an eligible third party protection provider that meets the requirements for unfunded credit protection in the non-trading book and perfectly offsets the market risk of the internal hedge.

Both an internal hedge recognised in accordance with the first subparagraph and the equity derivative entered into with the eligible third party protection provider shall be included in the trading book for the purpose of calculating the own funds requirements for market risk.

   5. Where an institution hedges non-trading book interest rate risk exposures using an interest rate risk position booked in its trading book, that interest rate risk position shall be considered to be an internal hedge for the purpose of assessing the interest rate risk arising from non-trading positions in accordance with Articles 84 and 98 of Directive 2013/36/EU where the following conditions are met:
   (a) the position has been assigned to a separate portfolio from the other trading book position, the business strategy of which is solely dedicated to manage and mitigate the market risk of internal hedges of interest rate risk exposure; for that purpose, the institution may assign to that portfolio other interest rate risk positions entered into with third parties, or its own trading book as long as the institution perfectly offsets the market risk of those interest rate risk positions entered into with its own trading book by entering into opposite interest rate risk positions with third parties;
   (b) for the purposes of the reporting requirements set out in Article 430b(3), the position has been assigned to a trading desk established in accordance with Article 104b the business strategy of which is solely dedicated to manage and mitigate the market risk of internal hedges of interest rate risk exposure; for that purpose, that trading desk may enter into other interest rate risk positions with third parties or other trading desks of the institution, as long as those other trading desks perfectly offset the market risk of those other interest rate risk positions by entering into opposite interest rate risk positions with third parties;
   (c) the institution has fully documented how the position mitigates the interest rate risk arising from non-trading book positions for the purposes of the requirements laid down in Articles 84 and 98 of Directive 2013/36/EU.
   6. The own funds requirements for the market risk of all the positions assigned to a separate portfolio as referred to in point (a) of paragraph 5 shall be calculated on a stand-alone basis and shall be in addition to the own funds requirements for the other trading book positions.
   7. For the purposes of the reporting requirements set out in Article 430b, the calculation of the own funds requirements for market risk of all the positions assigned to the separate portfolio as referred to in point (a) of paragraph 5 of this Article or to the trading desk or entered into by the trading desk referred to in point (b) of paragraph 5 of this Article, where appropriate, shall be calculated on a stand-alone basis as a separate portfolio and shall be additional to the calculation of own funds requirements for the other trading book positions.";

"

(56)  in Article 107, paragraph 3 is replaced by the following:"

3. For the purposes of this Regulation, exposures to a third-country investment firm, a third-country credit institution and a third-country exchange shall be treated as exposures to an institution only where the third country applies prudential and supervisory requirements to that entity that are at least equivalent to those applied in the Union.;

"

(57)  in Article 117, paragraph 2 is amended as follows:

(a)  the following points are added:"

"(o) the International Development Association;

   (p) the Asian Infrastructure Investment Bank.";

"

(b)  the following subparagraph is added:"

"The Commission is empowered to amend this Regulation by adopting delegated acts in accordance with Article 462 amending, in accordance with international standards, the list of multilateral development banks referred to in the first subparagraph.";

"

(58)  in Article 118, point (a) is replaced by the following:"

"(a) the European Union and the European Atomic Energy Community;";

"

(59)  in Article 123, the following paragraph is added:"

"Exposures due to loans granted by a credit institution to pensioners or employees with a permanent contract against the unconditional transfer of part of the borrower's pension or salary to that credit institution shall be assigned a risk weight of 35 %, provided that all the following conditions are met:

   (a) in order to repay the loan, the borrower unconditionally authorises the pension fund or employer to make direct payments to the credit institution by deducting the monthly payments on the loan from the borrower's monthly pension or salary;
   (b) the risks of death, inability to work, unemployment or reduction of the net monthly pension or salary of the borrower are properly covered through an insurance policy underwritten by the borrower to the benefit of the credit institution;
   (c) the monthly payments to be made by the borrower on all loans that meet the conditions set out in points (a) and (b) do not in aggregate exceed 20 % of the borrower's net monthly pension or salary;
   (d) the maximum original maturity of the loan is equal to or less than ten years.";

"

(60)  Article 124 is replaced by the following:"

“Article 124

Exposures secured by mortgages on immovable property

   1. An exposure or any part of an exposure fully secured by mortgage on immovable property shall be assigned a risk weight of 100 %, where the conditions set out in Article 125 or 126 are not met, except for any part of the exposure which is assigned to another exposure class. The part of the exposure that exceeds the mortgage value of the immovable property shall be assigned the risk weight applicable to the unsecured exposures of the counterparty involved.

The part of an exposure that is treated as fully secured by immovable property shall not be greater than the pledged amount of the market value or in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions, the mortgage lending value of the immovable property in question.

   1a. Member States shall designate an authority to be responsible for the application of paragraph 2. That authority shall be the competent authority or the designated authority.

Where the authority designated by the Member State for the application of this Article is the competent authority, it shall ensure that the relevant national bodies and authorities which have a macroprudential mandate are duly informed of the competent authority's intention to make use of this Article, and are appropriately involved in the assessment of financial stability concerns in its Member State in accordance with paragraph 2.

Where the authority designated by the Member State for the application of this Article is different from the competent authority, the Member State shall adopt the necessary provisions to ensure proper coordination and exchange of information between the competent authority and the designated authority for the proper application of this Article. In particular, authorities shall be required to cooperate closely and to share all the information that may be necessary for the adequate performance of the duties imposed upon the designated authority pursuant to this Article. That cooperation shall aim at avoiding any form of duplicative or inconsistent action between the competent authority and the designated authority, as well as ensuring that the interaction with other measures, in particular measures taken under Article 458 of this Regulation and Article 133 of Directive 2013/36/EU, is duly taken into account.

   2. Based on the data collected under Article 430a and on any other relevant indicators, the authority designated in accordance with paragraph 1a of this Article shall periodically, and at least annually, assess whether the risk weight of 35 % for exposures to one or more property segments secured by mortgages on residential property referred to in Article 125 located in one or more parts of the territory of the Member State of the relevant authority and the risk weight of 50 % for exposures secured by mortgages on commercial immovable property referred to in Article 126 located in one or more parts of the territory of the Member State of the relevant authority are appropriately based on:
   (a) the loss experience of exposures secured by immovable property;
   (b) forward-looking immovable property markets developments.

Where, on the basis of the assessment referred to in the first subparagraph  of this paragraph, the authority designated in accordance with paragraph 1a of this Article concludes that the risk weights set out in Article 125(2) or 126(2) do not adequately reflect the actual risks related to exposures to one or more property segments fully secured by mortgages on residential property or on commercial immovable property located in one or more parts of the territory of the Member State of the relevant authority, and if it considers that the inadequacy of the risk weights could adversely affect current or future financial stability in its Member State, it may increase the risk weights applicable to those exposures within the ranges determined in the fourth subparagraph of this paragraph or impose stricter criteria than those set out in Article 125(2) or 126(2).

The authority designated in accordance with paragraph 1a of this Article shall notify EBA and the ESRB of any adjustments to risk weights and criteria applied pursuant to this paragraph. Within one month of receipt of that notification, EBA and the ESRB shall provide their opinion to the Member State concerned. EBA and the ESRB shall publish the risk weights and criteria for exposures referred to in Articles 125, 126 and point (a) of Article 199(1) as implemented by the relevant authority.

For the purposes of the second subparagraph of this paragraph, the authority designated in accordance with paragraph 1a may set the risk weights within the following ranges:

   (a) 35 % to 150 % for exposures secured by mortgages on residential property;
   (b) 50 % to 150 % for exposures secured by mortgages on commercial immovable property.
   3. Where the authority designated in accordance with paragraph 1a sets higher risk weights or stricter criteria pursuant to the second subparagraph of paragraph 2, institutions shall have a six‑month transitional period to apply them.
   4. EBA, in close cooperation with the ESRB, shall develop draft regulatory technical standards to specify the rigorous criteria for the assessment of the mortgage lending value referred to in paragraph 1 and the types of factors to be considered for the assessment of the appropriateness of the risk weights referred in the first subparagraph of paragraph 2.

EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2019.

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 Articles 10 to 14 of Regulation (EU) No 1093/2010.

   5. The ESRB may, by means of recommendations in accordance with Article 16 of Regulation (EU) No 1092/2010, and in close cooperation with EBA, give guidance to authorities designated in accordance with paragraph 1a of this Article on the following:
   (a) factors which could "adversely affect current or future financial stability" referred to in the second subparagraph of paragraph 2; and
   (b) indicative benchmarks that the authority designated in accordance with paragraph 1a is to take into account when determining higher risk weights.
   6. The institutions of a Member State shall apply the risk weights and criteria that have been determined by the authorities of another Member State in accordance with paragraph 2 to all their corresponding exposures secured by mortgages on residential property or commercial immovable property located in one or more parts of that Member State.”;

"

(61)  in Article 128, paragraphs 1 and 2 are replaced by the following:"

“1. Institutions shall assign a 150 % risk weight to exposures that are associated with particularly high risks.

   2. For the purposes of this Article, institutions shall treat any of the following exposures as exposures associated with particularly high risks:
   (a) investments in venture capital firms, except where those investments are treated under Article 132;
   (b) investments in private equity, except where those investments are treated under Article 132;
   (c) speculative immovable property financing.";

"

(62)  Article 132 is replaced by the following:"

“Article 132

Own funds requirements for exposures in the form of units or shares in CIUs

   1. Institutions shall calculate the risk-weighted exposure amount for their exposures in the form of units or shares in a CIU by multiplying the risk-weighted exposure amount of the CIU's exposures, calculated in accordance with the approaches referred to in the first subparagraph of paragraph 2, with the percentage of units or shares held by those institutions.
   2. Where the conditions set out in paragraph 3 of this Article are met, institutions may apply the look‑through approach in accordance with Article 132a(1) or the mandate-based approach in accordance with Article 132a(2).

Subject to Article 132b(2), institutions that do not apply the look-through approach or the mandate-based approach shall assign a risk weight of 1 250 % (‘fall-back approach’) to their exposures in the form of units or shares in a CIU.

Institutions may calculate the risk-weighted exposure amount for their exposures in the form of units or shares in a CIU by using a combination of the approaches referred to in this paragraph, provided that the conditions for using those approaches are met.

   3. Institutions may determine the risk-weighted exposure amount of ▌ a CIU's exposures in accordance with the approaches set out in Article 132a where all the following conditions are met:
   (a) the CIU is one of the following:
   (i) an undertaking for collective investment in transferable securities (UCITS), governed by Directive 2009/65/EC;
   (ii) an ▌ AIF managed by an EU AIFM registered under Article 3(3) of Directive 2011/61/EU;
   (iii) an AIF managed by an EU AIFM authorised under Article 6 of Directive 2011/61/EU;
   (iv) an AIF managed by a non-EU AIFM authorised under Article 37 of Directive 2011/61/EU;
   (v) a non-EU AIF managed by a non-EU AIFM and marketed in accordance with Article 42 of Directive 2011/61/EU;
   (vi) a non-EU AIF not marketed in the Union and managed by a non-EU AIFM established in a third country that is covered by a delegated act referred to in Article 67(6) of Directive 2011/61/EU;
   (b) the CIU’s prospectus or equivalent document includes the following:
   (i) the categories of assets in which the CIU is authorised to invest;
   (ii) where investment limits apply, the relative limits and the methodologies to calculate them;
   (c) reporting by the CIU or the CIU management company to the institution complies with the following requirements:
   (i) the exposures of the CIU are reported at least as frequently as those of the institution;
   (ii) the granularity of the financial information is sufficient to allow the institution to calculate the CIU's risk -weighted exposure amount in accordance with the approach chosen by the institution;
   (iii) where the institution applies the look-through approach, information about the underlying exposures is verified by an independent third party.

By way of derogation from point (a) of the first subparagraph of this Article, multilateral and bilateral development banks and other institutions that co-invest in a CIU with multilateral or bilateral development banks may determine the risk-weighted exposure amount of that CIU’s exposures in accordance with the approaches set out in Article 132a, provided that the conditions set out in points (b) and (c) of the first subparagraph of this Article are met and that the CIU’s investment mandate limits the types of assets that the CIU can invest in to assets that promote sustainable development in developing countries.

Institutions shall notify their competent authority of the CIUs to which they apply the treatment referred to in the second subparagraph.

By way of derogation from point (c)(i) of the first subparagraph, where the institution determines the risk-weighted exposure amount of a CIU's exposures in accordance with the mandate-based approach, the reporting by the CIU or the CIU management company to the institution may be limited to the investment mandate of the CIU and any changes thereof and may be done only when the institution incurs the exposure to the CIU for the first time and when there is a change in the investment mandate of the CIU.

   4. Institutions that do not have adequate data or information to calculate the risk-weighted exposure amount of a CIU's exposures in accordance with the approaches set out in Article 132a may rely on the calculations of a third party, provided that all the following conditions are met:
   (a) the third party is one of the following:
   (i) the depository institution or the depository financial institution of the CIU, provided that the CIU exclusively invests in securities and deposits all securities at that depository institution or depository financial institution;
   (ii) for CIUs not covered by point (i) of this point, the CIU management company, provided that the company meets the condition set out in point (a) of paragraph 3;
   (b) the third party carries out the calculation in accordance with the approaches set out in Article 132a(1), (2) or (3), as applicable;
   (c) an external auditor has confirmed the correctness of the third party's calculation.

Institutions that rely on third-party calculations shall multiply the risk-weighted exposure amount of a CIU's exposures resulting from those calculations by a factor of 1,2.

By way of derogation from the second subparagraph, where the institution has unrestricted access to the detailed calculations carried out by the third party, the factor of 1,2 shall not apply. The institution shall provide those calculations to its competent authority upon request.

   5. Where an institution applies the approaches referred to in Article 132a for the purpose of calculating the risk-weighted exposure amount of a CIU's exposures (‘level 1 CIU’), and any of the underlying exposures of the level 1 CIU is an exposure in the form of units or shares in another CIU (‘level 2 CIU’), the risk-weighted exposure amount of the level 2 CIU's exposures may be calculated by using any of the three approaches described in paragraph 2 of this Article. The institution may use the look-through approach to calculate the risk-weighted exposure amounts of CIUs' exposures in level 3 and any subsequent level only where it used that approach for the calculation in the preceding level. In any other scenario it shall use the fall-back approach.
   6. The risk-weighted exposure amount of a CIU's exposures calculated in accordance with the look-through approach and the mandate-based approach set out in Article 132a(1) and (2) shall be capped at the risk-weighted amount of that CIU's exposures calculated in accordance with the fall-back approach.
   7. By way of derogation from paragraph 1 of this Article, institutions that apply the look-through approach in accordance with Article 132a(1) may calculate the risk-weighted exposure amount for their exposures in the form of units or shares in a CIU by multiplying the exposure values of those exposures, calculated in accordance with Article 111, with the risk weight (20190416-P8_TA-PROV(2019)0369_EN-p0000003.png) calculated in accordance with the formula set out in Article 132c, provided that the following conditions are met:
   (a) the institutions measure the value of their holdings of units or shares in a CIU at historical cost but measure the value of the underlying assets of the CIU at fair value if they apply the look-through approach;
   (b) a change in the market value of the units or shares for which institutions measure the value at historical cost changes neither the amount of own funds of those institutions nor the exposure value associated with those holdings.";

"

(63)  the following articles are inserted:"

“Article 132a

Approaches for calculating risk-weighted exposure amounts of CIUs

   1. Where the conditions set out in Article 132(3) are met, institutions that have sufficient information about the individual underlying exposures of a CIU shall look through to those exposures to calculate the risk-weighted exposure amount of the CIU, risk weighting all underlying exposures of the CIU as if they were directly held by those institutions.
   2. Where the conditions set out in Article 132(3) are met, institutions that do not have sufficient information about the individual underlying exposures of a CIU to use the look-through approach may calculate the risk-weighted exposure amount of those exposures in accordance with the limits set in the CIU’s mandate and relevant law.

Institutions shall carry out the calculations referred to in the first subparagraph under the assumption that the CIU first incurs exposures to the maximum extent allowed under its mandate or relevant law in the exposures attracting the highest own funds requirement and then continues incurring exposures in descending order until the maximum total exposure limit is reached, and that the CIU applies leverage to the maximum extent allowed under its mandate or relevant law, where applicable.

Institutions shall carry out the calculations referred to in the first subparagraph in accordance with the methods set out in this Chapter, in Chapter 5, and in Section 3, 4 or 5 of Chapter 6 of this Title.

   3. By way of derogation from point (d) of Article 92(3), institutions that calculate the risk-weighted exposure amount of a CIU's exposures in accordance with paragraph 1 or 2 of this Article may calculate the own funds requirement for the credit valuation adjustment risk of derivative exposures of that CIU as an amount equal to 50 % of the own funds requirement for those derivative exposures calculated in accordance with Section 3, 4 or 5 of Chapter 6 of this Title, as applicable.

By way of derogation from the first subparagraph, an institution may exclude from the calculation of the own funds requirement for credit valuation adjustment risk derivative exposures which would not be subject to that requirement if they were incurred directly by the institution.

   4. EBA shall develop draft regulatory technical standards to specify how institutions shall calculate the risk-weighted exposure amount referred to in paragraph 2 where one or more of the inputs required for that calculation are not available.

EBA shall submit those draft regulatory technical standards to the Commission by … [nine months after the date of entry into force of this amending Regulation].

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 Articles 10 to 14 of Regulation (EU) No 1093/2010.

Article 132b

Exclusions from the approaches for calculating risk-weighted exposure amounts of CIUs

   1. Institutions may exclude from the calculations referred to in Article 132 Common Equity Tier 1, Additional Tier 1, ▌ Tier 2 instruments and eligible liabilities instruments held by a CIU which institutions shall deduct in accordance with Article 36(1) and Articles 56, 66 and 72e respectively.
   2. Institutions may exclude from the calculations referred to in Article 132 exposures in the form of units or shares in CIUs referred to in points (g) and (h) of Article 150(1) and instead apply the treatment set out in Article 133 to those exposures.

Article 132c

Treatment of off-balance-sheet exposures to CIUs

   1. Institutions shall calculate the risk-weighted exposure amount for their off‑balance-sheet items with the potential to be converted into exposures in the form of units or shares in a CIU by multiplying the exposure values of those exposures calculated in accordance with Article 111, with the following risk weight:
   (a) for all exposures for which institutions use one of the approaches set out in Article 132a:

20190416-P8_TA-PROV(2019)0369_EN-p0000004.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000005.png = the risk weight;

i = the index denoting the CIU:

RW20190416-P8_TA-PROV(2019)0369_EN-p0000006.png= the amount calculated in accordance with Article 132a for a CIUi;

20190416-P8_TA-PROV(2019)0369_EN-p0000007.png= the exposure value of the exposures of CIUi;

20190416-P8_TA-PROV(2019)0369_EN-p0000008.png= the accounting value of assets of CIUi; and

EQi = the accounting value of the equity of CIUi.

   (b) for all other exposures, 20190416-P8_TA-PROV(2019)0369_EN-p0000009.png.
   2. Institutions shall calculate the exposure value of a minimum value commitment that meets the conditions set out in paragraph 3 of this Article as the discounted present value of the guaranteed amount using a default risk-free discount factor. Institutions may reduce the exposure value of the minimum value commitment by any losses recognised with respect to the minimum value commitment under the applicable accounting standard.

Institutions shall calculate the risk-weighted exposure amount for off-balance-sheet exposures arising from minimum value commitments that meet all the conditions set out in paragraph 3 of this Article by multiplying the exposure value of those exposures by a credit conversion factor of 20 % and the risk weight derived under Article 132 or 152.

   3. Institutions shall determine the risk-weighted exposure amount for off-balance-sheet exposures arising from minimum value commitments in accordance with paragraph 2 where all the following conditions are met:
   (a) the off-balance-sheet exposure of the institution is a minimum value commitment for an investment into units or shares of one or more CIUs under which the institution is only obliged to pay out under the minimum value commitment where the market value of the underlying exposures of the CIU or CIUs is below a predetermined threshold at one or more points in time, as specified in the contract;
   (b) the CIU is any of the following:
   (i) a UCITS as defined in Directive 2009/65/EC; or
   (ii) an AIF as defined in point (a) of Article 4(1) of Directive 2011/61/EU which solely invests in transferable securities or in other liquid financial assets referred to in Article 50(1) of Directive 2009/65/EC, where the mandate of the AIF does not allow a leverage higher than that allowed under Article 51(3) of Directive 2009/65/EC;
   (c) the current market value of the underlying exposures of the CIU underlying the minimum value commitment without considering the effect of the off-balance-sheet minimum value commitments covers or exceeds the present value of the threshold specified in the minimum value commitment;
   (d) when the excess of the market value of the underlying exposures of the CIU or CIUs over the present value of the minimum value commitment declines, the institution, or another undertaking in so far as it is covered by the supervision on a consolidated basis to which the institution itself is subject in accordance with this Regulation and Directive 2013/36/EU or Directive 2002/87/EC, can influence the composition of the underlying exposures of the CIU or CIUs or limit the potential for a further reduction of the excess in other ways;
   (e) the ultimate direct or indirect beneficiary of the minimum value commitment is typically a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU.";

"

(64)  in Article 144(1), point (g) is replaced by the following:"

"(g) the institution has calculated under the IRB Approach the own funds requirements resulting from its risk parameters estimates and is able to submit the reporting as required by Article 430;";

"

(65)  Article 152 is replaced by the following:"

“Article 152

Treatment of exposures in the form of units or shares in CIUs

   1. Institutions shall calculate the risk-weighted exposure amounts for their exposures in the form of units or shares in a CIU by multiplying the risk-weighted exposure amount of the CIU, calculated in accordance with the approaches set out in paragraphs 2 and 5, with the percentage of units or shares held by those institutions.
   2. Where the conditions set out in Article 132(3) are met, institutions that have sufficient information about the individual underlying exposures of a CIU shall look through to those underlying exposures to calculate the risk-weighted exposure amount of the CIU, risk weighting all underlying exposures of the CIU as if they were directly held by the institutions.
   3. By way of derogation from point (d) of Article 92(3), institutions that calculate the risk-weighted exposure amount of the CIU in accordance with paragraph 1 or 2 of this Article may calculate the own funds requirement for credit valuation adjustment risk of derivative exposures of that CIU as an amount equal to 50 % of the own funds requirement for those derivative exposures calculated in accordance with Section 3, 4 or 5 of Chapter 6 of this Title, as applicable.

By way of derogation from the first subparagraph, an institution may exclude from the calculation of the own funds requirement for credit valuation adjustment risk derivative exposures which would not be subject to that requirement if they were incurred directly by the institution.

   4. Institutions that apply the look-through approach in accordance with paragraphs 2 and 3 of this Article and that meet the conditions for permanent partial use in accordance with Article 150, or that do not meet the conditions for using the methods set out in this Chapter or one or more of the methods set out in Chapter 5 for all or parts of the underlying exposures of the CIU, shall calculate risk-weighted exposure amounts and expected loss amounts in accordance with the following principles:
   (a) for exposures assigned to the equity exposure class referred to in point (e) of Article 147(2), institutions shall apply the simple risk-weight approach set out in Article 155(2);
   (b) for exposures assigned to the items representing securitisation positions referred to in point (f) of Article 147(2), institutions shall apply the treatment set out in Article 254 as if those exposures were directly held by those institutions;
   (c) for all other underlying exposures, institutions shall apply the standardised approach laid down in Chapter 2 of this Title.

For the purposes of point (a) of the first subparagraph, where the institution is unable to differentiate between private equity exposures, exchange-traded exposures and other equity exposures, it shall treat the exposures concerned as other equity exposures.

   5. Where the conditions set out in Article 132(3) are met, institutions that do not have sufficient information about the individual underlying exposures of a CIU may calculate the risk-weighted exposure amount for those exposures in accordance with the mandate-based approach set out in Article 132a(2). However, for the exposures listed in points (a), (b) and (c) of paragraph 4 of this Article, institutions shall apply the approaches set out therein.
   6. Subject to Article 132b(2), institutions that do not apply the look-through approach in accordance with paragraphs 2 and 3 of this Article or the mandate-based approach in accordance with paragraph 5 of this Article shall apply the fall-back approach referred to in Article 132(2).
   7. Institutions may calculate the risk-weighted exposure amount for their exposures in the form of units or shares in a CIU by using a combination of the approaches referred to in this Article, provided that the conditions for using those approaches are met.
   8. Institutions that do not have adequate data or information to calculate the risk-weighted amount of a CIU in accordance with the approaches set out in paragraphs 2, 3, 4 and 5 may rely on the calculations of a third party, provided that all the following conditions are met:
   (a) the third party is one of the following:
   (i) the depository institution or the depository financial institution of the CIU, provided that the CIU exclusively invests in securities and deposits all securities at that depository institution or depository financial institution;
   (ii) for CIUs not covered by point (i) of this point, the CIU management company, provided that the CIU management company meets the criteria set out in point (a) of Article 132(3);
   (b) for exposures other than those listed in points (a), (b) and (c) of paragraph 4 of this Article, the third party carries out the calculation in accordance with the look-through approach set out in Article 132a(1);
   (c) for exposures listed in points (a), (b) and (c) of paragraph 4, the third party carries out the calculation in accordance with the approaches set out therein;
   (d) an external auditor has confirmed the correctness of the third party's calculation.

Institutions that rely on third-party calculations shall multiply the risk weighted exposure amounts of a CIU's exposures resulting from those calculations by a factor of 1,2.

By way of derogation from the second subparagraph, where the institution has unrestricted access to the detailed calculations carried out by the third party, the 1,2 factor shall not apply. The institution shall provide those calculations to its competent authority upon request.

   9. For the purposes of this Article, Article 132(5) and (6) and Article 132b shall apply▌. For the purposes of this Article, Article 132c shall apply, using the risk weights calculated in accordance with Chapter 3 of this Title.”;

"

(66)  in Article 158, the following paragraph is inserted:"

“9a. The expected loss amount for a minimum value commitment that meets all the requirements set out in Article 132c(3) shall be zero.”;

"

(67)  Article 164 is replaced by the following:"

“Article 164

Loss Given Default (LGD)

   1. Institutions shall provide own estimates of LGDs subject to the requirements specified in Section 6 of this Chapter and permission of the competent authorities granted in accordance with Article 143. For dilution risk of purchased receivables, an LGD value of 75 % shall be used. If an institution can decompose its EL estimates for dilution risk of purchased receivables into PDs and LGDs in a reliable manner, the institution may use its own LGD estimate.
   2. Unfunded credit protection may be recognised as eligible by adjusting PD or LGD estimates subject to requirements as specified in Article 183(1), (2) and (3) and the permission of the competent authorities either in support of an individual exposure or a pool of exposures. An institution shall not assign guaranteed exposures an adjusted PD or LGD such that the adjusted risk weight would be lower than that of a comparable, direct exposure to the guarantor.
   3. For the purposes of Article 154(2), the LGD of a comparable direct exposure to the protection provider referred to in Article 153(3) shall either be the LGD associated with an unhedged facility to the guarantor or the unhedged facility of the obligor, depending upon whether, in the event both the guarantor and obligor default during the life of the hedged transaction, available evidence and the structure of the guarantee indicate that the amount recovered would depend on the financial condition of the guarantor or obligor, respectively.
   4. The exposure-weighted average LGD for all retail exposures secured by residential property and not benefiting from guarantees from central governments shall not be lower than 10 %.

The exposure-weighted average LGD for all retail exposures secured by commercial immovable property and not benefiting from guarantees from central governments shall not be lower than 15 %.

   5. Member States shall designate an authority to be responsible for the application of paragraph 6. That authority shall be the competent authority or the designated authority.

Where the authority designated by the Member State for the application of this Article is the competent authority, it shall ensure that the relevant national bodies and authorities which have a macroprudential mandate are duly informed of the competent authority's intention to make use of this Article, and are appropriately involved in the assessment of financial stability concerns in its Member State in accordance with paragraph 6.

Where the authority designated by the Member State for the application of this Article is different from the competent authority, the Member State shall adopt the necessary provisions to ensure proper coordination and exchange of information between the competent authority and the designated authority for the proper application of this Article. In particular, authorities shall be required to cooperate closely and to share all the information that may be necessary for the adequate performance of the duties imposed upon the designated authority pursuant to this Article. That cooperation shall aim at avoiding any form of duplicative or inconsistent action between the competent authority and the designated authority, as well as ensuring that the interaction with other measures, in particular measures taken under Article 458 of this Regulation and Article 133 of Directive 2013/36/EU, is duly taken into account.

   6. Based on the data collected under Article 430a and on any other relevant indicators, and taking into account forward-looking immovable property market developments the authority designated in accordance with paragraph 5 of this Article shall periodically, and at least annually, assess whether the minimum LGD values referred to in paragraph 4 of this Article, are appropriate for exposures secured by mortgages on residential property or commercial immovable property located in one or more parts of the territory of the Member State of the relevant authority.

Where, on the basis of the assessment referred to in the first subparagraph of this paragraph, the authority designated in accordance with paragraph 5 concludes that the minimum LGD values referred to in paragraph 4 are not adequate, and if it considers that the inadequacy of LGD values could adversely affect current or future financial stability in its Member State, it may set higher minimum LGD values for those exposures located in one or more parts of the territory of the Member State of the relevant authority. Those higher minimum values may also be applied at the level of one or more property segments of such exposures.

The authority designated in accordance with paragraph 5 shall notify EBA and the ESRB before making the decision referred to in this paragraph. Within one month of receipt of that notification EBA and the ESRB shall provide their opinion to the Member State concerned. EBA and the ESRB shall publish those LGD values.

   7. Where the authority designated in accordance with paragraph 5 sets higher minimum LGD values pursuant to paragraph 6, institutions shall have a six-month transitional period to apply them.
   8. EBA, in close cooperation with the ESRB, shall develop draft regulatory technical standards to specify the conditions that the authority designated in accordance with paragraph 5 shall take into account when assessing the appropriateness of LGD values as part of the assessment referred to in paragraph 6.

EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2019.

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 Articles 10 to 14 of Regulation (EU) No 1093/2010.

   9. The ESRB may, by means of recommendations in accordance with Article 16 of Regulation (EU) No 1092/2010, and in close cooperation with EBA, give guidance to authorities designated in accordance with paragraph 5 of this Article on the following:
   (a) factors which could "adversely affect current or future financial stability" referred to in paragraph 6; and
   (b) indicative benchmarks that the authority designated in accordance with paragraph 5 is to take into account when determining higher minimum LGD values.
   10. The institutions of a Member State shall apply the higher minimum LGD values that have been determined by the authorities of another Member State in accordance with paragraph 6 to all their corresponding exposures secured by mortgages on residential property or commercial immovable property located in one or more parts of that Member State.”;

"

(68)  in Article 201(1), point (h) is replaced by the following:"

(h) qualifying central counterparties.;

"

(69)  the following article is inserted:"

Article 204a

Eligible types of equity derivatives

   1. Institutions may use equity derivatives which are total return swaps or economically effectively similar, as eligible credit protection only for the purpose of conducting internal hedges.

Where an institution buys credit protection through a total return swap and records the net payments received on the swap as net income, but does not record the offsetting deterioration in the value of the asset that is protected either through reductions in fair value or by an addition to reserves, that credit protection shall not qualify as eligible credit protection.

   2. Where an institution conducts an internal hedge using an equity derivative, in order for the internal hedge to qualify as eligible credit protection for the purposes of this Chapter, the credit risk transferred to the trading book shall be transferred out to a third party or parties.

Where an internal hedge has been conducted in accordance with the first subparagraph and the requirements in this Chapter have been met, institutions shall apply the rules set out in Sections 4 to 6 of this Chapter for the calculation of risk-weighted exposure amounts and expected loss amounts where they acquire unfunded credit protection.;

"

(70)  Article 223 is amended as follows:

(a)  in paragraph 3, the second subparagraph is replaced by the following:"

"In the case of OTC derivative transactions, institutions using the method laid down in Section 6 of Chapter 6 shall calculate EVA as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000010.png.";

"

(b)  in paragraph 5, the following subparagraph is added:"

In the case of OTC derivative transactions, institutions using the methods laid down in Sections 3, 4 and 5 of Chapter 6 shall take into account the risk-mitigating effects of collateral in accordance with the provisions laid down in Sections 3, 4 and 5 of Chapter 6, as applicable.”;

"

(71)  Article 272 is amended as follows:

(a)  point (6) is replaced by the following:"

(6) hedging set means a group of transactions within a single netting set for which full or partial offsetting is allowed for determining the potential future exposure under the methods set out in Section 3 or 4 of this Chapter;”;

"

(b)  the following point is inserted:"

(7a) one way margin agreement means a margin agreement under which an institution is required to post variation margin to a counterparty but is not entitled to receive variation margin from that counterparty or vice-versa;”;

"

(c)  point (12) is replaced by the following:"

“(12) current market value or CMV means the net market value of all the transactions within a netting set gross of any collateral held or posted where positive and negative market values are netted in computing the CMV;

"

(d)  the following point is inserted:"

(12a) net independent collateral amount or ▌NICA means the sum of the volatility-adjusted value of net collateral received or posted, as applicable, to the netting set other than variation margin;;

"

(72)  Article 273 is amended as follows:

(a)  paragraph 1 is replaced by the following:"

"1. Institutions shall calculate the exposure value for the contracts listed in Annex II on the basis of one of the methods set out in Sections 3 to 6 in accordance with this Article.

An institution which does not meet the conditions set out in Article 273a(1) shall not use the method set out in Section 4. An institution which does not meet the conditions set out in Article 273a(2) shall not use the method set out in Section 5.

Institutions may use in combination the methods set out in Sections 3 to 6 on a permanent basis within a group. A single institution shall not use in combination the methods set out in Sections 3 to 6 on a permanent basis.";

"

(b)  paragraphs 6, 7 and 8 are replaced by the following:"

"6. Under the methods set out in Sections 3 to 6, the exposure value for a given counterparty shall be equal to the sum of the exposure values calculated for each netting set with that counterparty.

By way of derogation from the first subparagraph, where one margin agreement applies to multiple netting sets with that counterparty and the institution is using one of the methods set out in Sections 3 to 6 to calculate the exposure value of those netting sets, the exposure value shall be calculated in accordance with the relevant Section.

For a given counterparty, the exposure value for a given netting set of OTC derivative instruments listed in Annex II calculated in accordance with this Chapter shall be the greater of zero and the difference between the sum of exposure values across all netting sets with the counterparty and the sum of credit valuation adjustments for that counterparty being recognised by the institution as an incurred write-down. The credit valuation adjustments shall be calculated without taking into account any offsetting debit value adjustment attributed to the own credit risk of the firm that has been already excluded from own funds in accordance with point (c) of Article 33(1).

   7. In calculating the exposure value in accordance with the methods set out in Sections 3, 4 and 5, institutions may treat two OTC derivative contracts included in the same netting agreement that are perfectly matching as if they were a single contract with a notional principal equal to zero.

For the purposes of the first subparagraph, two OTC derivative contracts are perfectly matching when they meet all the following conditions:

   (a) their risk positions are opposite;
   (b) their features, with the exception of the trade date, are identical;
   (c) their cash flows fully offset each other.
   8. Institutions shall determine the exposure value for exposures arising from long settlement transactions by any of the methods set out in Sections 3 to 6 of this Chapter, regardless of which method the institution has chosen for treating OTC derivatives and repurchase transactions, securities or commodities lending or borrowing transactions, and margin lending transactions. In calculating the own funds requirements for long settlement transactions, an institution that uses the approach set out in Chapter 3 may assign the risk weights under the approach set out in Chapter 2 on a permanent basis and irrespective of the materiality of those positions.";

"

(c)  the following paragraph is added:"

"9. For the methods set out in Sections 3 to 6 of this Chapter, institutions shall treat transactions where Specific Wrong-Way risk has been identified in accordance with Article 291(2), (4), (5), and (6).";

"

(73)  the following articles are inserted:"

"Article 273a

Conditions for using simplified methods for calculating the exposure value

   1. An institution may calculate the exposure value of its derivative positions in accordance with the method set out in Section 4, provided that the size of its on- and off-balance-sheet derivative business is equal to or less than both of the following thresholds on the basis of an assessment carried out on a monthly basis using the data as of the last day of the month:
   (a) 10 % of the institution’s total assets;
   (b) EUR 300 million.

   2. An institution may calculate the exposure value of ▌ its derivative positions in accordance with the method set out in Section 5, provided that the size of its on- and off-balance-sheet derivative business is equal to or less than both of the following thresholds on the basis of an assessment carried out on a monthly basis using the data as of the last day of the month:
   (a) 5 % of the institution’s total assets;
   (b) EUR 100 million.

   3. For the purposes of paragraphs 1 and 2, institutions shall calculate the size of their on- and off-balance-sheet derivative business on the basis of data as of the last day of each month in accordance with the following requirements:
   (a) derivative positions shall be valued at their market values on that given date; where the market value of a position is not available on a given date, institutions shall take a fair value for the position on that date; where the market value and fair value of a position are not available on a given date, institutions shall take the most recent of the market value or fair value for that position;
   (b) the absolute value of long derivative positions shall be summed with the absolute value of short derivative positions;
   (c) all derivative positions shall be included, except credit derivatives that are recognised as internal hedges against non-trading book credit risk exposures.
   4. By way of derogation from paragraph 1 or 2, as applicable, where the derivative business on a consolidated basis does not exceed the thresholds set out in paragraph 1 or 2, as applicable, an institution which is included in the consolidation and which would have to apply the method set out in Section 3 or 4 because it exceeds those thresholds on an individual basis, may, subject to the approval of competent authorities, instead choose to apply the method that would apply on a consolidated basis.
   5. Institutions shall notify the competent authorities of the methods set out in Section 4 or 5 that they use, or cease to use, as applicable, to calculate the exposure value of their derivative positions.
   6. Institutions shall not enter into, buy or sell a derivative transaction for the sole purpose of complying with any of the conditions set out in paragraphs 1 and 2 during the monthly assessment.

Article 273b

Non-compliance with the conditions for using simplified methods for calculating the exposure value of derivatives

   1. An institution that no longer meets one or more of the conditions set out in Article 273a(1) or (2) shall immediately notify the competent authority thereof.
   2. An institution shall cease to calculate the exposure values of its derivative positions in accordance with Section 4 or 5, as applicable, within three months of one of the following occurring:
   (a) the institution does not meet ▌ the conditions set out in point (a) of Article 273a(1) or (2), as applicable, or the conditions set out in point (b) of Article 273a(1) or (2), as applicable, for three consecutive months;
   (b) the institution does not meet the conditions set out in point (a) of Article 273a(1) or (2), as applicable, or the conditions set out in point (b) of Article 273a(1) or (2), as applicable, for more than six of the preceding 12 months.
   3. Where an institution has ceased to calculate the exposure values of its derivative positions in accordance with Section 4 or 5, as applicable, it shall only be permitted to resume calculating the exposure value of its derivative positions as set out in Section 4 or 5 where it demonstrates to the competent authority that all the conditions set out in Article 273a(1) or (2) have been met for an uninterrupted period of one year.";

"

(74)  in Chapter 6 of Title II of Part Three, Sections 3, 4 and 5 are replaced by the following:"

"Section 3

Standardised approach for counterparty credit risk

Article 274

Exposure value

   1. An institution may calculate a single exposure value at netting set level for all the transactions covered by a contractual netting agreement where all the following conditions are met:
   (a) the netting agreement belongs to one of the types of contractual netting agreements referred to in Article 295;
   (b) the netting agreement has been recognised by competent authorities in accordance with Article 296;
   (c) the institution has fulfilled the obligations laid down in Article 297 in respect of the netting agreement ▌.

Where any of the conditions set out in the first subparagraph are not met, the institution shall treat each transaction as if it was its own netting set.

   2. Institutions shall calculate the exposure value of a netting set under the standardised approach for counterparty credit risk as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000011.png

where:

RC = the replacement cost calculated in accordance with Article 275; and

PFE = the potential future exposure calculated in accordance with Article 278;

α = 1,4.

   3. The exposure value of a netting set that is subject to a contractual margin agreement shall be capped at the exposure value of the same netting set not subject to any form of margin agreement.
   4. Where multiple margin agreements apply to the same netting set, institutions shall allocate each margin agreement to the group of transactions in the netting set to which that margin agreement contractually applies to and calculate an exposure value separately for each of those grouped transactions.
   5. Institutions may set to zero the exposure value of a netting set that satisfies all the following conditions:
   (a) the netting set is solely composed of sold options;
   (b) the current market value of the netting set is at all times negative;
   (c) the premium of all the options included in the netting set has been received upfront by the institution to guarantee the performance of the contracts;
   (d) the netting set is not subject to any margin agreement.
   6. In a netting set, institutions shall replace a transaction which is a finite linear combination of bought or sold call or put options with all the single options that form that linear combination, taken as an individual transaction, for the purpose of calculating the exposure value of the netting set in accordance with this Section. Each such combination of options shall be treated as an individual transaction in the netting set in which the combination is included for the purpose of calculating the exposure value.
   7. The exposure value of a credit derivative transaction representing a long position in the underlying may be capped to the amount of outstanding unpaid premium provided it is treated as its own netting set that is not subject to a margin agreement.

Article 275

Replacement cost

   1. Institutions shall calculate the replacement cost RC for netting sets that are not subject to a margin agreement, in accordance with the following formula:

20190416-P8_TA-PROV(2019)0369_EN-p0000012.png

   2. Institutions shall calculate the replacement cost for single netting sets that are subject to a margin agreement in accordance with the following formula:

20190416-P8_TA-PROV(2019)0369_EN-p0000013.png

where:

RC = the replacement cost;

VM = the volatility-adjusted value of the net variation margin received or posted, as applicable, to the netting set on a regular basis to mitigate changes in the netting set's CMV;

TH = the margin threshold applicable to the netting set under the margin agreement below which the institution cannot call for collateral; and

MTA = the minimum transfer amount applicable to the netting set under the margin agreement.

   3. Institutions shall calculate the replacement cost for multiple netting sets that are subject to the same margin agreement in accordance with the following formula:

20190416-P8_TA-PROV(2019)0369_EN-p0000014.png

where:

RC = the replacement cost;

i = the index that denotes the netting sets that are subject to the single margin agreement;

CMVi = the CMV of netting set i;

VMMA = the sum of the volatility-adjusted value of collateral received or posted, as applicable, to multiple netting sets on a regular basis to mitigate changes in their CMV; and

NICAMA = the sum of the volatility-adjusted value of collateral received or posted, as applicable, to multiple netting sets other than VMMA.

For the purposes of the first subparagraph, NICAMA may be calculated at trade level, at netting set level or at the level of all the netting sets to which the margin agreement applies depending on the level at which the margin agreement applies.

Article 276

Recognition and treatment of collateral

   1. For the purposes of this Section, institutions shall calculate the collateral amounts of VM, VMMA, NICA and NICAMA, by applying all the following requirements:
   (a) where all the transactions included in a netting set belong to the trading book, only collateral that is eligible under Articles 197 and 299 shall be recognised;
   (b) where a netting set contains at least one transaction that belongs to the non‑trading book, only collateral that is eligible under Article 197 shall be recognised;
   (c) collateral received from a counterparty shall be recognised with a positive sign and collateral posted to a counterparty shall be recognised with a negative sign;
   (d) the volatility-adjusted value of any type of collateral received or posted shall be calculated in accordance with Article 223; for the purposes of that calculation, institutions shall not use the method set out in Article 225;
   (e) the same collateral item shall not be included in both VM and NICA at the same time;
   (f) the same collateral item shall not be included in both VMMA and NICAMA at the same time;
   (g) any collateral posted to the counterparty that is segregated from the assets of that counterparty and, as a result of that segregation, is bankruptcy remote in the event of the default or insolvency of that counterparty shall not be recognised in the calculation of NICA and NICAMA.
   2. For the calculation of the volatility-adjusted value of collateral posted referred to in point (d) of paragraph 1 of this Article, institutions shall replace the formula set out in Article 223(2) with the following formula:

20190416-P8_TA-PROV(2019)0369_EN-p0000015.png

where:

CVA = the volatility-adjusted value of collateral posted; and

C = the collateral;

Hc and Hfx are defined in accordance with Article 223(2).

   3. For the purposes of point (d) of paragraph 1, institutions shall set the liquidation period relevant for the calculation of the volatility-adjusted value of any collateral received or posted in accordance with one of the following time horizons:
   (a) one year for the netting sets referred to in Article 275(1);
   (b) the margin period of risk determined in accordance with point (b) of Article 279c(1) for the netting sets referred to in Article 275(2) and (3).

Article 277

Mapping of transactions to risk categories

   1. Institutions shall map each transaction of a netting set to one of the following risk categories to determine the potential future exposure of the netting set referred to in Article 278:
   (a) interest rate risk;
   (b) foreign exchange risk;
   (c) credit risk;
   (d) equity risk;
   (e) commodity risk;
   (f) other risks.
   2. Institutions shall conduct the mapping referred to in paragraph 1 on the basis of the primary risk driver of a derivative transaction. The primary risk driver shall be the only material risk driver of a derivative transaction.

   3. By way of derogation from paragraph 2, institutions shall map derivative transactions that have more than one material risk driver to more than one risk category. Where all the material risk drivers of one of those transactions belong to the same risk category, institutions shall only be required to map that transaction once to that risk category on the basis of the most material of those risk drivers. Where the material risk drivers of one of those transactions belong to different risk categories, institutions shall map that transaction once to each risk category for which the transaction has at least one material risk driver, on the basis of the most material of the risk drivers in that risk category.
   4. Notwithstanding paragraphs 1, 2 and 3, when mapping transactions to the risk categories listed in paragraph 1, institutions shall apply the following requirements:
   (a) where the primary risk driver of a transaction, or the most material risk driver in a given risk category for transactions referred to in paragraph 3, is an inflation variable, institutions shall map the transaction to the interest rate risk category;
   (b) where the primary risk driver of a transaction, or the most material risk driver in a given risk category for transactions referred to in paragraph 3, is a climatic conditions variable, institutions shall map the transaction to the commodity risk category.
   5. EBA shall develop draft regulatory technical standards to specify:
   (a) the method for identifying transactions with only one material risk driver ▌;
   (b) the method for identifying transactions with more than one material risk driver and for identifying the most material of those risk drivers for the purposes of paragraph 3.

EBA shall submit those draft regulatory technical standards to the Commission by … [six months after the date of entry into force of this amending Regulation].

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 Articles 10 to 14 of Regulation (EU) No 1093/2010.

Article 277a

Hedging sets

   1. Institutions shall establish the relevant hedging sets for each risk category of a netting set and assign each transaction to those hedging sets as follows:
   (a) transactions mapped to the interest rate risk category shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is denominated in the same currency;
   (b) transactions mapped to the foreign exchange risk category shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is based on the same currency pair;
   (c) all the transactions mapped to the credit risk category shall be assigned to the same hedging set;
   (d) all the transactions mapped to the equity risk category shall be assigned to the same hedging set;
   (e) transactions mapped to the commodity risk category shall be assigned to one of the following hedging sets on the basis of the nature of their primary risk driver or the most material risk driver in the given risk category for transactions referred to in Article 277(3):
   (i) energy;
   (ii) metals;
   (iii) agricultural goods;
   (iv) other commodities;
   (v) climatic conditions;
   (f) transactions mapped to the other risks category shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is identical.

For the purposes of point (a) of the first subparagraph of this paragraph, transactions mapped to the interest rate risk category that have an inflation variable as the primary risk driver shall be assigned to separate hedging sets, other than the hedging sets established for transactions mapped to the interest rate risk category that do not have an inflation variable as the primary risk driver. Those transactions shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is denominated in the same currency.

   2. By way of derogation from paragraph 1 of this Article, institutions shall establish separate individual hedging sets in each risk category for the following transactions:
   (a) transactions for which the primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is either the market implied volatility or the realised volatility of a risk driver or the correlation between two risk drivers;
   (b) transactions for which the primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is the difference between two risk drivers mapped to the same risk category or transactions that consist of two payment legs denominated in the same currency and for which a risk driver from the same risk category of the primary risk driver is contained in the other payment leg than the one containing the primary risk driver.

For the purposes of point (a) of the first subparagraph of this paragraph, institutions shall assign transactions to the same hedging set of the relevant risk category only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is identical.

For the purposes of point (b) of the first subparagraph, institutions shall assign transactions to the same hedging set of the relevant risk category only where the pair of risk drivers in those transactions as referred to therein is identical and the two risk drivers contained in this pair are positively correlated. Otherwise, institutions shall assign transactions referred to in point (b) of the first subparagraph to one of the hedging sets established in accordance with paragraph 1, on the basis of only one of the two risk drivers referred to in point (b) of the first subparagraph.

   3. Institutions shall make available upon request by the competent authorities the number of hedging sets established in accordance with paragraph 2 of this Article for each risk category, with the primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), or the pair of risk drivers of each of those hedging sets and with the number of transactions in each of those hedging sets.

Article 278

Potential future exposure

   1. Institutions shall calculate the potential future exposure of a netting set as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000016.png

where:

PFE = the potential future exposure;

a = the index that denotes the risk categories included in the calculation of the potential future exposure of the netting set;

AddOn(a) = the add-on for risk category a calculated in accordance with Articles 280a to 280f, as applicable; and

multiplier = the multiplication factor calculated in accordance with the formula referred to in paragraph 3.

For the purpose of this calculation, institutions shall include the add-on of a given risk category in the calculation of the potential future exposure of a netting set where at least one transaction of the netting set has been mapped to that risk category.

   2. The potential future exposure of multiple netting sets that are subject to one margin agreement, as referred in Article 275(3), shall be calculated as the sum of the potential future exposures of all the individual netting sets as if they were not subject to any form of a margin agreement.
   3. For the purposes of paragraph 1, the multiplier shall be calculated as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000017.png

where:

Floorm = 5 %;

y = 20190416-P8_TA-PROV(2019)0369_EN-p0000018.png

z = 20190416-P8_TA-PROV(2019)0369_EN-p0000019.png

NICAi = the net independent collateral amount calculated only for transactions that are included in netting set i. NICAi shall be calculated at trade level or at netting set level depending on the margin agreement.

Article 279

Calculation of the risk position

For the purpose of calculating the risk category add-ons referred to in Articles 280a to 280f, institutions shall calculate the risk position of each transaction of a netting set as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000020.png

where:

δ = the supervisory delta of the transaction calculated in accordance with the formula laid down in Article 279a;

AdjNot = the adjusted notional amount of the transaction calculated in accordance with Article 279b; and

MF = the maturity factor of the transaction calculated in accordance with the formula laid down in Article 279c.

Article 279a

Supervisory delta

   1. Institutions shall calculate the supervisory delta as follows:
   (a) for call and put options that entitle the option buyer to purchase or sell an underlying instrument at a positive price on a single or multiple dates in the future, except where those options are mapped to the interest rate risk category, institutions shall use the following formula:

20190416-P8_TA-PROV(2019)0369_EN-p0000021.png

where:

δ = the supervisory delta;

sign = -1 where the transaction is a sold call option or a bought put option;

sign = +1 where the transaction is a bought call option or sold put option;

type = -1 where the transaction is a put option;

type = +1 where the transaction is a call option;

N(x) = the cumulative distribution function for a standard normal random variable meaning the probability that a normal random variable with mean zero and variance of one is less than or equal to x;

P = the spot or forward price of the underlying instrument of the option; for options the cash flows of which depend on an average value of the price of the underlying instrument, P shall be equal to the average value at the calculation date;

K = the strike price of the option;

T = the expiry date of the option; for options which can be exercised at one future date only, the expiry date is equal to that date; for options which can be exercised at multiple future dates, the expiry date is equal to the latest of those dates; the expiry date shall be expressed in years using the relevant business day convention; and

σ = the supervisory volatility of the option determined in accordance with Table 1 on the basis of the risk category of the transaction and the nature of the underlying instrument of the option.

Table 1

Risk category

Underlying instrument

Supervisory volatility

Foreign exchange

All

15 %

Credit

Single-name instrument

100 %

Multiple-names instrument

80 %

Equity

Single-name instrument

120 %

Multiple-names instrument

75 %

Commodity

Electricity

150%

Other commodities (excluding electricity)

70 %

Others

All

150 %

Institutions using the forward price of the underlying instrument of an option shall ensure that:

   (i) the forward price is consistent with the characteristics of the option;
   (ii) the forward price is calculated using a relevant interest rate prevailing at the reporting date;
   (iii) the forward price integrates the expected cash flows of the underlying instrument before the expiry of the option;
   (b) for tranches of a synthetic securitisation and a nth-to-default credit derivative, institutions shall use the following formula:

20190416-P8_TA-PROV(2019)0369_EN-p0000022.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000023.png

A = the attachment point of the tranche; for a nth-to-default credit derivative transaction based on reference entities k, A = (n-1)/k; and

D = the detachment point of the tranche; for a nth-to-default credit derivative transaction based on reference entities k, D = n/k;

   (c) for transactions not referred to in point (a) or (b), institutions shall use the following supervisory delta:

20190416-P8_TA-PROV(2019)0369_EN-p0000024.png

   2. For the purposes of this Section, a long position in the primary risk driver or in the most material risk driver in the given risk category for transactions referred to in Article 277(3) means that the market value of the transaction increases when the value of that risk driver increases and a short position in the primary risk driver or in the most material risk driver in the given risk category for transactions referred to in Article 277(3) means that the market value of the transaction decreases when the value of that risk driver increases.

   3. EBA shall develop draft regulatory technical standards to specify:
   (a) in accordance with international regulatory developments, the formula that institutions shall use to calculate the supervisory delta of call and put options mapped to the interest rate risk category compatible with market conditions in which interest rates may be negative as well as the supervisory volatility that is suitable for that formula;
   (b) the method for determining whether a transaction ▌ is a long or short position in the primary risk driver or in the most material risk driver in the given risk category for transactions referred to in Article 277(3).

EBA shall submit those draft regulatory technical standards to the Commission by … [six months after the date of entry into force of this amending Regulation].

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 Articles 10 to 14 of Regulation (EU) No 1093/2010.

Article 279b

Adjusted notional amount

   1. Institutions shall calculate the adjusted notional amount as follows:
   (a) for transactions mapped to the interest rate risk category or the credit risk category, institutions shall calculate the adjusted notional amount as the product of the notional amount of the derivative contract and the supervisory duration factor, which shall be calculated as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000025.png

where:

R = the supervisory discount rate; R = 5 %;

S = the period between the start date of a transaction and the reporting date, which shall be expressed in years using the relevant business day convention; and

E = the period between the end date ▌ of a transaction ▌ and the reporting date, which shall be expressed in years using the relevant business day convention.

The start date of a transaction is the earliest date at which at least a contractual payment under the transaction, to or from the institution, is either fixed or exchanged, other than payments related to the exchange of collateral in a margin agreement. Where the transaction has already been fixing or making payments at the reporting date, the start date of a transaction shall be equal to 0. ▌

Where a transaction involves one or more contractual future dates on which the institution or the counterparty may decide to terminate the transaction prior to its contractual maturity, the start date of a transaction shall be equal to the earliest of the following:

   (i) the date or the earliest of the multiple future dates at which the institution or the counterparty may decide to terminate the transaction earlier than its contractual maturity;
   (ii) the date at which a transaction starts fixing or making payments, other than payments related to the exchange of collateral in a margin agreement.

Where a transaction has a financial instrument as the underlying instrument that may give rise to contractual obligations additional to those of the transaction, the start date of a transaction shall be determined on the basis of the earliest date at which the underlying instrument starts fixing or making payments.

The end date of a transaction is the latest date at which a contractual payment under the transaction, to or from the institution, is or may be exchanged.

Where a transaction has a financial instrument as an underlying instrument that may give rise to contractual obligations additional to those of the transaction, the end date of a transaction shall be determined on the basis of the last contractual payment of the underlying instrument of the transaction.

Where a transaction is structured to settle an outstanding exposure following specified payment dates and where the terms are reset so that the market value of the transaction is zero on those specified dates, the settlement of the outstanding exposure at those specified dates is considered a contractual payment under the same transaction;

   (b) for transactions mapped to the foreign exchange risk category, institutions shall calculate the adjusted notional amount as follows:
   (i) where the transaction consists of one payment leg, the adjusted notional amount shall be the notional amount of the derivative contract;
   (ii) where the transaction consists of two payment legs and the notional amount of one payment leg is denominated in the institution's reporting currency, the adjusted notional amount shall be the notional amount of the other payment leg;
   (iii) where the transaction consists of two payment legs and the notional amount of each payment leg is denominated in a currency other than the institution's reporting currency, the adjusted notional amount shall be the largest of the notional amounts of the two payment legs after those amounts have been converted into the institution's reporting currency at the prevailing spot exchange rate;
   (c) for transactions mapped to the equity risk category or commodity risk category, institutions shall calculate the adjusted notional amount as the product of the market price of one unit of the underlying instrument of the transaction and the number of units in the underlying instrument referenced by the transaction;

where a transaction mapped to the equity risk category or commodity risk category is contractually expressed as a notional amount, institutions shall use the notional amount of the transaction rather than the number of units in the underlying instrument as the adjusted notional amount;

   (d) for transactions mapped to the other risks category, institutions shall calculate the adjusted notional amount on the basis of the most appropriate method among the methods set out in points (a), (b) and (c), depending on the nature and characteristics of the underlying instrument of the transaction.
   2. Institutions shall determine the notional amount or number of units of the underlying instrument for the purpose of calculating the adjusted notional amount of a transaction referred to in paragraph 1 as follows:
   (a) where the notional amount or the number of units of the underlying instrument of a transaction is not fixed until its contractual maturity ▌:
   (i) for deterministic notional amounts and numbers of units of the underlying instrument, the notional amount shall be the weighted average of all the deterministic values of notional amounts or number of units of the underlying instrument, as applicable, until the contractual maturity of the transaction, where the weights are the proportion of the time period during which each value of notional amount applies;
   (ii) for stochastic notional amounts and numbers of units of the underlying instrument, the notional amount shall be the amount determined by fixing current market values within the formula for calculating the future market values;

   (b) for contracts with multiple exchanges of the notional amount, the notional amount shall be multiplied by the number of remaining payments still to be made in accordance with the contracts;
   (c) for contracts that provide for a multiplication of the cash-flow payments or a multiplication of the underlying of the derivative contract, the notional amount shall be adjusted by an institution to take into account the effects of the multiplication on the risk structure of those contracts.
   3. Institutions shall convert the adjusted notional amount of a transaction into their reporting currency at the prevailing spot exchange rate where the adjusted notional amount is calculated under this Article from a contractual notional amount or a market price of the number of units of the underlying instrument denominated in another currency.

Article 279c

Maturity Factor

   1. Institutions shall calculate the maturity factor as follows:
   (a) for transactions included in the netting sets referred to in Article 275(1), institutions shall use the following formula:

20190416-P8_TA-PROV(2019)0369_EN-p0000026.png

where:

MF = the maturity factor;

M = the remaining maturity of the transaction which is equal to the period of time needed for the termination of all contractual obligations of the transaction; for that purpose, any optionality of a derivative contract shall be considered to be a contractual obligation; the remaining maturity shall be expressed in years using the relevant business day convention;

where a transaction has another derivative contract as underlying instrument that may give rise to additional contractual obligations beyond the contractual obligations of the transaction, the remaining maturity of the transaction shall be equal to the period of time needed for the termination of all contractual obligations of the underlying instrument;

where a transaction is structured to settle outstanding exposure following specified payment dates and where the terms are reset so that the market value of the transaction is zero on those specified dates, the remaining maturity of the transaction shall be equal to the time until the next reset date; and

OneBusinessYear = one year expressed in business days using the relevant business day convention;

   (b) for transactions included in the netting sets referred to in Article 275(2) and (3), the maturity factor is defined as:

20190416-P8_TA-PROV(2019)0369_EN-p0000027.png

where:

MF = the maturity factor;

MPOR = the margin period of risk of the netting set determined in accordance with Article 285(2) to (5); and

OneBusinessYear = one year expressed in business days using the relevant business day conventio.

When determining the margin period of risk for transactions between a client and a clearing member, an institution acting either as the client or as the clearing member shall replace the minimum period set out in point (b) of Article 285(2) with five business days.

   2. For the purposes of paragraph 1, the remaining maturity shall be equal to the period of time until the next reset date for transactions that are structured to settle outstanding exposure following specified payment dates and where the terms are reset in such a way that the market value of the contract shall be zero on those specified payment dates.

Article 280

Hedging set supervisory factor coefficient

For the purpose of calculating the add-on of a hedging set as referred to in Articles 280a to 280f, the hedging set supervisory factor coefficient 'ϵ' shall be the following:

20190416-P8_TA-PROV(2019)0369_EN-p0000028.png

Article 280a

Interest rate risk category add-on

   1. For the purposes of Article 278, institutions shall calculate the interest rate risk category add-on for a given netting set as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000029.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000030.png = the interest rate risk category add-on;

j = the index that denotes all the interest rate risk hedging sets established in accordance with point (a) of Article 277a(1) and with Article 277a(2) for the netting set; and

20190416-P8_TA-PROV(2019)0369_EN-p0000031.png = the interest rate risk category add-on for hedging set j calculated in accordance with paragraph 2.

   2. Institutions shall calculate the interest rate risk category add-on for hedging set j as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000032.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000033.png = the hedging set supervisory factor coefficient of hedging set j determined in accordance with the applicable value specified in Article 280;

SFIR = the supervisory factor for the interest rate risk category with a value equal to 0,5 %; and

20190416-P8_TA-PROV(2019)0369_EN-p0000034.png = the effective notional amount of hedging set j calculated in accordance with paragraph 3.

   3. For the purpose of calculating the effective notional amount of hedging set j, institutions shall first map each transaction of the hedging set to the appropriate bucket in Table 2. They shall do so on the basis of the end date of each transaction as determined under point (a) of Article 279b(1):

Table 2

Bucket

End date

(in years)

1

>0 and <=1

2

>1 and <= 5

3

> 5

Institutions shall then calculate the effective notional amount of hedging set j in accordance with the following formula:

20190416-P8_TA-PROV(2019)0369_EN-p0000035.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000036.png = the effective notional amount of hedging set j; and

Dj,k = the effective notional amount of bucket k of hedging set j calculated as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000037.png

where:

l = the index that denotes the risk position.

Article 280b

Foreign exchange risk category add-on

   1. For the purposes of Article 278, institutions shall calculate the foreign exchange risk category add-on for a given netting set as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000038.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000039.png = the foreign exchange risk category add on;

j = the index that denotes the foreign exchange risk hedging sets established in accordance with point (b) of Article 277a(1) and with Article 277a(2) for the netting set; and

20190416-P8_TA-PROV(2019)0369_EN-p0000040.png = the foreign exchange risk category add-on for hedging set j calculated in accordance with paragraph 2.

   2. Institutions shall calculate the foreign exchange risk category add-on for hedging set j as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000041.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000042.png = the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280;

SFFX = the supervisory factor for the foreign exchange risk category with a value equal to 4 %;

20190416-P8_TA-PROV(2019)0369_EN-p0000043.png= = the effective notional amount of hedging set j calculated as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000044.png

where:

l = the index that denotes the risk position.

Article 280c

Credit risk category add-on

   1. For the purposes of paragraph 2, institutions shall establish the relevant credit reference entities of the netting set in accordance with the following:
   (a) there shall be one credit reference entity for each issuer of a reference debt instrument that underlies a single-name transaction allocated to the credit risk category; single-name transactions shall be assigned to the same credit reference entity only where the underlying reference debt instrument of those transactions is issued by the same issuer;
   (b) there shall be one credit reference entity for each group of reference debt instruments or single-name credit derivatives that underlie a multi-name transaction allocated to the credit risk category; multi-names transactions shall be assigned to the same credit reference entity only where the group of underlying reference debt instruments or single-name credit derivatives of those transactions have the same constituents.
   2. For the purposes of Article 278, institution shall calculate the credit risk category add-on for a given netting set as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000045.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000046.png credit risk category add-on;

j = the index that denotes all the credit risk hedging sets established in accordance with point (c) of Article 277a(1) and with Article 277a(2) for the netting set; and

20190416-P8_TA-PROV(2019)0369_EN-p0000047.png = the credit risk category add-on for hedging set j calculated in accordance with paragraph 3.

   3. Institutions shall calculate the credit risk category add-on for hedging set j as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000048.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000049.png the credit risk category add-on for hedging set j;

ϵj = the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280 ▌;

k = the index that denotes the credit reference entities of the netting set established in accordance with paragraph 1;

ρkCredit = the correlation factor of the credit reference entity k; where the credit reference entity k has been established in accordance with point (a) of paragraph 1, ρkCredit = 50 %, where the credit reference entity k has been established in accordance with point (b) of paragraph 1, ρkCredit = 80 %; and

AddOn(Entityk) = the add-on for the credit reference entity k determined in accordance with paragraph 4.

   4. Institutions shall calculate the add-on for the credit reference entity k as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000050.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000051.png = the effective notional amount of the credit reference entity k calculated as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000052.png

where:

l = the index that denotes the risk position; and

20190416-P8_TA-PROV(2019)0369_EN-p0000053.png = the supervisory factor applicable to the credit reference entity k calculated in accordance with paragraph 5.

   5. Institutions shall calculate the supervisory factor applicable to the credit reference entity k as follows:
   (a) for the credit reference entity k established in accordance with point (a) of paragraph 1, 20190416-P8_TA-PROV(2019)0369_EN-p0000054.pngshall be mapped to one of the six supervisory factors set out in Table 3 of this paragraph on the basis of an external credit assessment by a nominated ECAI of the corresponding individual issuer; for an individual issuer for which a credit assessment by a nominated ECAI is not available:
   (i) an institution using the approach referred to in Chapter 3 shall map the internal rating of the individual issuer to one of the external credit assessments;
   (ii) an institution using the approach referred to in Chapter 2 shall assign SFk,lCredit = 0,54 % to that credit reference entity; however, where an institution applies Article 128 to risk weight counterparty credit risk exposures to that individual issuer, 20190416-P8_TA-PROV(2019)0369_EN-p0000055.png= 1,6 % shall be assigned to that credit reference entity;
   (b) for the credit reference entity k established in accordance with point (b) of paragraph 1:
   (i) where a risk position l assigned to the credit reference entity k is a credit index listed on a recognised exchange, 20190416-P8_TA-PROV(2019)0369_EN-p0000056.png shall be mapped to one of the two supervisory factors set out in Table 4 of this paragraph on the basis of the ▌ credit quality of the majority of its individual constituents;
   (ii) where a risk position l assigned to the credit reference entity k is not referred to in point (b)(i), 20190416-P8_TA-PROV(2019)0369_EN-p0000057.png shall be the weighted average of the supervisory factors mapped to each constituent in accordance with the method set out in point (a), where the weights are defined by the proportion of notional of the constituents in that position.

Table 3

Credit quality step

Supervisory factor for single-name transactions

1

0,38 %

2

0,42 %

3

0,54 %

4

1,06 %

5

1,6 %

6

6,0 %

Table 4

Dominant credit quality

Supervisory factor for quoted indices

Investment grade

0,38 %

Non-investment grade

1,06 %

Article 280d

Equity risk category add-on

   1. For the purposes of paragraph 2, institutions shall establish the relevant equity reference entities of the netting set in accordance with the following:
   (a) there shall be one equity reference entity for each issuer of a reference equity instrument that underlies a single-name transaction allocated to the equity risk category; single-name transactions shall be assigned to same equity reference entity only where the underlying reference equity instrument of those transactions is issued by the same issuer;
   (b) there shall be one equity reference entity for each group of reference equity instruments or single-name equity derivatives that underlie a multi-name transaction allocated to the equity risk category; multi-names transactions shall be assigned to the same equity reference entity only where the group of underlying reference equity instruments or single-name equity derivatives of those transactions, as applicable, has the same constituents.
   2. For the purposes of Article 278, institutions shall calculate the equity risk category add-on for a given netting set as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000058.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000059.png the equity risk category add-on;

j = the index that denotes all the equity risk hedging sets established in accordance with point (d) of Article 277a(1) and Article 277a(2) for the netting set; and

20190416-P8_TA-PROV(2019)0369_EN-p0000060.png = the equity risk category add-on for hedging set j calculated in accordance with paragraph 3.

   3. Institutions shall calculate the equity risk category add-on for hedging set j as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000061.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000062.png = the equity risk category add-on for hedging set j;

ϵj = the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280;

k = the index that denotes the equity reference entities of the netting set established in accordance with paragraph 1;

20190416-P8_TA-PROV(2019)0369_EN-p0000063.png= the correlation factor of the equity reference entity k; where the equity reference entity k has been established in accordance with point (a) of paragraph 1, 20190416-P8_TA-PROV(2019)0369_EN-p0000064.png =50 %; where the equity reference entity k has been established in accordance with point (b) of paragraph 1, 20190416-P8_TA-PROV(2019)0369_EN-p0000065.png =80 %; and

AddOn(Entityk) = the add-on for the equity reference entity k determined in accordance with paragraph 4.

   4. Institutions shall calculate the add-on for the equity reference entity k as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000066.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000067.png the add-on for the equity reference entity k;

SFkEquity = the supervisory factor applicable to the equity reference entity k; where the equity reference entity k has been established in accordance with point (a) of paragraph 1, SFkEquity = 32 %; where the equity reference entity k has been established in accordance with point (b) of paragraph 1, SFkEquity = 20 %; and

20190416-P8_TA-PROV(2019)0369_EN-p0000068.png = the effective notional amount of the equity reference entity k calculated as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000069.png

where:

l = the index that denotes the risk position.

Article 280e

Commodity risk category add-on

   1. For the purposes of Article 278, institutions shall calculate the commodity risk category add-on for a given netting set as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000070.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000071.png the commodity risk category add-on;

j = the index that denotes the commodity hedging sets established in accordance with point (e) of Article 277a(1) and with Article 277a(2) for the netting set; and

20190416-P8_TA-PROV(2019)0369_EN-p0000072.png = the commodity risk category add-on for hedging set j calculated in accordance with paragraph 4.

   2. For the purpose of calculating the add-on for a commodity hedging set of a given netting set in accordance with paragraph 4, institutions shall establish the relevant commodity reference types of each hedging set. Commodity derivative transactions shall be assigned to the same commodity reference type only where the underlying commodity instrument of those transactions has the same nature, irrespective of the delivery location and quality of the commodity instrument.
   3. By way of derogation from paragraph 2, competent authorities may require an institution which is significantly exposed to the basis risk of different positions sharing the same nature as referred to in paragraph 2 to establish the commodity reference types for those positions using more characteristics than just the nature of the underlying commodity instrument ▌. In such a situation, commodity derivative transactions shall be assigned the same commodity reference type only where they share those characteristics.

   4. Institutions shall calculate the commodity risk category add-on for hedging set j as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000073.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000074.png the commodity risk category add-on for hedging set j;

ϵj = the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280;

ρCom = the correlation factor of the commodity risk category with a value equal to 40 %;

k = the index that denotes the commodity reference types of the netting set established in accordance with paragraph 2; and

20190416-P8_TA-PROV(2019)0369_EN-p0000075.png= the add-on for the commodity reference type k calculated in accordance with paragraph 5.

   5. Institutions shall calculate the add-on for the commodity reference type k as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000076.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000077.png the add-on for the commodity reference type k;

20190416-P8_TA-PROV(2019)0369_EN-p0000078.png = the supervisory factor applicable to the commodity reference type k; where the commodity reference type k corresponds to transactions allocated to the hedging set referred to in point (e)(i) of Article 277a(1), excluding transactions concerning electricity, SFkCom = 18 %; for transactions concerning electricity, SFkCom = 40 %; and

20190416-P8_TA-PROV(2019)0369_EN-p0000079.png = the effective notional amount of the commodity reference type k calculated as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000080.png

where:

l = the index that denotes the risk position.

Article 280f

Other risks category add-on

   1. For the purposes of Article 278, institutions shall calculate the other risks category add-on for a given netting set as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000081.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000082.png the other risks category add-on;

j = the index that denotes the other risk hedging sets established in accordance with point (f) of Article 277a(1) and Article 277a(2) for the netting set; and

20190416-P8_TA-PROV(2019)0369_EN-p0000083.png = the other risks category add-on for hedging set j calculated in accordance with paragraph 2.

   2. Institutions shall calculate the other risks category add-on for hedging set j as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000084.png

where:

20190416-P8_TA-PROV(2019)0369_EN-p0000085.png the other risks category add-on for hedging set j;

ϵj = the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280; and

SFOther = the supervisory factor for the other risk category with a value equal to 8 %;

20190416-P8_TA-PROV(2019)0369_EN-p0000086.png = the effective notional amount of hedging set j calculated as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000087.png

where:

l = the index that denotes the risk position.

Section 4

Simplified standardised approach for counterparty credit risk ▌

Article 281

Calculation of the exposure value

   1. Institutions shall calculate a single exposure value at netting set level in accordance with Section 3, subject to paragraph 2 of this Article.
   2. The exposure value of a netting set shall be calculated in accordance with the following requirements:
   (a) institutions shall not apply the treatment referred to in Article 274(6);
   (b) by way of derogation from Article 275(1), for netting sets that are not referred to in Article 275(2), institutions shall calculate the replacement cost in accordance with the following formula:

20190416-P8_TA-PROV(2019)0369_EN-p0000088.png

where:

RC = the replacement cost; and

CMV = the current market value.

   (c) by way of derogation from Article 275(2) of this Regulation, for netting sets of transactions: that are traded on a recognised exchange; that are centrally cleared by a central counterparty authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation; or for which collateral is exchanged bilaterally with the counterparty in accordance with Article 11 of Regulation (EU) No 648/2012, institutions shall calculate the replacement cost in accordance with the following formula:

20190416-P8_TA-PROV(2019)0369_EN-p0000089.png

where:

RC = the replacement cost;

TH = the margin threshold applicable to the netting set under the margin agreement below which the institution cannot call for collateral; and

MTA = the minimum transfer amount applicable to the netting set under the margin agreement;

   (d) by way of derogation from Article 275(3), for multiple netting sets that are subject to a margin agreement, institutions shall calculate the replacement cost as the sum of the replacement cost of each individual netting set, calculated in accordance with paragraph 1 as if they were not margined;
   (e) all hedging sets shall be established in accordance with Article 277a(1);
   (f) institutions shall set to 1 the multiplier in the formula that is used to calculate the potential future exposure in Article 278(1), as follows:

20190416-P8_TA-PROV(2019)0369_EN-p0000090.png

where:

PFE = the potential future exposure; and

AddOn(a) = the add-on for risk category a;

   (g) by way of derogation from Article 279a(1), for all transactions, institutions shall calculate the supervisory delta as follows: