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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 (Text with EEA relevance)
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Regulation (EU) No 575/2013 of the European Parliament and of the Council, CHAPTER 3 is up to date with all changes known to be in force on or before 10 October 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations.
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1 . Under the Standardised Approach, institutions shall divide their activities into the business lines set out in Table 2 of paragraph 4 and in accordance with the principles set out in Article 318.
2 . Institutions shall calculate the own funds requirement for operational risk as the average over three years of the sum of the annual own funds requirements across all business lines referred to in Table 2 of paragraph 4. The annual own funds requirement of each business line is equal to the product of the corresponding beta factor referred to in that Table and the part of the relevant indicator mapped to the respective business line.
3 . In any given year, institutions may offset negative own funds requirements resulting from a negative part of the relevant indicator in any business line with positive own funds requirements in other business lines without limit. However, where the aggregate own funds requirement across all business lines within a given year is negative, institutions shall use the value zero as the input to the numerator for that year.
4 . Institutions shall calculate the average over three years of the sum referred to in paragraph 2 on the basis of the last three twelve-monthly observations at the end of the financial year. When audited figures are not available, institutions may use business estimates.
Where an institution can prove to its competent authority that, due to a merger, an acquisition or a disposal of entities or activities, using a three year average to calculate the relevant indicator would lead to a biased estimation for the own funds requirement for operational risk, the competent authority may permit institutions to amend the calculation in a way that would take into account such events F1... . In such circumstances, the competent authority may, on its own initiative, also require an institution to amend the calculation.
Where an institution has been in operation for less than three years it may use forward-looking business estimates in calculating the relevant indicator, provided that it starts using historical data as soon as it is available.
Business line | List of activities | Percentage (beta factor) |
---|---|---|
Corporate finance | Underwriting of financial instruments or placing of financial instruments on a firm commitment basis Services related to underwriting Investment advice Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to the mergers and the purchase of undertakings Investment research and financial analysis and other forms of general recommendation relating to transactions in financial instruments | 18 % |
Trading and sales | Dealing on own account Money broking Reception and transmission of orders in relation to one or more financial instruments Execution of orders on behalf of clients Placing of financial instruments without a firm commitment basis Operation of Multilateral Trading Facilities | 18 % |
Retail brokerage (Activities with natural persons or with SMEs meeting the criteria set out in Article 123 for the retail exposure class) | Reception and transmission of orders in relation to one or more financial instruments Execution of orders on behalf of clients Placing of financial instruments without a firm commitment basis | 12 % |
Commercial banking | Acceptance of deposits and other repayable funds Lending Financial leasing Guarantees and commitments | 15 % |
Retail banking (Activities with natural persons or with SMEs meeting the criteria set out in Article 123 for the retail exposure class) | Acceptance of deposits and other repayable funds Lending Financial leasing Guarantees and commitments | 12 % |
Payment and settlement | Money transmission services, Issuing and administering means of payment | 18 % |
Agency services | Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management | 15 % |
Asset management | Portfolio management Managing of UCITS Other forms of asset management | 12 % |
Textual Amendments
F1Words in Art. 317(4) omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 155 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
1.Institutions shall develop and document specific policies and criteria for mapping the relevant indicator for current business lines and activities into the standardised framework set out in Article 317. They shall review and adjust those policies and criteria as appropriate for new or changing business activities and risks.
2.Institutions shall apply the following principles for business line mapping:
(a)institutions shall map all activities into the business lines in a mutually exclusive and jointly exhaustive manner;
(b)institutions shall allocate any activity which cannot be readily mapped into the business line framework, but which represents an ancillary activity to an activity included in the framework, to the business line it supports. Where more than one business line is supported through the ancillary activity, institutions shall use an objective-mapping criterion;
(c)where an activity cannot be mapped into a particular business line then institutions shall use the business line yielding the highest percentage. The same business line equally applies to any ancillary activity associated with that activity;
(d)institutions may use internal pricing methods to allocate the relevant indicator between business lines. Costs generated in one business line which are imputable to a different business line may be reallocated to the business line to which they pertain;
(e)the mapping of activities into business lines for operational risk capital purposes shall be consistent with the categories institutions use for credit and market risks;
(f)senior management shall be responsible for the mapping policy under the control of the management body of the institution;
(g)institutions shall subject the mapping process to business lines to independent review.
3.[F2The [F3PRA may] make technical standards] to determine the conditions of application of the principles for business line mapping provided in this Article.
F4...
Textual Amendments
F2Words in Art. 318(3) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 222(1)(a)(2) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
F3Words in Art. 318(3) substituted (1.1.2022) by Financial Services Act 2021 (c. 22), s. 49(5), Sch. 1 para. 47; S.I. 2021/671, reg. 5(1)(b) (with reg. 5(2)) (as amended by S.I. 2021/1163, regs. 1(2), 2)
F4Words in Art. 318(3) omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 222(1)(b) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
1. Under the Alternative Standardised Approach, for the business lines ‘ retail banking ’ and ‘ commercial banking ’ , institutions shall apply the following:
(a) the relevant indicator is a normalised income indicator equal to the nominal amount of loans and advances multiplied by 0,035;
(b) the loans and advances consist of the total drawn amounts in the corresponding credit portfolios. For the ‘ commercial banking ’ business line, institutions shall also include securities held in the non trading book in the nominal amount of loans and advances.
2. To be permitted to use the Alternative Standardised Approach, an institution shall meet all the following conditions:
(a) its retail or commercial banking activities shall account for at least 90 % of its income;
(b) a significant proportion of its retail or commercial banking activities shall comprise loans associated with a high PD;
(c) the Alternative Standardised Approach provides an appropriate basis for calculating its own funds requirement for operational risk.
The criteria referred to in the first subparagraph of Article 312(1) are the following:
an institution shall have in place a well-documented assessment and management system for operational risk with clear responsibilities assigned for this system. It shall identify its exposures to operational risk and track relevant operational risk data, including material loss data. This system shall be subject to regular independent review carried out by an internal or external party possessing the necessary knowledge to carry out such review;
an institution's operational risk assessment system shall be closely integrated into the risk management processes of the institution. Its output shall be an integral part of the process of monitoring and controlling the institution's operational risk profile;
an institution shall implement a system of reporting to senior management that provides operational risk reports to relevant functions within the institution. An institution shall have in place procedures for taking appropriate action according to the information within the reports to management.]
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