What changed, Directive 2006/49/EC

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− ## Section 1 / **Subject matter and scope**
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− ### Article 1
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− 1. This Directive lays down the capital adequacy requirements applying to investment firms and credit institutions, the rules for their calculation and the rules for their prudential supervision. Member States shall apply the requirements of this Directive to investment firms and credit institutions…
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− 2. A Member State may impose additional or more stringent requirements on those investment firms and credit institutions that it has authorised.
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− ### Article 2
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− 1. Subject to Articles 18, 20, 22 to 32, 34 and 39 of this Directive, Articles 68 to 73 of Directive 2006/48/EC shall apply mutatis mutandis to investment firms. In applying Articles 70 to 72 of Directive 2006/48/EC to investment firms, every reference to a parent credit institution in a Member Stat…
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− 1. Where a credit institution has as a parent undertaking a parent investment firm in a Member State, only that parent investment firm shall be subject to requirements on a consolidated basis in accordance with Articles 71 to 73 of Directive 2006/48/EC.
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− 1. Where an investment firm has as a parent undertaking a parent credit institution in a Member State, only that parent credit institution shall be subject to requirements on a consolidated basis in accordance with Articles 71 to 73 of Directive 2006/48/EC.
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− 1. Where a financial holding company has as a subsidiary both a credit institution and an investment firm, requirements on the basis of the consolidated financial situation of the financial holding company shall apply to the credit institution.
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− 2. When a group covered by paragraph 1 does not include a credit institution, Directive 2006/48/EC shall apply, subject to the following:
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− (a) every reference to credit institutions shall be construed as a reference to investment firms;
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− (b) in Articles 125 and 140(2) of Directive 2006/48/EC, each reference to other articles of that Directive shall be construed as a reference to Directive 2004/39/EC;
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− (c) for the purposes of Article 39(3) of Directive 2006/48/EC, references to the European Banking Committee shall be construed as references to the Council and the Commission; and
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− (d) by way of derogation from Article 140(1) of Directive 2006/48/EC, where a group does not include a credit institution, the first sentence of that Article shall be replaced by the following: ‘Where an investment firm, a financial holding company or a mixed-activity holding company controls one or…
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− ## Section 2 / **Definitions**
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− ### Article 3
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− 1. For the purposes of this Directive the following definitions shall apply:
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− (a) ‘credit institutions’ means credit institutions as defined in Article 4(1) of Directive 2006/48/EC;
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− (b) ‘investment firms’ means institutions as defined in Article 4(1)(1) of Directive 2004/39/EC, which are subject to the requirements imposed by that Directive, excluding:
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− (i) credit institutions;
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− (ii) local firms as defined in point (p); and
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− (iii) firms which are only authorised to provide the service of investment advice and/or receive and transmit orders from investors without holding money or securities belonging to their clients and which for that reason may not at any time place themselves in debt with those clients;
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− (c) ‘institutions’ means credit institutions and investment firms;
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− (d) ‘recognised third-country investment firms’ means firms meeting the following conditions:
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− (i) firms which, if they were established within the Community, would be covered by the definition of investment firm;
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− (ii) firms which are authorised in a third country; and
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− (iii) firms which are subject to and comply with prudential rules considered by the competent authorities as at least as stringent as those laid down by this Directive;
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− (e) ‘financial instruments’ means any contract that gives rise to both a financial asset of one party and a financial liability or equity instrument of another party;
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− (f) ‘parent investment firm in a Member State’ means an investment firm which has an institution or financial institution as a subsidiary or which holds a participation in one or both such entities, and which is not itself a subsidiary of another institution authorised in the same Member State or of…
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− (g) ‘EU parent investment firm’ means a parent investment firm in a Member State which is not a subsidiary of another institution authorised in any Member State or of a financial holding company set up in any Member State;
+ 2006L0049 — EN — 01.01.2014 — 005.001 This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents ►B DIRECTIVE 2006/49/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 June 2006 on the capital adequacy of investment firms and credit i…
− (h) ‘over-the-counter (OTC) derivative instruments’ means the items falling within the list in Annex IV to Directive 2006/48/EC other than those items to which an exposure value of zero is attributed under point 6 of Part 2 of Annex III to that Directive;
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− (i) ‘regulated market’ means a market as defined in Article 4(1)(14) of Directive 2004/39/EC;
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− (j) ‘convertible’ means a security which, at the option of the holder, may be exchanged for another security;
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− (k) ‘warrant’ means a security which gives the holder the right to purchase an underlying asset at a stipulated price until or at the expiry date of the warrant and which may be settled by the delivery of the underlying itself or by cash settlement;
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− (l) ‘stock financing’ means positions where physical stock has been sold forward and the cost of funding has been locked in until the date of the forward sale;
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− (m) ‘repurchase agreement’ and ‘reverse repurchase agreement’ mean any agreement in which an institution or its counterparty transfers securities or commodities or guaranteed rights relating to title — to securities or commodities where that guarantee is issued by a recognised exchange which holds t…
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− (n) ‘securities or commodities lending’ and ‘securities or commodities borrowing’ mean any transaction in which an institution or its counterparty transfers securities or commodities against appropriate collateral, subject to a commitment that the borrower will return equivalent securities or commod…
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− (o) ‘clearing member’ means a member of the exchange or the clearing house which has a direct contractual relationship with the central counterparty (market guarantor);
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− (p) ‘local firm’ means a firm dealing for its own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, or dealing for the accounts of other members of those markets and being guaranteed by cleari…
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− (q) ‘delta’ means the expected change in an option price as a proportion of a small change in the price of the instrument underlying the option;
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− (r) ‘own funds’ means own funds as defined in Directive 2006/48/EC; and
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− (s) ‘capital’ means own funds ; and
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− (t) “securitisation position” and “re-securitisation position” mean, respectively, securitisation position and re-securitisation position as defined in Directive 2006/48/EC.
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− 1. For the purposes of applying supervision on a consolidated basis, the term ‘investment firm’ shall include third-country investment firms.
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− 1. For the purposes of point (e), financial instruments shall include both primary financial instruments or cash instruments and derivative financial instruments the value of which is derived from the price of an underlying financial instrument, a rate, an index or the price of another underlying it…
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− 2. The terms ‘parent undertaking’, ‘subsidiary undertaking’, ‘asset management company’ and ‘financial institution’ shall cover undertakings defined in Article 4 of Directive 2006/48/EC.
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− 2. The terms ‘financial holding company’, ‘parent financial holding company in a Member State’, ‘EU parent financial holding company’ and ‘ancillary services undertaking’ shall cover undertakings defined in Article 4 of Directive 2006/48/EC, save that every reference to credit institutions shall be …
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− 3. For the purposes of applying Directive 2006/48/EC to groups covered by Article 2(1) which do not include a credit institution, the following definitions shall apply:
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− (a) ‘financial holding company’ means a financial institution the subsidiary undertakings of which are either exclusively or mainly investment firms or other financial institutions, at least one of which is an investment firm, and which is not a mixed financial holding company within the meaning of …
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− (b) ‘mixed-activity holding company’ means a parent undertaking, other than a financial holding company or an investment firm or a mixed financial holding company within the meaning of Directive 2002/87/EC, the subsidiaries of which include at least one investment firm; and
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− (c) ‘competent authorities’ means the national authorities which are empowered by law or regulation to supervise investment firms.
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− ## CHAPTER II / ***Initial capital***
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− ### Article 4
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− For the purposes of this Directive, ‘initial capital’ shall be comprised of the items referred to in Article 57(a) and (b) of Directive 2006/48/EC.
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− ### Article 5
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− 1. An investment firm that does not deal in any financial instruments for its own account or underwrite issues of financial instruments on a firm commitment basis, but which holds clients' money and/or securities and which offers one or more of the following services, shall have initial capital of E…
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− (a) the reception and transmission of investors' orders for financial instruments;
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− (b) the execution of investors' orders for financial instruments; or
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− (c) the management of individual portfolios of investments in financial instruments.
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− 2. The competent authorities may allow an investment firm which executes investors' orders for financial instruments to hold such instruments for its own account if the following conditions are met:
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− (a) such positions arise only as a result of the firm's failure to match investors' orders precisely;
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− (b) the total market value of all such positions is subject to a ceiling of 15 % of the firm's initial capital;
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− (c) the firm meets the requirements laid down in Articles 18, 20 and 28; and
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− (d) such positions are incidental and provisional in nature and strictly limited to the time required to carry out the transaction in question.
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− 2. The holding of non-trading-book positions in financial instruments in order to invest own funds shall not be considered as dealing in relation to the services set out in paragraph 1 or for the purposes of paragraph 3.
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− 3. Member States may reduce the amount referred to in paragraph 1 to EUR 50 000 where a firm is not authorised to hold clients' money or securities, to deal for its own account, or to underwrite issues on a firm commitment basis.
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− ### Article 6
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− Local firms shall have initial capital of EUR 50 000 insofar as they benefit from the freedom of establishment or to provide services specified in Articles 31 and 32 of Directive 2004/39/EC.
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− ### Article 7
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− Coverage for the firms referred to in Article 3(1)(b)(iii) shall take one of the following forms:
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− (a) initial capital of EUR 50 000;
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− (b) professional indemnity insurance covering the whole territory of the Community or some other comparable guarantee against liability arising from professional negligence, representing at least EUR 1 000 000 applying to each claim and in aggregate EUR 1 500 000 per year for all claims; or
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− (c) a combination of initial capital and professional indemnity insurance in a form resulting in a level of coverage equivalent to that referred to in points (a) or (b).
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− The amounts referred to in the first sub-paragraph shall be periodically reviewed by the Commission in order to take account of changes in the European Index of Consumer Prices as published by Eurostat, in line with and at the same time as the adjustments made under Article 4(7) of Directive 2002/92…
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− ### Article 8
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− If a firm as referred to in Article 3(1)(b)(iii) is also registered under Directive 2002/92/EC, it shall comply with Article 4(3) of that Directive and have coverage in one of the following forms:
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− (a) initial capital of EUR 25 000;
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− (b) professional indemnity insurance covering the whole territory of the Community or some other comparable guarantee against liability arising from professional negligence, representing at least EUR 500 000 applying to each claim and in aggregate EUR 750 000 per year for all claims; or
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− (c) a combination of initial capital and professional indemnity insurance in a form resulting in a level of coverage equivalent to that referred to in points (a) or (b).
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− ### Article 9
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− All investment firms other than those referred to in Articles 5 to 8 shall have initial capital of EUR 730 000.
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− ### Article 10
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− 1. By way of derogation from Articles 5(1), 5(3), 6 and 9, Member States may continue an authorisation of investment firms and firms covered by Article 6 which was in existence before 31 December 1995, the own funds of which firms or investment firms are less than the initial capital levels specifie…
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− 1. The own funds of such firms or investment firms shall not fall below the highest reference level calculated after the date of notification contained in Directive 93/6/EEC. That reference level shall be the average daily level of own funds calculated over a six-month period preceding the date of c…
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− 2. If control of a firm covered by paragraph 1 is taken by a natural or legal person other than the person who controlled it previously, the own funds of that firm shall attain at least the level specified for them in Articles 5(1), 5(3), 6 and 9, except in the case of a first transfer by inheritanc…
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− 3. In certain specific circumstances, and with the approval of the competent authorities, in the event of a merger of two or more investment firms and/or firms covered by Article 6, the own funds of the firm produced by the merger need not attain the level specified in Articles 5(1), 5(3), 6 and 9. …
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− 4. The own funds of investment firms and firms covered by Article 6 may not fall below the level specified in Articles 5(1), 5(3), 6 and 9 and paragraphs 1 and 3 of this Article.
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− 4. In the event that the own funds of such firms and investment firms fall below that level, the competent authorities may, where the circumstances justify it, allow such firms a limited period in which to rectify their situations or cease their activities.
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− ## CHAPTER III / ***Trading book***
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− ### Article 11
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− 1. The trading book of an institution shall consist of all positions in financial instruments and commodities held either with trading intent or in order to hedge other elements of the trading book and which are either free of any restrictive covenants on their tradability or able to be hedged.
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− 2. Positions held with trading intent are those held intentionally for short-term resale and/or with the intention of benefiting from actual or expected short-term price differences between buying and selling prices or from other price or interest rate variations. The term ‘positions’ shall include …
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− 3. 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 Part A of Annex VII.
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− 4. Institutions shall establish and maintain systems and controls to manage their trading book in accordance with Parts B and D of Annex VII.
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− 5. Internal hedges may be included in the trading book, in which case Part C of Annex VII shall apply.
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− ## CHAPTER IV / ***Own funds***
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− ### Article 12
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− ‘Original own funds’ means the sum of points (a) to (ca), less the sum of points (i), (j) and (k) of Article 57 of Directive 2006/48/EC.
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− The Commission shall, by 1 January 2009,,submit an appropriate proposal to the European Parliament and to the Council for amendment of this Chapter.
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− ### Article 13
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− 1. Subject to paragraphs 2 to 5 of this Article and Articles 14 to 17, the own funds of investment firms and credit institutions shall be determined in accordance with Directive 2006/48/EC.
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− 1. In addition, the first subparagraph applies to investment firms which do not have one of the legal forms referred to in Article 1(1) of the Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3) of the Treaty on the annual accounts of certain types of companies (11).
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− 2. By way of derogation from paragraph 1, the competent authorities may permit those institutions which are obliged to meet the capital requirements calculated in accordance with Articles 21 and 28 to 32 and Annexes I and III to VI to use, for that purpose only, an alternative determination of own f…
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− 2. Such an alternative determination shall be the sum of the items set out in points (a) to (c) of this subparagraph, minus the item set out in point (d), with the deduction of that last item being left to the discretion of the competent authorities:
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− (a) own funds as defined in Directive 2006/48/EC*,* excluding only points (l) to (p) of Article 57 of that Directive for those investment firms which are required to deduct item (d) of this paragraph from the total of items (a) to (c);
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− (b) an institution's net trading-book profits net of any foreseeable charges or dividends, less net losses on its other business, provided that none of those amounts has already been included in item (a) of this paragraph as one of the items set out in points (b) or (k) of Article 57 of Directive 20…
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− (c) subordinated loan capital and/or the items referred to in paragraph 5 of this Article, subject to the conditions set out in paragraphs 3 and 4 of this Article and in Article 14; and
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− (d) illiquid assets as specified in Article 15.
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− 3. The subordinated loan capital referred to in point (c) of the second subparagraph of paragraph 2 shall have an initial maturity of at least two years. It shall be fully paid up and the loan agreement shall not include any clause providing that in specified circumstances, other than the winding up…
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− 3. In addition, an institution shall notify the competent authorities of all repayments on such subordinated loan capital as soon as its own funds fall below 120 % of its overall capital requirements.
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− 4. The subordinated loan capital referred to in point (c) of the second subparagraph of paragraph 2 may not exceed a maximum of 150 % of the original own funds left to meet the requirements calculated in accordance with Articles 21 and 28 to 32 and Annexes I to VI and may approach that maximum only …
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− 5. The competent authorities may permit institutions to replace the subordinated loan capital referred to in point (c) of the second subparagraph of paragraph 2 with points (d) to (h) of Article 57 of Directive 2006/48/EC.
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− ### Article 14
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− 1. The competent authorities may permit investment firms to exceed the ceiling for subordinated loan capital set out in Article 13(4) if they judge it prudentially adequate and provided that the total of such subordinated loan capital and the items referred to in Article 13(5) does not exceed 200 % …
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− 2. The competent authorities may permit the ceiling for subordinated loan capital set out in Article 13(4) to be exceeded by a credit institution if they judge it prudentially adequate and provided that the total of such subordinated loan capital and points (d) to (h) of Article 57 of Directive 2006…
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− ### Article 15
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− Illiquid assets as referred to in point (d) of the second subparagraph of Article 13(2) shall include the following:
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− (a) tangible fixed assets, except to the extent that land and buildings may be allowed to count against the loans which they are securing;
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− (b) holdings in, including subordinated claims on, credit or financial institutions which may be included in the own funds of those institutions, unless they have been deducted under points (l) to (p) of Article 57 of Directive 2006/48/EC or under Article 16(d) of this Directive;
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− (c) holdings and other investments in undertakings other than credit or financial institutions, which are not readily marketable;
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− (d) deficiencies in subsidiaries;
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− (e) deposits made, other than those which are available for repayment within 90 days, and also excluding payments in connection with margined futures or options contracts;
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− (f) loans and other amounts due, other than those due to be repaid within 90 days; and
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− (g) physical stocks, unless they are already subject to capital requirements at least as stringent as those set out in Articles 18 and 20.
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− For the purposes of point (b), where shares in a credit or financial institution are held temporarily for the purpose of a financial assistance operation designed to reorganise and save that institution, the competent authorities may waive the application of this Article. They may also waive it in r…
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− ### Article 16
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− Investment firms included in a group which has been granted the waiver provided for in Article 22 shall calculate their own funds in accordance with Articles 13 to 15, subject to the following:
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− (a) the illiquid assets referred to in Article 13(2)(d) shall be deducted;
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− (b) the exclusion referred to in point (a) of Article 13(2) shall not cover those components of points (l) to (p) of Article 57 of Directive 2006/48/EC which an investment firm holds in respect of undertakings included in the scope of consolidation as defined in Article 2(1) of this Directive;
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− (c) the limits referred to in points (a) and (b) of Article 66(1) of Directive 2006/48/EC shall be calculated with reference to the original own funds less the components of points (l) to (p) of Article 57 of that Directive as referred to in point (b) of this Article which are elements of the origin…
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− (d) the components of points (l) to (p) of Article 57 of Directive 2006/48/EC referred to in point (c) of this Article shall be deducted from the original own funds rather than from the total of all items as laid down in Article 66(2) of that Directive for the purposes in particular of Articles 13(4…
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− ### Article 17
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− 1. ►M4 Where an institution calculates risk-weighted exposure amounts for the purposes of Annex II to this Directive in accordance with Articles 84 to 89 of Directive 2006/48/EC, the following shall apply for the purposes of the calculation provided for in point 36 of Part 1 of Annex VII to Directiv…
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− (a) value adjustments made to take account of the credit quality of the counterparty may be included in the sum of value adjustments and provisions made for the exposures indicated in Annex II; and
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− (b) subject to the approval of the competent authorities, if the credit risk of the counterparty is adequately taken into account in the valuation of a position included in the trading book, the expected loss amount for the counterparty risk exposure shall be zero.
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− 1. For the purposes of point (a), for such institutions, such value adjustments shall not be included in own funds other than in accordance with the provisions of this paragraph.
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− 2. For the purposes of this Article, Article 153 and 154 of Directive 2006/48/EC shall apply.
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− ## Section 1 / **Provisions against risks**
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− ### Article 18
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− 1. Institutions shall have own funds which are always more than or equal to the sum of the following:
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− (a) the capital requirements, calculated in accordance with the methods and options laid down in Articles 28 to 32 and Annexes I, II, and VI and, as appropriate, Annex V, for their trading book business, and points 1 to 4 of Annex II for their non-trading book business;
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− (b) the capital requirements, calculated in accordance with the methods and options laid down in Annexes III and IV and, as appropriate, Annex V, for all of their business activities.
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− 2. By way of derogation from paragraph 1, the competent authorities may allow institutions to calculate the capital requirements for their trading book business in accordance with Article 75(a) of Directive 2006/48/EC and points 6, 7, and 9 of Annex II to this Directive, where the size of the tradin…
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− (a) the trading-book business of such institutions does not normally exceed 5 % of their total business;
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− (b) their total trading-book positions do not normally exceed EUR 15 million; and
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− (c) the trading-book business of such institutions never exceeds 6 % of their total business and their total trading-book positions never exceed EUR 20 million.
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− 3. In order to calculate the proportion that trading-book business bears to total business for the purposes of points (a) and (c) of paragraph 2, the competent authorities may refer either to the size of the combined on- and off-balance-sheet business, to the profit and loss account or to the own fu…
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− 4. If an institution should happen for more than a short period to exceed either or both of the limits imposed in paragraph 2(a) and (b) or either or both of the limits imposed in paragraph 2(c), it shall be required to meet the requirements imposed in paragraph 1(a) in respect of its trading-book b…
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− 5. The European Supervisory Authority (European Banking Authority) (hereinafter “EBA”) established by Regulation (EU) No 1093/2010 of the European Parliament and of the Council (12), may develop draft regulatory technical standards to specify the assessment methodology under which competent authorit…
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− 5. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1093/2010.
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− ### Article 19
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− 1. For the purposes of point 14 of Annex I, subject to the discretion of the national authorities, a 0 % weighting can be assigned to debt securities issued by the entities listed in Table 1 of Annex I, where these debt securities are denominated and funded in domestic currency.
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− 2. By way of derogation from points 13 and 14 of Annex I, Member States may set a specific risk requirement for any bonds falling within points 68 to 70 of Part 1 of Annex VI to Directive 2006/48/EC which shall be equal to the specific risk requirement for a qualifying item with the same residual ma…
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− 3. If, as set out in point 52 of Annex I, a competent authority approves a third country's collective investment undertaking (CIU) as eligible, a competent authority in another Member State may make use of this approval without conducting its own assessment.
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− ### Article 20
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− 1. Subject to paragraphs 2, 3 and 4 of this Article, and Article 34 of this Directive, the requirements in Article 75 of Directive 2006/48/EC shall apply to investment firms.
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− 2. By way of derogation from paragraph 1, competent authorities may allow investment firms that are not authorised to provide the investment services listed in points 3 and 6 of Section A of Annex I to Directive 2004/39/EC to provide own funds which are always more than or equal to the higher of the…
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− (a) the sum of the capital requirements contained in points (a) to (c) of Article 75 of Directive 2006/48/EC; and
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− (b) the amount laid down in Article 21 of this Directive.
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− 3. By way of derogation from paragraph 1, competent authorities may allow investment firms which hold initial capital as set out in Article 9, but which fall within the following categories, to provide own funds which are always more than or equal to the sum of the capital requirements calculated in…
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− (a) investment firms that deal on own account only for the purpose of fulfilling or executing a client order or for the purpose of gaining entrance to a clearing and settlement system or a recognised exchange when acting in an agency capacity or executing a client order; and
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− b) investment firms:
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− (i) that do not hold client money or securities;
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− (ii) that undertake only dealing on own account;
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− (iii) that have no external customers;
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− (iv) the execution and settlement of whose transactions takes place under the responsibility of a clearing institution and are guaranteed by that clearing institution.
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− 4. Investment firms referred to in paragraphs 2 and 3 shall remain subject to all other provisions regarding operational risk set out in Annex V of Directive 2006/48/EC.
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− 5. Article 21 shall apply only to investment firms to which paragraphs (2) or (3) or Article 46 apply and in the manner specified therein.
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− ### Article 21
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− Investment firms shall be required to hold own funds equivalent to one quarter of their preceding year's fixed overheads.
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− The competent authorities may adjust that requirement in the event of a material change in a firm's business since the preceding year.
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− Where a firm has not completed a year's business, starting from the day it starts up, the requirement shall be a quarter of the fixed overheads projected in its business plan, unless an adjustment to that plan is required by the competent authorities.
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− ## Section 2 / **Application of requirements on a consolidated basis**
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− ### Article 22
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− 1. The competent authorities required or mandated to exercise supervision of groups covered by Article 2 on a consolidated basis may waive, on a case-by-case basis, the application of capital requirements on a consolidated basis provided that:
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− (a) each EU investment firm in such a group uses the calculation of own funds set out in Article 16;
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− (b) all investment firms in such a group fall within the categories in Article 20(2) and (3);
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− (c) each EU investment firm in such a group meets the requirements imposed in Articles 18 and 20 on an individual basis and at the same time deducts from its own funds any contingent liability in favour of investment firms, financial institutions, asset management companies and ancillary services un…
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− (d) any financial holding company which is the parent financial holding company in a Member State of any investment firm in such a group holds at least as much capital, defined here as the sum of points (a) to (h) of Article 57 of Directive 2006/48/EC, as the sum of the full book value of any holdin…
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− 1. Where the criteria in the first subparagraph are met, each EU investment firm shall have in place systems to monitor and control the sources of capital and funding of all financial holding companies, investment firms, financial institutions, asset management companies and ancillary services under…
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− Where the competent authorities waive the application of capital requirements on a consolidated basis provided for in this Article, they shall notify the Commission and EBA.
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− 2. By way of derogation from paragraph 1, competent authorities may permit financial holding companies which are the parent financial holding company in a Member State of an investment firm in such a group to use a value lower than the value calculated under paragraph 1(d), but no lower than the sum…
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− ### Article 23
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− The competent authorities shall require investment firms in a group which has been granted the waiver provided for in Article 22 to notify them of the risks which could undermine their financial positions, including those associated with the composition and sources of their capital and funding. If t…
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− Where the competent authorities waive the obligation of supervision on a consolidated basis provided for in Article 22, they shall take other appropriate measures to monitor the risks, namely large exposures, of the whole group, including any undertakings not located in a Member State.
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− Where the competent authorities waive the application of capital requirements on a consolidated basis provided for in Article 22, the requirements of Article 123 and Chapter 5 of Title V of Directive 2006/48/EC shall apply on an individual basis, and the requirements of Article 124 of that Directive…
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− ### Article 24
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− 1. By way of derogation from Article 2(2), competent authorities may exempt investment firms from the consolidated capital requirement established in that Article, provided that all the investment firms in the group are covered by Article 20(2) and the group does not include credit institutions.
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− 2. Where the requirements of paragraph 1 are met, a parent investment firm in a Member State shall be required to provide own funds at a consolidated level which are always more than or equal to the higher of the following two amounts, calculated on the basis of the parent investment firm's consolid…
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− (a) the sum of the capital requirements contained in points (a) to (c) of Article 75 of Directive 2006/48/EC; and
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− (b) the amount prescribed in Article 21 of this Directive.
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− 3. Where the requirements of paragraph 1 are met, an investment firm controlled by a financial holding company shall be required to provide own funds at a consolidated level which are always more than or equal to the higher of the following two amounts, calculated on the basis of the financial holdi…
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− (a) the sum of the capital requirements contained in points (a) to (c) of Article 75 of Directive 2006/48/EC; and
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− (b) the amount prescribed in Article 21 of this Directive.
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− ### Article 25
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− By way of derogation from Article 2(2), competent authorities may exempt investment firms from the consolidated capital requirement established in that Article, provided that all the investment firms in the group fall within the investment firms referred to in Article 20(2) and (3), and the group do…
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− Where the requirements of the first paragraph are met, a parent investment firm in a Member State shall be required to provide own funds at a consolidated level which are always more than or equal to the sum of the requirements contained in points (a) to (c) of Article 75 of Directive 2006/48/EC and…
− 
− Where the requirements of the first paragraph are met, an investment firm controlled by a financial holding company shall be required to provide own funds at a consolidated level which are always more than or equal to the sum of the requirements contained in points (a) to (c) of Article 75 of Direct…
− 
− ## Section 3 / **Calculation of consolidated requirements**
− 
− ### Article 26
− 
− 1. Where the waiver provided for in Article 22 is not exercised, the competent authorities may, for the purpose of calculating the capital requirements set out in Annexes I and V and the exposures to clients set out in Articles 28 to 32 and Annex VI on a consolidated basis, permit positions in the t…
− 
− 1. In addition, the competent authorities may allow foreign-exchange positions in one institution to offset foreign-exchange positions in another institution in accordance with the rules set out in Annex III and/or Annex V. They may also allow commodities positions in one institution to offset commo…
− 
− 2. The competent authorities may permit offsetting of the trading book and of the foreign-exchange and commodities positions, respectively, of undertakings located in third countries, subject to the simultaneous fulfilment of the following conditions:
− 
− (a) such undertakings have been authorised in a third country and either satisfy the definition of credit institution set out in Article 4(1) of Directive 2006/48/EC or are recognised third-country investment firms;
− 
− (b) such undertakings comply, on an individual basis, with capital adequacy rules equivalent to those laid down in this Directive; and
− 
− (c) no regulations exist in the third countries in question which might significantly affect the transfer of funds within the group.
− 
− 3. The competent authorities may also allow the offsetting provided for in paragraph 1 between institutions within a group that have been authorised in the Member State in question, provided that:
− 
− (a) there is a satisfactory allocation of capital within the group; and
− 
− (b) the regulatory, legal or contractual framework in which the institutions operate is such as to guarantee mutual financial support within the group.
− 
− 4. Furthermore, the competent authorities may allow the offsetting provided for in paragraph 1 between institutions within a group that fulfil the conditions imposed in paragraph 3 and any institution included in the same group which has been authorised in another Member State provided that that ins…
− 
− ### Article 27
− 
− 1. In the calculation of own funds on a consolidated basis Article 65 of Directive 2006/48/EC shall apply.
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− 2. The competent authorities responsible for exercising supervision on a consolidated basis may recognise the validity of the specific own-funds definitions applicable to the institutions concerned under Chapter IV in the calculation of their consolidated own funds.
− 
− ## Section 4 / **Monitoring and control of large exposures**
− 
− ### Article 28
− 
− 1. Institutions, except investment firms that fulfil the criteria set out in paragraph 2 or 3 of Article 20 of this Directive, shall monitor and control their large exposures in accordance with Articles 106 to 118 of Directive 2006/48/EC.
− 
− 2. By way of derogation from paragraph 1, institutions which calculate the capital requirements for their trading-book business in accordance with Annexes I and II, and, as appropriate, Annex V to this Directive, shall monitor and control their large exposures in accordance with Articles 106 to 118 …
− 
− ### Article 29
− 
− 1. The exposures to individual clients which arise on the trading book shall be calculated by summing the following items:
− 
− (a) the excess — where positive — of an institution's long positions over its short positions in all the financial instruments issued by the client in question, the net position in each of the different instruments being calculated according to the methods laid down in Annex I;
− 
− (b) the net exposure, in the case of the underwriting of a debt or an equity instrument; and
− 
− (c) the exposures due to the transactions, agreements and contracts referred to in Annex II with the client in question, such exposures being calculated in the manner laid down in that Annex, for the calculation of exposure values.
− 
− 1. For the purposes of point (b), the net exposure is calculated by deducting those underwriting positions which are subscribed or sub-underwritten by third parties on the basis of a formal agreement reduced by the factors set out in point 41 of Annex I.
− 
− 1. For the purposes of point (b), pending further coordination, the competent authorities shall require institutions to set up systems to monitor and control their underwriting exposures between the time of the initial commitment and working day one in the light of the nature of the risks incurred i…
− 
− 1. For the purposes of point (c), Articles 84 to 89 of Directive 2006/48/EC shall be excluded from the reference in point 6 of Annex II to this Directive.
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− 2. The exposures to groups of connected clients on the trading book shall be calculated by summing the exposures to individual clients in a group, as calculated in paragraph 1.
− 
− ### Article 30
− 
− 1. The overall exposures to individual clients or groups of connected clients shall be calculated by summing the exposures which arise on the trading book and the exposures which arise on the non-trading book, taking into account Article 112 to 117 of Directive 2006/48/EC.
− 
− 1. In order to calculate the exposure which arises on the non-trading book, institutions shall take the exposure arising from assets which are deducted from their own funds by virtue of point (d) of the second subparagraph of Article 13(2) to be zero.
− 
− 2. Institutions' overall exposures to individual clients and groups of connected clients calculated in accordance with paragraph 4 shall be reported in accordance with Article 110 of Directive 2006/48/EC.
− 
− 2. Other than in relation to repurchase transactions, securities or commodities lending or borrowing transactions, the calculation of large exposures to individual clients and groups of connected clients for reporting purposes shall not include the recognition of credit risk mitigation.
− 
− 3. The sum of the exposures to an individual client or group of connected clients in paragraph 1 shall be limited in accordance with Articles 111 to 117 of Directive 2006/48/EC.
− 
− 4. By derogation from paragraph 3 competent authorities may allow assets constituting claims and other exposures on recognised third country investment firms and recognised clearing houses and exchanges to be subject to the same treatment as laid down in Article 111(1) of Directive 2006/48/EC and in…
− 
− ### Article 31
− 
− The competent authorities may authorise the limits laid down in Articles 111 to 117 of Directive 2006/48/EC to be exceeded if the following conditions are met:
− 
− (a) the exposure on the non-trading book to the client or group of clients in question does not exceed the limit laid down in Article 111(1) of Directive 2006/48/EC, this limit being calculated with reference to own funds as specified in that Directive, so that the excess arises entirely on the trad…
− 
− (b) the institution meets an additional capital requirement on the excess in respect of the limit laid down in Article 111(1) of Directive 2006/48/EC, that additional capital requirement being calculated in accordance with Annex VI to this Directive;
− 
− (c) where 10 days or less has elapsed since the excess occurred, the trading-book exposure to the client or group of connected clients in question shall not exceed 500 % of the institution's own funds;
− 
− (d) any excesses that have persisted for more than 10 days must not, in aggregate, exceed 600 % of the institution's own funds; and
− 
− (e) institutions shall report to the competent authorities every three months all cases where the limit laid down in Article 111(1) of Directive 2006/48/EC has been exceeded during the preceding three months.
− 
− In relation to point (e), in each case in which the limit has been exceeded, the amount of the excess and the name of the client concerned shall be reported.
− 
− ### Article 32
− 
− 1. The competent authorities shall establish procedures to prevent institutions from deliberately avoiding the additional capital requirements that they would otherwise incur, on exposures exceeding the limit laid down in Article 111(1) of Directive 2006/48/EC once those exposures have been maintain…
− 
− 1. The competent authorities shall notify EBA, the Council and the Commission of those procedures.
− 
− 1. Institutions shall maintain systems which ensure that any transfer which has the effect referred to in the first subparagraph is immediately reported to the competent authorities.
− 
− EBA shall issue guidelines in relation to the procedures referred to in this paragraph.
− 
− 2. The competent authorities may permit institutions which are allowed to use the alternative determination of own funds under Article 13(2) to use that determination for the purposes of Articles 30(2), 30(3) and 31 provided that the institutions concerned are required to meet all of the obligations…
− 
− ## Section 5 / **Valuation of positions for reporting purposes**
− 
− ### Article 33
− 
− 1. All trading book positions shall be subject to prudent valuation rules as specified in Annex VII, Part B. These rules shall require institutions to ensure that the value applied to each of its trading book positions appropriately reflects the current market value. The former value shall contain a…
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