What changed, Commission Delegated Regulation (EU) No 241/2014 of 7 January 2014 supplementing Regulation (EU) No 575/2013

+ ### Article 7a — Multiple distributions constituting a disproportionate drag on own funds
+ 
+ 1. Distributions on Common Equity Tier 1 instruments referred to in Article 28 of Regulation (EU) No 575/2013 shall be deemed not to constitute a disproportionate drag on capital where all of the following conditions are met:
+ 
+ (a) the dividend multiple is a multiple of the distribution paid on the voting instruments and not a predetermined fixed amount;
+ 
+ (b) the dividend multiple is set contractually or under the statutes of the institution;
+ 
+ (c) the dividend multiple is not revisable;
+ 
+ (d) the same dividend multiple applies to all instruments with a dividend multiple;
+ 
+ (e) the amount of the distribution on one instrument with a dividend multiple does not represent more than 125 % of the amount of the distribution on one voting Common Equity Tier 1 instrument.
+ 
+ In formulaic form this shall be expressed as:
+ 
+ where:
+ 
+ *k* shall represent the amount of the distribution on one instrument without a dividend multiple;
+ 
+ *l* shall represent the amount of the distribution on one instrument with a dividend multiple;
+ 
+ (f) the total amount of the distributions paid on all Common Equity Tier 1 instruments during a one year period does not exceed 105 % of the amount that would have been paid if instruments with fewer or no voting rights received the same distributions as voting instruments.
+ 
+ In formulaic form this shall be expressed as:
+ 
+ where:
+ 
+ *k* shall represent the amount of the distribution on one instrument without a dividend multiple;
+ 
+ *l* shall represent the amount of the distribution on one instrument with a dividend multiple;
+ 
+ *X* shall represent the number of voting instruments;
+ 
+ *Y* shall represent the number of non-voting instruments.
+ 
+ The formula shall be applied on a one-year basis.
+ 
+ 2. Where the condition of point (f) of paragraph 1 is not met, only the amount of the instruments with a dividend multiple that exceeds the threshold defined therein shall be deemed to cause a disproportionate drag on capital.
+ 
+ 3. Where any of the conditions of points (a) to (e) of paragraph 1 are not met, all outstanding instruments with a dividend multiple shall be deemed to cause a disproportionate drag on capital.
+ 
+ ### Article 7b — Preferential distributions regarding preferential rights to payments of distributions
+ 
+ 1. For Common Equity Tier 1 instruments referred to in Article 28 of Regulation (EU) No 575/2013, a distribution on a Common Equity Tier 1 instrument shall be deemed to be preferential relative to other Common Equity Tier 1 instruments where there are differentiated levels of distributions, unless t…
+ 
+ 2. For Common Equity Tier 1 instruments with fewer or no voting rights issued by institutions referred to in Article 27 of Regulation (EU) No 575/2013, where distribution is a multiple of the distribution on the voting instruments and that multiple distribution is set contractually or statutorily, d…
+ 
+ (a) the dividend multiple is a multiple of the distribution paid on the voting instruments and not a predetermined fixed amount;
+ 
+ (b) the dividend multiple is set contractually or under the statutes of the institution;
+ 
+ (c) the dividend multiple is not revisable;
+ 
+ (d) the same dividend multiple applies to all instruments with a dividend multiple;
+ 
+ (e) the amount of the distribution on one instrument with a dividend multiple does not represent more than 125 % of the amount of the distribution on one voting Common Equity Tier 1 instrument.
+ 
+ In formulaic form this shall be expressed as:
+ 
+ where:
+ 
+ *k* shall represent the amount of the distribution on one instrument without a dividend multiple;
+ 
+ *l* shall represent the amount of the distribution on one instrument with a dividend multiple;
+ 
+ (f) the total amount of the distributions paid on all Common Equity Tier 1 instruments during a one year period does not exceed 105 % of the amount that would have been paid if instruments with fewer or no voting rights received the same distributions as voting instruments.
+ 
+ In formulaic form this shall be expressed as:
+ 
+ where:
+ 
+ *k* shall represent the amount of the distribution on one instrument without a dividend multiple;
+ 
+ *l* shall represent the amount of the distribution on one instrument with a dividend multiple;
+ 
+ *X* shall represent the number of voting instruments;
+ 
+ *Y* shall represent the number of non-voting instruments;
+ 
+ The formula shall be applied on a one-year basis.
+ 
+ 3. Where the condition of paragraph 2 point (f) is not met, only the amount of the instruments with a dividend multiple that exceeds the threshold defined therein shall be disqualified from Common Equity Tier 1.
+ 
+ 4. Where any of the conditions of points (a) to (e) of paragraph 2 are not met, all outstanding instruments with a dividend multiple shall be disqualified from Common Equity Tier 1 capital.
+ 
+ 5. For the purposes of paragraph 2, where the distributions of Common Equity Tier 1 instruments are expressed, for the voting or the non-voting instruments, with reference to the purchase price at issuance of the instrument, the formulas shall be adapted as follows, for the instrument or instruments…
+ 
+ (a) *l* shall represent the amount of the distribution on one instrument without a dividend multiple divided by the purchase price at issuance of that instrument;
+ 
+ (b) *k* shall represent the amount of the distribution on one instrument with a dividend multiple divided by the purchase price at issuance of that instrument.
+ 
+ 6. For Common Equity Tier 1 instruments with fewer or no voting rights issued by institutions referred to in Article 27 of Regulation (EU) No 575/2013, where the distribution is not a multiple of the distribution on the voting instruments, distributions shall be deemed not to be preferential where e…
+ 
+ 7. For the purposes of paragraph 6, either of the following conditions (a) or (b) shall apply:
+ 
+ (a) both of the following points (i) and (ii) are met:
+ 
+ (i) the instrument with fewer or no voting rights can only be subscribed and held by the holders of voting instruments;
+ 
+ (ii) the number of the voting rights of any single holder is limited;
+ 
+ (b) the distributions on the voting instruments issued by the institutions are subject to a cap set out under applicable national law.
+ 
+ 8. For the purposes of paragraph 6 both of the following conditions shall apply:
+ 
+ (a) the institution demonstrates that the average of the distributions on voting instruments during the preceding five years, is low in relation to other comparable instruments;
+ 
+ (b) the institution demonstrates that the payout ratio is low, where a payout ratio is calculated in accordance with Article 7c. A payout ratio under 30 % shall be deemed to be low.
+ 
+ 9. For the purposes of point (a) of paragraph 7, the voting rights of any single holder shall be deemed to be limited in the following cases:
+ 
+ (a) where each holder only receives one voting right irrespective of the number of voting instruments for any holder;
+ 
+ (b) where the number of voting rights is capped irrespective of the number of number of voting instruments held by any holder;
+ 
+ (c) where the number of voting instruments any holder may hold is limited under the statutes of the institution or under applicable national law.
+ 
+ 10. For the purposes of this Article, the one year period shall be deemed to end on the date of the last financial statements of the institution.
+ 
+ 11. Institutions shall assess compliance with the conditions referred to in paragraphs 7 and 8, and shall inform the competent authority about the result of their assessment, at least in the following situations:
+ 
+ (a) every time a decision on the amount of distributions on Common Equity Tier 1 instruments is taken;
+ 
+ (b) every time a new class of Common Equity Tier 1 instruments with fewer or no voting rights is issued.
+ 
+ 12. Where the condition of point (b) of paragraph 8 is not met, only the amount of the non-voting instruments for which distributions exceed the threshold defined therein shall be deemed to entail preferential distributions.
+ 
+ 13. Where the condition of point (a) of paragraph 8 is not met, the distributions on all outstanding non-voting instruments shall be deemed to be preferential unless they meet the conditions of paragraph 2.
+ 
+ 14. Where neither of the conditions of paragraph 7 are met, the distributions on all outstanding non-voting instruments shall be deemed to be preferential unless they meet the conditions of paragraph 2.
+ 
+ 15. The requirement referred to in point (i) of paragraph 7(a), or the requirement referred to in point (b) of paragraph 8, or both requirements may be waived, as appropriate, where both of the following conditions are met:
+ 
+ (a) an institution is in breach of or, due, inter alia, to a rapidly deteriorating financial condition, is likely in the near future to be in breach of any of the requirements of Regulation (EU) No 575/2013;
+ 
+ (b) the competent authority has required the institution to urgently increase its Common Equity Tier 1 capital within a specified period and has assessed that the institution is not able to rectify or avoid the breach referred to in point (a) within that specified period, without resorting to the wa…
+ 
+ ### Article 7c — Calculation of the payout ratio for the purposes of point (b) of Article 7b(8)
+ 
+ 1. For the purposes of point (b) of Article 7b(8), institutions shall choose either the way described in point (a) or point (b) to calculate the payout ratio. The institution shall follow the way chosen in a consistent manner over time.
+ 
+ (a) as the sum of distributions related to total Common Equity Tier 1 instruments over the previous five year periods, divided by the sum of profits related to the previous five year periods;
+ 
+ (b) for the period from the date of application of this Regulation until 31 December 2017 only:
+ 
+ (i) in 2014, as the sum of distributions related to total Common Equity Tier 1 instruments over the previous one year period, divided by the sum of profits related to the previous one year period;
+ 
+ (ii) in 2015, as the sum of distributions related to total Common Equity Tier 1 instruments over the previous two year periods, divided by the sum of profits related to the previous two year periods;
+ 
+ (iii) in 2016, as the sum of distributions related to total Common Equity Tier 1 instruments over the previous three year periods, divided by the sum of profits related to the previous three year periods;
+ 
+ (iv) in 2017, as the sum of distributions related to total Common Equity Tier 1 instruments over the previous four year periods, divided by the sum of profits related to the previous four year periods.
+ 
+ 2. For the purposes of paragraph 1, profits shall mean the amount reported in row 670 of template 2 of Annex III to Commission Implementing Regulation (EU) No 680/2014 (7), or, where applicable, the amount reported in row 670 of template 2 of Annex IV to that Implementing Regulation with regard to s…
+ 
+ ### Article 7d — Preferential distributions regarding the order of distribution payments
+ 
+ For the purposes of Article 28 of Regulation (EU) No 575/2013, a distribution on a Common Equity Tier 1 instrument shall be deemed to be preferential relative to other Common Equity Tier 1 instruments and regarding the order of distribution payments where at least one of the following conditions is …
+ 
+ (a) distributions are decided at different times;
+ 
+ (b) distributions are paid at different times;
+ 
+ (c) there is an obligation on the issuer to pay the distributions on one type of Common Equity Tier 1 instruments before paying the distributions on another type of Common Equity Tier 1 instruments;
+ 
+ (d) a distribution is paid on some Common Equity Tier 1 instruments but not on others, unless the condition of point (a) of Article 7b(7) is met.
+ 
+ 3. Direct funding shall also include funding granted for other purposes than purchasing an institution’s capital instruments, to any natural or legal person who has a qualifying holding in the credit institution, as referred to in Article 4(36) of Regulation (EU) No 575/2013, or who is deemed to be …
− 3. Direct funding shall also include funding granted for other purposes than purchasing an institution’s capital instruments, to any natural or legal person who has a qualifying holding in the credit institution, as referred to in Article 4(36) of Regulation (EU) No 575/2013, or who is deemed to be …
+ (3) the scope of supplementary supervision of the institution in accordance with Directive 2002/87/EC of the European Parliament and of the Council (9) on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate;
− (3) the scope of supplementary supervision of the institution in accordance with Directive 2002/87/EC of the European Parliament and of the Council (8) on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate;
+ 3. Where losses for the current financial year have already reduced Common Equity Tier 1 items as a result of an interim or a year-end financial report, a deduction is not needed. For the purpose of this Article, the financial report means that the profit and losses have been determined after a clos…
− 3. Where losses for the current financial year have already reduced Common Equity Tier 1 items as a result of an interim or a year-end financial report, a deduction is not needed. For the purpose of this Article, the financial report means that the profit and losses have been determined after a clos…
+ (b) where the financial institution is an electronic money institution within the meaning of Article 2 of Directive 2009/110/EC of the European Parliament and of the Council (11) and does not benefit from optional exemptions as provided by Article 9 of that Directive;
− (b) where the financial institution is an electronic money institution within the meaning of Article 2 of Directive 2009/110/EC of the European Parliament and of the Council (10) and does not benefit from optional exemptions as provided by Article 9 of that Directive;
+ (c) where the financial institution is a payment institution within the meaning of Article 4 of Directive 2007/64/EC of the European Parliament and of the Council (12) and does not benefit from a waiver as provided by Article 26 of that Directive;
− (c) where the financial institution is a payment institution within the meaning of Article 4 of Directive 2007/64/EC of the European Parliament and of the Council (11) and does not benefit from a waiver as provided by Article 26 of that Directive;
+ (d) where the financial institution is an alternative investment fund manager within the meaning of Article 4 of Directive 2011/61/EU of the European Parliament and of the Council (13) or a management company within the meaning of Article 2(1) of Directive 2009/65/EC of the European Parliament and o…
− (d) where the financial institution is an alternative investment fund manager within the meaning of Article 4 of Directive 2011/61/EU of the European Parliament and of the Council (12) or a management company within the meaning of Article 2(1) of Directive 2009/65/EC of the European Parliament and o…
+ 1. For the purposes of this Chapter, ‘firm’ means an entity referred to in point (2)(c) of Article 4(1) of Regulation (EU) No 575/2013 that provides the investment services and activities listed in points (2) and (4) of Section A of Annex I to Directive 2004/39/EC of the European Parliament and of t…
− 1. For the purposes of this Chapter, ‘firm’ means an entity referred to in point (2)(c) of Article 4(1) of Regulation (EU) No 575/2013 that provides the investment services and activities listed in points (2) and (4) of Section A of Annex I to Directive 2004/39/EC of the European Parliament and of t…
+ 
+ (7) Commission Implementing Regulation (EU) No 680/2014 of 16 April 2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council (OJ L 191, 28.6.2014, p. 1).
+ (8) Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards, (OJ L 243, 11.9.2002, p. 1).
− (7) Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards, (OJ L 243, 11.9.2002, p. 1).
+ (9) 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 (OJ L 35, 11.2.2003, p.1).
− (8) 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 (OJ L 35, 11.2.2003, p.1).
+ (10) Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions (OJ L 372, 31.12.1986, p. 1).
− (9) Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions (OJ L 372, 31.12.1986, p. 1).
+ (11) 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 (OJ L 267, 10.10.2009, p. 7).
− (10) 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 (OJ L 267, 10.10.2009, p. 7).
+ (12) Directive 2007/64/EC of the European Parliament and of the Council on payment services in the internal market (OJ L 319, 5.12.2007, p. 1).
− (11) Directive 2007/64/EC of the European Parliament and of the Council on payment services in the internal market (OJ L 319, 5.12.2007, p. 1).
+ (13) Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investments Fund Managers (OJ L 174, 1.7.2011, p. 1).
− (12) Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investments Fund Managers (OJ L 174, 1.7.2011, p. 1).
+ (14) 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).
− (13) 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).
+ (15) Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (OJ L 145,…
− (14) Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (OJ L 145,…