Evaluation of Credit Quality Assessment of Loans

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					                                                                                         List of discretions analysed by the EGRBCD
No.       Cross-Reference if
            not mentioned
              otherwise:
              Document                                                                                         EG RBCD proposal to proceed after
                                                  Text of the directive (summary)                                                                                           Drafting proposals                                            Additional comments
           MARKT/1050/04                                                                                            meeting September 10




         Scope
       1 Art. 73.2             Imposition of the application of capital requirements on a sub-              Leave the national discretion in place.
                               consolidated basis                                                           Important to a number of Member States




       2 Art. 60               Option for parent institution not to deduct holdings in institutions etc     Leave the national discretion in place.
                               included in sub-consolidation                                                Important to a number of Member States



       3 Art. 22 of 93/6/EEC   Investment firms waiver                                                      Leave the national discretion in place.
                                                                                                            Important to a number of Member States



         Standardised approach (mortgage lending is covered separately in
         items 71-81 below)


       4 art 80-3/Annex VI,    "for the purpose of calculating risk-weighted exposure amounts for         Leave the national discretion in place.                                                                  The text of §24 in Annex VI needs to be clarified to be consistent
         Part 1, §24           exposures to institutions, competent authorities shall decide whether to Important to a number of Member States                                                                     with art 80,3: the choice between the two methods must be kept
                               adopt the method based on the credit quality of the central government                                                                                                              within supervisors' hands.
                               of the jurisdiction in which the credit institution is incorporated or the
                               method based on the credit quality of the counterparty institution in
                               accordance with Annex VI.


       5 art 80-7              "With the exception of exposures giving rise to liabilities in the form of   Leave the national discretion in place.
                               the items referred to in points (1) to (8) of article 57(1 (items of own     Important to a number of Member States
                               funds), competent authorities may exempt from the requirements of
                               article 80-1 (risk-weight) the exposures of a credit institution to a
                               counterparty which is its parent untertaking, its subsidiary or a
                               subsidiary of its parent undertaking, provided that the following
       6 art 81-1              conditions are met assessmenta case, a risk weight of 0% the risk
                               "An external credit (...) In such may be used to determine shall be          Leave the national discretion in place. It is
                               weight of an exposure if the ECAI has been recognised by competent           an option for credit institutions, not for the
                               authorities (…)"                                                             competent authorities.

       7 art 81-3              Mutual recognition of ECAI within EU: "if an ECAI has been                   Leave the national discretion in place.                                                                Convergence issue
                               recognised as eligible by the competent authorities of a Member State,       Important to a number of Member States
                               the competent authorities of other Member States may recognise that
                               ECAI as eligible without carrying out their own evaluation process"

       8 art 82-2              Mutual recognition of mapping within EU: "when a competent                   Leave the national discretion in place.
                               authorities of a Member State have made a determination under § 1            Important to a number of Member States
                               (ECA I assessment associated with credit quality step), the competent
                               authorities of other Member State may recognise that determination
                               without carrying out their own determination process"

         Annex VI, Part 1: Risk Weight
       9 §4                    Exposures to central government and central bank denominated and             Remove the national discretion                   Exposures to Member States' central government
                               funded in domestic currency: "Subject to the discretion of competent                                                          and central bank denominated and funded in the
                               authorities, exposures to their central government and central bank                                                           domestic currency of the central government and
                               denominated and funded in the domestic currency may be assigned a                                                             central bank shall be assigned a risk weight of 0%.
                               risk weight which is lower than that indicated in § 2"


      10 §5                    Mutual recognition within EU:" When the discretion in §4 is exercised        Remove the national discretion                   Remove the provision                                  When §4 is redrafted §5 is not needed any longer.
                               by the competent authorities of one MS, the competent authorities of
                               another MS may also allow their credit institutions to apply the same
                               RW to exposures to that central government or central bank
                               denominated and funded in that currency."


      11 §6                    Recognition by Member States of the treatment of exposures to central Leave the national discretion in place.                 Replace "Member States" by "the competent
                               gvt and central bank by third countries: "When the competent          Important to a number of Member States                  authorities".
                               authorities of a third country which apply supervisory and regulatory
                               arrangements at least equivalent to those applied in the Community
                               assigns a risk weight which is lower than the indicted in §1 to 2 to
                               exposures to its central government and central bank denominated and
                               funded in the domestic currency, Member States may allow their credit
                               institutions to risk weight such exposures in the same manner."
      12 § 7                   Recognition of Export Credit Agencies' (ECA) assessments for claims Remove the national discretion                            To be recognised by competent authorities, a          Remove the option by making clear that the recognition of the
                               on central governments and central banks: "a credit assessment by                                                             credit assessment by an ECA shall meet the            ECA's credit assessment is made by the competent authorities.
                               an ECA may be recognised only if either of the following conditions are                                                       following conditions
      13 § 9                   met"
                               Exposures to regional governments or local authorities as exposures to Remove the national discretion                         Delete "exercise of this discretion" and draft        Removal of the national discretion may require a drafting
                               institutions: "Without prejudice to the other provisions of the present                                                       instead "This treatment is independent of the         amendment to article 80.
                               section, exposures to regional governments and local authorities shall                                                        exercise of discretion by competent authorities as
                               be risk weighted as exposures to institutions. Exercise of this                                                               specified in art 80. (…)"
                               discretion by competent authorities is independent of the exercise of
                               discretion by competent authorities as specified in art 80. The
                               preferential treatment for short-term exposures specified in paragraphs
                               30,31 and 36 shall not be applied."


      14 § 10                  Exposures to regional governments or local authorities as exposures to Remove the national discretion                         Delete the words "subject to the discretion of        Remove the national discretion by indicating clearly that it is the
                               central government: "Subject to the discretion of competent authorities,                                                      competent authorities" and replace "may" by           competent authorities rather than the credit institutions that will
                               exposures to regional governments and local authorities may be                                                                "shall". Add "Competent authorities will draw up      determine whether there is no difference in risk. A list of the
                               treated as exposures to the central government in whose jurisdiction                                                          and make public the list of the regional              regional governments or local authorities that are treated as
                               they are established where there is no difference in risk between such                                                        governments and local authorities to be Risk          central government shall be drawn up and released.
                               exposures because of the specific revenue-raising powers of the                                                               Weighted like central governments"
                               former, and the existence of specific institutional arrangements the
                               effect of which is to reduce their risks of default. "




      15 §11                   Mutual recognition within EU: "when the discretion in §10 is exercised       Remove the national discretion                   Remove the provision                                  When §10 is redrafted §11 is not needed any longer.
                               by the competent authorities of one MS, the competent authorities of
                               another MS may also allow their credit institutions to apply the same
                               RW to exposures to those regional government and local authorities."




      16 §12                   Treatment of exposures to regional governments or local authorities as       Leave the national discretion in place.
                               exposures to their central government or central bank by third countries     Important to a number of Member States
      17 § 15                  Claims on PSEs as if institutions: "Subject to the national discretion of    Leave the national discretion in place.
                               competent authorities, exposures to public sector entities may be            Important to a number of Member States
      18 §16                   treated as exposures to institutions (…)"
                               Mutual recognition within EU of claims on PSEs as if institutions            Leave the national discretion in place.
                                                                                                            Important to a number of Member States
      19 §17                   Recognition by Member States of the treatment of claims on PSEs as           Leave the national discretion in place.
                               if institutions by third countries                                           Important to a number of Member States
      20 § 18                  Claims on churches as if institutions                                        Leave the national discretion in place.
                                                                                                            Important to a number of Member States
      21 § 21                  Exposures to a list of multilateral development banks                        Remove the option                                Exposures to a list of multilateral development       Already taken into account in the draft directive
                                                                                                                                                             banks shall attract a 0% risk weight.
      22 § 22                  Risk weight of the portion of unpaid capital subscribed to the               Remove the option                                A risk weight of 20% shall be applied to the          Already taken into account in the draft directive
                               European Investment Fund                                                                                                      portion of unpaid capital subscribed to the
                                                                                                                                                             European Investment Fund




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                                                                                      List of discretions analysed by the EGRBCD
No.      Cross-Reference if
           not mentioned
             otherwise:
             Document                                                                                   EG RBCD proposal to proceed after
                                                Text of the directive (summary)                                                                            Drafting proposals                                           Additional comments
          MARKT/1050/04                                                                                      meeting September 10



      23 §28                  Exposures to institutions with an original effective maturity of more   Remove the option                     Exposures to institutions with an original effective Already taken into account in the draft directive
                              than three months for with a credit assessment by a nominated ECAI                                            maturity of more than three months for which a
                                                                                                                                            credit assessment by a nominated ECAI is
                                                                                                                                            available shall be assigned a risk weight
                                                                                                                                            according to the following table in accordance with
                                                                                                                                            the assignment by the competent authorities of
                                                                                                                                            the credit assessments of eligible ECAIs to six
                                                                                                                                            steps in a credit quality assessment scale.



      24 §30                  Preferential RW treatment for claims on institutions with an original   Remove the option                     Exposure to an institution with an original effective Already taken into account in the draft directive
                              maturity of 3 months or less under Option 2                                                                   maturity of three months or less for which a credit
                                                                                                                                            assessment by a nominated ECAI is available
                                                                                                                                            shall receive a risk weight according to Table 5
                                                                                                                                            (…)




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                                                                                          List of discretions analysed by the EGRBCD
No.       Cross-Reference if
            not mentioned
              otherwise:
              Document                                                                                      EG RBCD proposal to proceed after
                                                  Text of the directive (summary)                                                                                   Drafting proposals                                           Additional comments
           MARKT/1050/04                                                                                         meeting September 10



      25 § 36                  Extension to institutions of a lower RW (one category less) to claims     Leave the national discretion in place.                                                          The text of §36 has to be consistent with §4.
                               on central government and central bank in domestic currency if funded Important to a number of Member States
                               in that currency: "when competent authorities have adopted for
                               exposures to central governments and central banks the method
                               described in § 4 to 6, subject to their discretion, exposures to
                               institutions of an original maturity of 3 months or less denominated and
                               funded in the national currency may be assigned, under both methods
                               described in § 26 to 27 and 28 to 31, a risk weight that is one category
                               less favourable than the preferential risk weight, as described in § 4 to
                               6, assigned to exposures to its central government."

      26 § 39                  Exposures for which a credit assessment by a nominated ECAI is             Remove the option                          Exposures for which a credit assessment by a      Already taken into account in the draft directive
                               available                                                                                                             nominated ECAI is available shall be assigned a
                                                                                                                                                     risk weight according to the following table in
                                                                                                                                                     accordance with the assignment by the competent
                                                                                                                                                     authorities of the credit assessments of eligible
                                                                                                                                                     ECAIs to six steps in a credit quality assessment
                                                                                                                                                     scale.

      27 § 41                  Risk weight of retail exposures : "exposures that comply with the          Remove the national discretion             delete the words "subject to national discretions"   the national discretion for the authorities is removed and the option
                               criteria listed in article 47(2) may, subject to national discretion, be                                              and leave "may" as an option given to credit         is left to credit institutions. §49 should refer to article 79 (2).
                               assigned a risk weight of 75% "                                                                                       institutions: "exposures that comply with the
                                                                                                                                                     criteria listed in article 47(2) may be assigned a
                                                                                                                                                     risk weight of 75%"


      28 § 58                  Corporate past due items: " (...)the unsecured portion of any item that Remove the national discretion in § c)        Delete the last paragraph c) : "- 50%, subject to    Some group members pointed out that not making this discretion
                               is past due for more than 90 days shall be assigned a risk weight of:                                                 discretion of competent authorities, if value        available might raise level playing field concerns for EU banks
                               a)- 150% if value adjustments are less than 20% of the unsecured part                                                 adjustments are no less than 50% of the              competing in foreign markets (emerging ones in particular, but
                               of the exposure gross of value b) - 100% if value adjustments are no                                                  unsecured part of the exposure gross of value        possibly also Japan and Canada) where local authorities make
                               less than 20% of the unsecured part of the exposure gross of value                                                    adjustments."                                        this treatment available to local banks. However, it is not clear that
                               adjustments c)- 50%, subject to discretion of competent authorities, if                                                                                                    this will be a significant issue for any institution on the
                               value adjustments are no less than 50% of the unsecured part of the                                                                                                        standardised approach.
                               exposure gross of value adjustments."
      29 §60                   Where a past due item is fully secured by forms of collateral other than Leave the national discretion in place
                               those eligible for credit risk mitigation purposes, a 100% risk weight
                               may apply subject to the discretion of competent authorities based
                               upon strict operational criteria to ensure the good quality of the
                               collateral when value adjustments reach 15% of the exposure gross of
                               value adjustments.
      30 § 61                  Exposures indicated in paragraphs 43 to 47 (mortages on residential      Remove the national discretion               Exposures indicated in paragraphs 43 to 47 shall
                               property) shall be assigned a risk weight of 100% net of value                                                        be assigned a risk weight of 100% net of value
                               adjustments if they are past due for more than 90 days. If value                                                      adjustments if they are past due for more than 90
                               adjustments are no less than 20% of the exposures gross of value                                                      days. If value adjustments are no less than 20%
                               adjustments, the risk weight applicable to the remainder of the                                                       of the exposures gross of value adjustments, the
                               exposure may be reduced to 50% at national discretion                                                                 risk weight applicable to the remainder of the
                                                                                                                                                     exposure is 50%.




      31 §63                   Risk weight of high-risk categories: "Subject to the discretion of         Leave the national discretion in place                                                          Large majority in favour of keeping the national discretion as it
                               competent authorities, exposures associated with particularly high                                                                                                         appears difficult to develop common definition or criteria on what a
                               risks such as investments in venture capital firms and private equity                                                                                                      particularly high risk exposure is.Minority suggests to treat
                               investments shall be assigned a risk weight of 150%"                                                                                                                       exposures on venture capital firms separately and assign them a
                                                                                                                                                                                                          150% RW.




      32 §64                   Competent authorities may permit non past due items receiving a       Leave the national discretion in place.                                                              competent authorities may wish to give an incentive for institutions
                               150% RW (…) to be assigned a risk weight of (a) 100% if value         Important to a number of Member States                                                               to establish value adjustments for non past due high risk
                               adjustments are no less than 20% of the exposure value gross of value                                                                                                      exposures.
                               adjustments; (b) 50% if value adjustments are no less than 50% of the
                               exposure value gross of value adjustments




      33 § 65 e)               Increase of 60% LTV for eligible CRE collateral for covered bonds: "       Leave the national discretion in place.
                               (…) the competent authorities may recognise loans secured by               Important to a number of Member States
                               commercial real estate as eligible where the loan to value ratio of 60%
                               is exceeded up to a maximum level of 70% if…"

      34 § 82                  Member States may allow a risk weight of 10% for exposures to              Remove the national discretion             Delete the provision.
                               institutions specialising in the inter-bank and public-debt markets in
                               their home Member States and subject to close supervision by the
                               competent authorities where those asset items are fully completely
                               secured to the satisfaction of the competent authorities of the home
                               Member States by a item assigned a 0% or a 20% risk weight and
                               recognised by the latter as constituting adequate collateral.

      35 § 84                  Risk Weight of gold bullion held in own vaults or on an allocated basis    Remove the option                          Gold bullion held in own vaults or on an allocated   already taken into account in the draft directive
                                                                                                                                                     basis to the extent backed by bullion liabilities
                                                                                                                                                     shall receive a 0% RW
         Annex VI, Part 3: Use of ECAIs' credit assessments for the
         determination of risk weight
      36 §8                                                                                               credit the national discretion in place.
                               The competent authorities may allow credit institutions to use unsolicited Leave assessments.
                                                                                                          Important to a number of Member States

      37 §18                   Domestic and foreign currency items: "nothwithstanding §17, when an Leave the national discretion in place
                               exposure arises through a bank's participation in a loan that has been
                               extended by a Multilateral Development Bank whose preferred creditor
                               status is recognised in the market, competent authorities may allow the
                               credit assessment on the obligor's domestic currency item to be used




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                                                                                           List of discretions analysed by the EGRBCD
No.       Cross-Reference if
            not mentioned
              otherwise:
              Document                                                                                         EG RBCD proposal to proceed after
                                                     Text of the directive (summary)                                                                         Drafting proposals                          Additional comments
           MARKT/1050/04                                                                                            meeting September 10




          Internal ratings based approach (IRB)

      38 Art.85, 1+2              Roll-out: "(1): Subject to the approval of the competent authorities,     Leave the national discretion in place.
                                  implementation may be carried out sequentially across the different       Important to a number of Member States
                                  exposure classes (…) (2) Implementation as referred to §1 shall be
                                  carried out within a reasonable period of time to be agreed by the
                                  competent authorities."
      39 Art. 89, 1               Partial use : "subject to the approval of the competent authorities,      Leave the national discretion in place.
                                  credit institutions permitted to use the IRB approach (…) for one or      Important to a number of Member States
                                  more exposure classes may apply Subsection 1 (standardised
                                  approach) for the following exposures (…)

      40 Art. 89, 1a, 1b and 1c Materiality: (a) and (b): the exposures class referred to in (...) and in   Leave the national discretion in place.                               Covergence issue as to what materiality means.
                                (...) where the number of material counterparties is limited and it would
                                be unduly burdensome for the credit institution to implement a rating
                                system for those counterparties, c) exposures in non-significant
                                business units as well as exposure classes that are immaterial in
                                terms of size and perceived risk profile
      41 Art. 89, 1 f) and g)     Standardised Approach treatment for equity exposures to entities          Leave the national discretion in place.
                                  whose credit obligations qualify for a zero risk weight under the         Important to a number of Member States
                                  standardised approach (including those publicly sponsored entities
                                  where a zero weight can be applied) and g) to equity exposures
                                  incurred under legislated programmes to promote specified sectors of
                                  the economy and (...)
      42 Art 89 1. Last           Mutual recognition within EU of the use of standardised approach for       Leave the national discretion in place.
         sentence                 the exposures listed : " this paragraph shall not prevent the competent Important to a number of Member States
                                  authorities of other Member State to allow the application of the rules of
                                  Subsection 1 (standardised approach) for equity exposures which
                                  have been allowed for this treatment in other Member State.

      43 Art. 154, 3              Grandfathering for equity: "until 31/12/2017, the competent authorities   Leave the national discretion in place.                               National discretion will fall and be reviewed at the end of the
                                  of the Member States may exempt from the IRB treatment certain            Required for transitional period                                      mentioned period
                                  equity exposures held at 31 December 2007."
      44 Art. 154, 4              DoD days past due for corporate: "until 31 December 2011, for             Leave the national discretion in place.                               National discretion will fall at the end of the mentioned period
                                  corporate exposures the competent authorities of each Member State        Required for transitional period                                      anyway.
                                  may set the number of days past due that all credit institutions in its
                                  jurisdiction shall abide by under the definition of default set out in
                                  Annex VII, Part 4, §44 for exposures to such counterparts situated
      45 Art. 154-5 and 154-6     within this Member State."
                                  Transitional relaxation of data requirements: "in respect of the        Leave the national discretion in place.                                 National discretion will fall at the end of the mentioned period
                                  observation period referred to in Annex VII,Part 4, §66, Member States Required for transitional period                                         anyway.
                                  may allow credit institutions which are not permitted to use own
                                  estimates of LGDs or conversion factors to have , when they
                                  implement the IRB Approach, but at the latest at the 31 December
                                  2007, relevant data covering a period of 2 years.(...)". Same provision
                                  in respect of the period referred to in Annex VII, Part 4, §71, 85, 94


          Annex VII, Part 1: Risk weighted exposure amounts and expected loss amounts

      46 § 4                      Firm-size adjustment: "for exposures to companies where the total         Leave the national discretion in place. It is
                                  annual sales for the consolidated group of which the firm is a part is    an option for credit institutions, not for the
                                  less than 50 MEUR, credit institutions may use the following              competent authorities.
                                  correlation formula (…)
      47 § 5                      Lower risk weights for SL slotting: "the competent authorities may          Leave the national discretion in place.
                                  authorise a credit institution to generally assign preferential risk weigh Important to a number of Member States
                                  of 50% to exposures in cat 1 and a 70% risk weight to exposures in cat
                                  2, provided the credit institutions' underwriting characteristics and
                                  other risk characteristics are substantially strong for the relevant
      48 §15                      category.
                                  Use different approaches for equity: "subject to the approval of the        Leave the national discretion in place.
                                  competent authorities, a credit institution may employ different            Important to a number of Member States
                                  approaches to different portfolios where the credit institution itself uses
                                  different approaches internally. Where a credit institution is permitted
                                  to use different approaches, the credit institution shall demonstrate to
                                  the competent authorities that the choice is made consistently and is
                                  not determined by regulatory arbitrage considerations."
      49 §16                      "Notwithstanding §15, competent authorities may allow the attribution     Leave the national discretion in place.
                                  of risk weighted exposure amounts for equity exposures to ancillary       Important to a number of Member States
                                  services undertakings according to the treatment of other non-credit
                                  obligation assets.
          Annex VII, Part 2: PD, LGD and maturity
      50 § 11                     Use of implicit or explicit maturity under Foundation IRB: "(…)           Leave the national discretion in place.
                                  competent authorities may require all credit institutions in their        Important to a number of Member States
                                  jurisdiction to use M for each exposure as set out under §12."
      51 §13                      Use of 1 day maturity floor for specified exposures: " (…) for short-     Leave the national discretion in place.                               Convergence issue as to the specification of short-term
                                  term exposures specified by the competent authorities with a                                                                                    exposures. Already under scrutiny with Basel 2,5
                                  remaining maturity below one year and which are not part of the credit
                                  institutions ongoing financing of the obligor ,M shall be at least one-
                                  day"

      52 § 14                     Carve out from explicit maturity for SME exposures: " competent           Leave the national discretion in place.
                                  authorities may allow for exposures to corporates situated in the         Important to a number of Member States
                                  Community and having consolidated sales and consolidated assets of
                                  less than 50 MEUR the use of M as set out in §11. "
          Annex VII, Part 3: Exposure value


      53 § 8 and Annex III,       Exemption for OTC contracts cleared by clearing houses of the            Leave the national discretion in place.
         Part 1,on the            treatment of derivative instruments: "notwithstanding § 5, competent     Important to a number of Member States
         treatment of             authorities may exempt from the application of the methods set out in
         derivative instruments   Annex III and attribute an exposure value of zero to OTC contracts
                                  cleared by a clearing house where (...). The competent authorities shall
                                  be satisfied that the risk of a build-up of the clearing house's
                                  exposures beyond the market value of posted collateral is eliminated."




                                                                                                                                                                                           2a64dcc8-5046-4a0e-bba5-44f353517e65.xls\National discretions Seite 4/10
                                                                                         List of discretions analysed by the EGRBCD
No.       Cross-Reference if
            not mentioned
              otherwise:
              Document                                                                                         EG RBCD proposal to proceed after
                                                  Text of the directive (summary)                                                                                            Drafting proposals                                               Additional comments
           MARKT/1050/04                                                                                            meeting September 10




         Annex VII, Part 4: Minimum requirements for IRB approach

      54 § 48                  DoD days past due for retail and PSEs: " for retail and PSE                  Leave the national discretion in place.                                                                    Convergence issues as to the number of days past due for retail
                               exposures, the competent authorities of each Member States shall set Important to a number of Member States                                                                             and PSE exposures
                               the exact number of days past due that all credit institutions in its
                               jurisdiction shall abide by under the definition of defaults set out in §44,
                               for exposures to such counterparts situated within this Member State.
                               The specific number shall fall within 990-180 days and may differ
                               across product lines. (...)"

      55 § 56                  Flexibility in standards for data: "if credit institutions can demonstrate   Leave the national discretion in place.
                               to its competent authorities that for data that have been collected prior    Required for transitional period
                               to the date of implementation of this directive appropriate adjustments
                               have been made to achieve broad equivalence with the definitions of
                               default or loss, competent authorities may allow the credit institutions
                               some flexibility in the application of the required standards for data."



         CREDIT RISK MITIGATION (Mortgage lending is covered
         separately in items 71-81 below)

         Annex VIII, Part 1: Eligibility
      56 § 8                   Recognition as collateral of unrated, listed institution securities: "debt   Leave the national discretion in place. It is
                               securities issued by credit institutions which securities do not have a      an option for credit institutions, not for the
                               credit assessment by an eligible ECAI may be recognised as eligible          competent authorities.
                               collateral if they fulfil the following criteria ..."
      57 §21                   Other physical collateral: "the competent authorities may recognise as Leave the national discretion in place.                                                                          Convergence issue as to the definition of liquidity of physical
                               eligible collateral physical items of a type other than those types                                                                                                                     collateral
                               indicated above if satisfied as to the following: a) the existence of liquid
                               markets (…) and b) the existence of well-established, publicly available
                               market prices for the collateral (...)
      58 § 24 and              Recognition of life insurance policies as funded protection: "life           Leave the national discretion in place. It is
         Part 2, § 13          insurance policies pledged to the lending credit institution may be          an option for credit institutions, not for the
         Part 3, § 81          recognised as eligible credit protection"                                    competent authorities.


      59 § 25 and              Recognition as funded protection of institution instruments                  Leave the national discretion in place. It is                                                              Majority wish to tighten the use of the option by the institutions by
         Part 3, § 82          repurchased on request as funded protection                                  an option for credit institutions, not for the                                                             adding minimum requirements related to the solvency of the
                                                                                                            competent authorities.                                                                                     issuer (e.g risk weight <20%) and the liquidity of the instruments
         Annex VIII, Part2: Minimum requirements

      60 §16                   Treatment where an exposure is protected by a guarantee which is             Leave the national discretion in place. It is    Redraft § c): delete the words "the competent
                               counter-guaranteed by a central government or central bank (…): the          an option for credit institutions, not for the   authorities are satisfied that" and replace by "the
                               exposure may be treated as protected by a guarantee by the entity in         competent authorities.                           institutions can demonstrate that"
                               question provided the following conditions are satisfied : a); b) and c)
                               the competent authority is satisfied that the cover is robust and that
                               nothing in the historical evidence...in question.




      61 §18                   Discretion for supervisors to recognise „provisional payment‟              Remove the national discretion                      in the case of guarantees (…), the requirements
                               guarantees in the context of recognised „mutual guarantee schemes‟                                                            in paragraph (a) shall be considered to be
                               and in the context of guarantees backed by national authorities or                                                            satisfied where...: (a) "the lending credit institution
                               public sector entitities: "in the case of guarantees provided in the                                                          has the right to obtain in a timely manner (...) ", (b)
                               context of mutual guarantee schemes recognised for these purposes                                                             : " the lending credit institution can demonstrate
                               by the competent authorities or provided by or counter-guranteed by                                                           that the loss-protecting effects of the guarantee,
                               entities referred to in §16, the requirements in § (a) may be considered                                                      including losses resulting from the non-payment
                               to be satisfied where either of the following conditions are met: (a) the                                                     which the borrower is obliged to make, justify
                               competent authorities are satisfied that the lending credit institution                                                       such treatment."
                               has the right to obtain in a timely manner a provisional payment by the
                               guarantor calculated to represent a robust estimate of the economic
                               loss, including losses resulting from the non-payment of interest and
                               other types of payment which the borrower is obliged to make, likely to
                               be incurred by the lending credit institution proportional to the coverage
                               of the guarantee; (b) the competent authorities are otherwise satisfied
                               as to the loss-protecting effects of the guarantee, including losses
                               resulting from the non-payment of interest and other types of payment
                               which the borrower is obliged to make"



         Annex VIII, Part 3: Calculating the effects of credit risk mitigation

      62 § 12                  Recognition of internal models for calculation adjusted exposure             Leave the national discretion in place.
                               amounts (E*) for repo-style transactions subject to a master netting         Important to a number of Member States
                               agreement: "as an alternative to using the supervisory volatility
                               adjustments approach or the own estimates volatility adjustments
                               approach in calculating the fully adjusted exposure value (E*) resulting
                               from the applicaation of an eligible master netting agreement covering
                               repurchase transactions, securities or commodities lending or
                               borrowing transactions ...., credit institutions may be permitted to use
                               an internal models approach which ..."



      63 § 43                  Permission for institutions to use „own estimates‟ of volatility             Remove the national discretion                   "the competent authorities shall permit credit            the national discretion for the authorities is removed and the option
                               adjustments: "the competent authorities may permit credit institutions                                                        institutions complying with …to use their own             is left to credit institutions
                               complying with the requirements set out in § 48 to 57 to use their own                                                        estimates of calculating the volatility adjustments
                               estimates of volatility for calculating the volatility adjustments to be                                                      to be applied to collateral and exposures"
                               applied to collateral and exposures."

      64 § 44                  Own estimate for „each category of security‟ investment grade or             Leave the national discretion in place                                                                     the text needs to be clarified so as to specify what is meant by
                               above: "when debt securities have a credit assessment from a                                                                                                                            "investment grade": what credit quality step in the standardised
                               recognised ECAI equivalent to investment grade or better, the                                                                                                                           approach does "Investment grade" refer to?
                               competent authorities may allow credit institutions to calculate a
                               volatility for each category of security".


      65 § 59                  Conditions for applying a 0% volatility adjustment: "in relation to          Remove the national discretion                   In relation to repurchase transactions and
                               repurchase transactions and securities lending or borrowing                                                                   securities lending or borrowing transactions,
                               transactions where …and where the conditions set out below are                                                                where (…) and where the conditions set out
                               satisfied, the competent authorities may allow credit institutions not to                                                     below are satisfied, credit institutions shall not
                               apply the volatility adjustments calculated under §35 to 58 and to                                                            apply the volatility adjustments specified above
                               instead apply a 0% volatility adjustment. "                                                                                   and shall instead apply a 0% volatility adjustment.




      66 § 59 (h)              List of core markets participants required as a condition for applying a     Remove the national discretion                   Replace "may" by "shall". Also, the text shall allow This could only be removed as a national discretion if the Directive
                               0% volatility adjustment                                                                                                      competent authorities to assess which                required competent authorities to draw up and publish a list of
                                                                                                                                                             counterparts are core market participants and to     core market participants.
                                                                                                                                                             draw up and publish a list of core market
                                                                                                                                                             participants.




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         Large exposures

      67 Art. 110, 3           Reporting of concentrated exposures to the issuers of collateral taken:       Leave the national discretion in place.                        Reconsider the provision once the directive on large exposure,
                               "Member States may require the reporting of concentrated exposures                                                                           currently under review by the European Commission, will have
                               to the issuers of collateral taken by the credit institutions".                                                                              been revised. The same rationale for articles 111,113,
                                                                                                                                                                            115,116,117_2c)




      68 Art. 114, 1           Use of Financial Collateral Comprehensive Method in calculation of            Leave the national discretion in place.                        Reconsider the provision once the directive on large exposure,
                               exposure amounts for purposes of LE limits: " subject to § 3, for the                                                                        currently under review by the European Commission, will have
                               purposes of calculating the value of exposures for the purposes of                                                                           been revised. The same rationale for articles 111,113,
                               article 111 (1) to (3), Member States may, in respect of credit                                                                              115,116,117_2c)
                               institutions using the Financial Collateral Comprehensive Method (...),
                               permit such credit institutions to use a value lower than the value of
                               exposure ...


      69 Art. 114, 2           Allow Advanced IRB institutions to use own estimates of collateral            Leave the national discretion in place.                        Reconsider the provision once the directive on large exposure,
                               effects in calculation of exposure amounts for purposes of LE limits: "                                                                      currently under review by the European Commission, will have
                               a credit institution permitted to use own estimates of LGDs and                                                                              been revised. The same rationale for articles 111,113,
                               conversion factors for an exposure class under articles 84 to 89 may                                                                         115,116,117_2c)
                               be permitted, where it is able to the satisfaction of the competent
                               authorities to estimate the effects of financial collateral on their
                               exposures separately from other LGD-relevant aspects, to recognise
                               such effects in calculating the value of exposures for the purposes of
                               article 113 (3)."


      70 Art. 114, 4           "where the effects of collateral are recognised under the terms of §1 or Leave the national discretion in place.                             Reconsider the provision once the directive on large exposure,
                               2 above, MS may treat any covered part of the exposure as having                                                                             currently under review by the European Commission, will have
                               been incurred to the collateral issuer rather than to client"                                                                                been revised. The same rationale for articles 111,113,
                                                                                                                                                                            115,116,117_2c)


         Mortgage lending

         Annex VI, Part 1: Standardised Approach, Risk Weight
      71 § 46                  Waiver eligibility criterion residential real estate (RRE): "competent        Leave the national discretion in place.
                               authorities may dispense with the condition contained in § 45(b) for          Important to a number of Member States
                               exposures fully and completely secured by mortageges on residential
                               property which is situated within their territory, if they have evidence
                               that a well-developed and long-established residential real estate
                               market in present in their territory with loss rates which are sufficiently
                               low to justify such treatment".


      72 §47                   Recognition of the treatment in §46 within EU: "when the discretion   Leave the national discretion in place.
                               contained in §46 is exercised by the competent authorities of a       Important to a number of Member States
                               Member State, the competent authorities of another Member State may
                               allow their credit institutions to apply a risk weight of 35% to such
                               exposures fully and completely secured by mortages on residential
                               property".


      73 § 48                  50% RW for commercial real estate (CRE): "subject to the discretion      Leave the national discretion in place.
                               of the competent authorities, exposures fully and completely secured,    Important to a number of Member States
                               to the satisfaction of the competent authorities by mortgages on offices
                               or other commercial premises situated within their territory may be
                               assigned a risk weight of 50%"
      74 § 49                  50% RW for Finnish Housing CRE                                             Leave the national discretion in place.
                                                                                                          Important to a number of Member States
      75 § 50 + art 153        Property leasing transactions: "Subject to the discretion of competent     Leave the national discretion in place.
                               authorities, exposures related to property leasing transactions            Required for transitional period.
                               concerning offices or other commercial premises situated in their
                               territory and governed by statutory provisions whereby the lessor
                               retains full ownership of the rented assets until the tenant exercises his
                               option to purchase, may be assigned a risk weight of 50%. " Art 153:
                               (...) the competent authorities may until 31 December 2012 allow a
                               50% risk weighting to be applied without the application of Annex VI,
                               Part 1, § 55 & 56.


      76 § 55                  Waiver eligibility criterion CRE: "competent authorities may dispense         Leave the national discretion in place.
                               with the condition contained in § 51 (b) for exposures fully and              Important to a number of Member States
                               completely secured by mortgages on commercial property which is
                               situated within their territory if they have evidence that (...) with loss
                               rates do not exceed the following limits (...)

         Annex VIII, Part 1: Credit risk mitigation, Eligibility
      77 § 16                  Waiver eligibility criterion RRE: "the competent authorities may waive        Leave the national discretion in place.
                               the requirement for their credit institutions to comply with condition (b)    Important to a number of Member States
                               in § 13 for exposures secured by residential real estate property
                               situated within the territory of that Member State if the competent
                               authority have evidence that (...).
      78 § 17                  Waiver eligibility criterion CRE: "the competent authorities may waive        Leave the national discretion in place.
                               the requirement for their credit institutions to comply with condition (b)    Important to a number of Member States
                               in § 13 for exposures secured by commercial real estate property
                               situated within the territory of that Member State if the competent
                               authority have evidence that (...).
      79 §19                   Application of the waiver in §17 within EU: "the competent authorities        Leave the national discretion in place.
                               of a Member State, which do not use the waiver in §17, may recognise          Important to a number of Member States
                               as eligible commercial real estate property recognised as eligible in
                               another Member State by virtue of the waiver".


         Annex VIII, Part 3: Calculating the effects of credit risk mitigation
      80 § 74                  Cap for RRE: "subject to the requirements of this paragraph and §75       Leave the national discretion in place.
                               and as an alternative to the treatment in § 69 to 73, the competent       Important to a number of Member States
                               authorities of a Member State may autorise credit institutions to apply a
                               50% risk weighting to the part of the exposure fully collateralised by
                               RRE property or CRE property situated within the territory of the
      81 § 74                  Member State if they have evidence that (...)
                               Cap for CRE: "subject to the requirements of this paragraph and §75       Leave the national discretion in place.
                               and as an alternative to the treatment in § 69 to 73, the competent       Important to a number of Member States
                               authorities of a Member State may autorise credit institutions to apply a
                               50% risk weighting to the part of the exposure fully collateralised by
                               RRE property or CRE property situated within the territory of the
                               Member State if they have evidence that (...)




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           Securitisation

       82 Article 95.1          Where significant credit risk associated with securitised exposures             Leave the discretion in place. It is an option                                                         One group member pointed out that as a national
                                has been transferred from the originator credit institution, in                 for credit institutions, not for the competent                                                         discretion, competent authorities would have to assess
                                accordance with the terms of Annex IX, Part 2, that credit institution          authorities.                                                                                           to what extent a credit risk transfer is significant
                                may …
       83 Article 96.1          To calculate the risk-weighted exposure amount of a securitisation              Leave the discretion in place. It is an option
                                position, risk weights shall be applied to the exposure value of the            for credit institutions, not for the competent
                                position in accordance with Annex IX, based on the credit quality of            authorities.
                                the position, which may be determined by reference to an ECAI credit
                                assessment or otherwise, as set out in Annex IX.


       84 Article 96.3          Where a securitised position is subject to funded or unfunded credit      Leave the discretion in place. It is an option
                                protection the risk-weight to be applied to that position may be modified for credit institutions, not for the competent
                                …                                                                         authorities.

       85 Article 97.2          The competent authorities shall recognise an ECAI as eligible for the  Leave the national discretion in place.                                                                         Difficult to define "market acceptance"
                                purpose of paragraph 1 only if they are satisfied as to its compliance Important to a number of Member States
                                with the requirements … and that it has a demonstrated ability in the
                                area of securitisation, which may be evidenced by a strong market
       86 Article 97.3          acceptance.
                                Recognition of ECAI within EU for securitisation purposes: "if an ECAI Leave the national discretion in place.                                                                         Convergence issue
                                has been recognised as eligible by the competent authories of one      Important to a number of Member States
                                Member State for the purpose of paragraph I, the competent
                                authorities of the other Member States may recognise that ECAI as
                                eligible for those purposes without carrying out their own evaluation
       87 Article 98.2          process"
                                Recognition of mapping within EU for securitisation purposes: When     Leave the national discretion in place.                                                                         Convergence issue
                                the competent authorities of a Member State have made a                 Important to a number of Member States
                                determination under paragraph I, the competent authorities of the other
                                Member States may recognise that determination without carrying out
                                their own determination process.
       88 Article 100.3         In the case of securitisation subject to an early amortisation provision        Leave the national discretion in place.                                                                IT was noted that this option was introduced on purpose in order
                                of retail exposures … the competent authorities may apply a treatment           Important for a number of Member States.                                                               to allow application of US excess spread rules to european
                                which approximates closely to that prescribed in Annex IX, Part 4,                                                                                                                     products (where other triggers are used). Option to maintain for
                                paragraphs 27 to 30 for determining the conversion figure indicated.                                                                                                                   level playing field with US.
           Annex IX, Part 2: Minimum requirements for recognition of
           significant risk transfer and calculation of risk-weighted exposure
           amounts and expected loss amounts for securitised exposures.
       89 § 1                   The originator credit institution of a traditional securitisation may   Leave the discretion in place. It is an option
                                exclude securitised exposures from the calculation of risk-weighted     for credit institutions, not for the competent
                                exposure amounts and expected loss amounts if significant credit risk authorities.
                                associated with the securitised exposures has been transferred to third
                                parties and the transfer complies with the following conditions: ...
       90 § 1 (ii)              The clean-up call may only be exercised when 10% or less of the                 Leave the discretion in place. It is an option
                                original value of the exposures securitised remains unmortised…                 for credit institutions, not for the competent
                                                                                                                authorities.
       91 § 2                   An originator credit institution of a synthetic securitisation may       Leave the discretion in place. It is an option
                                calculate risk-weighted exposure amounts, and, as relevant, expected for credit institutions, not for the competent
                                loss amounts, for the securitised exposures … if significant credit risk authorities.
                                has been transferred to third parties either through funded or unfunded
                                credit protection and the transfer complied with the following
                                conditions: ...
           Annex IX, Part 3: External credit assessment

       92 § 7                   Where credit protection eligible under Articles 90 to 93 is provided            Leave the discretion in place. It is an option
                                directly to the SSPE, and that protection is reflected in the credit            for credit institutions, not for the competent
                                assessment of a position by a nominated ECAI, the risk weight                   authorities.
                                associated with that credit assessment may be used. …
           Annex IX, Part 4: Calculation
       93 § 4                   Where a securitised position is subject to funded credit protection, the Leave the discretion in place. It is an option
                                exposure value of that position may be modified …                        for credit institutions, not for the competent
                                                                                                         authorities.
       94 § 9                   For an originator credit institution or sponsor credit institution, the risk-   Leave the discretion in place. It is an option
                                weighted exposure amount calculated in respect of the positions in a            for credit institutions, not for the competent
                                securitisation may be limited to the risk-weighted exposures amounts            authorities.
                                which would be calculated for the securitised exposures had they not
                                been securitised subject to the presumed application of a 150% risk
                                weight to all past due items and...
       95 § 10                  Competent authorities may permit a credit institution having an unrated Remove the national discretion and make it               Credit institution having an unrated securitisation   The fact that the composition of “the pool of exposures securitised
                                securitisation position to apply the treatment set out in paragraph 11 … an option for credit institutions                       position may apply the treatment set out in           is known at all time” is considered sufficient for the purpose of
                                                                                                                                                                 paragraph 11 for calculating the risk-weighted        §11.
                                                                                                                                                                 exposure amount for that position provided that
       96 § 11                  A credit institution may apply the weighted risk-weight that would be           Leave the discretion in place. It is an option   credit institution demonstrate that the composition
                                applied to the securised exposures Articles 78 to 83 by a credit                for credit institutions, not for the competent
                                institution holding the exposures multiplied by a concentration ratio….         authorities.
       97 § 12                  Subject to the availability of a more favourable treatment by virtue of         Leave the discretion in place. It is an option
                                the provisions concerning liquidity facilities in Paragraphs 14 to 16, a        for credit institutions, not for the competent
                                credit institution may apply to securitisation positions meeting the            authorities.
                                conditions set out in paragraph 13 a risk weight that is the greater of (i)
                                100% or (ii) ....
       98 § 14                  When the following conditions are met, to determine its exposure value          Leave the discretion in place. It is an option
                                a conversion figure of 20% may be applied to the nominal amount of a            for credit institutions, not for the competent
                                liquidity facility with an original maturity of one year or less and a          authorities.
                                conversion figure of 50% may be applied to the nominal amount of a
                                liquidity facility with an original maturity of more than one year.
       99 § 15                  To determine its exposure value a conversion figure of 0% may be                Leave the discretion in place. It is an option
                                applied to the nominal amount of a liquditiy facility that may be drawn         for credit institutions, not for the competent
                                only in the event of a general market disruption …                              authorities.

      100 § 16                  To determine its exposure value, a conversion figure of 0% may be               Leave the discretion in place. It is an option
                                applied to the nominal amount of a liquidity facility that is                   for credit institutions, not for the competent
                                unconditionally cancellable provided ….                                         authorities.
      101 § 33                  Where credit protection is obtained on a securitisation position, the           Leave the discretion in place. It is an option
                                calculation of risk-weighted exposure amounts may be modified in                for credit institutions, not for the competent
                                accordance with Annex VIII.                                                     authorities.
      102 § 34                  As provided in Article 66 (2), in respect of a securitisation position in       Leave the discretion in place. It is an option
                                respect of which a 1250% risk weight applies, credit institutions may,          for credit institutions, not for the competent
                                as an alternative to including the position in their calculation of risk-       authorities.
                                weighted exposure amounts, deduct from own funds the exposure
                                value of the position.
                                For these purposes, the calculation of the exposure value may reflect
                                eligible funded protection in a manner consistent with paragraph 33.
      103 § 39                  A credit institution other than a originator credit institution or a sponsor    Leave the discretion in place. It is an option
                                credit institution may only use the supervisory formula with the                for credit institutions, not for the competent
                                approval of the competent authorities.                                          authorities.
      104 §42                   Use of „internal assessment approach‟ for unrated ABCP exposures:            Leave the national discretion in place                                                                    A majority of members was in favour of removing the option as the
                                "subject to the approval of the competent authorities, when the                                                                                                                        conditions listed in the paragraph are sufficient. However, others
                                following conditions are satisfied, a credit institution may attribute to an                                                                                                           observed that an element of discretion was appropriate to deal
                                unrated position in an asset backed commercial paper programme a                                                                                                                       with new and innovative securitisation structures.
                                dreived rating as laid down in §43"

      105 § 42,+B156 last       The requirement for the assessment methodology to be publicly                   Leave the national discretion in place.
          paragraph             available may be waived by the competent authorities …                          Important for a number of Member States.
      106 § 44                  For an originator credit institution, a sponsor credit institution, or for      Leave the discretion in place. It is an option
                                other credit institutions which can calculate KIRB, the risk-weighted           for credit institutions, not for the competent
                                exposure amounts calculated in respect of its position in a                     authorities.
                                securitisation may be limited to that which would produce a capital
                                requirement under Article 75(a) equal to the sum of 8% of the risk-
                                weighted exposure amounts which would be produced if the
                                securitised assets had not been securitised ...




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           MARKT/1050/04                                                                                          meeting September 10



      107 § 47                 … If the portfolio share associated with the largest exposure, C1, is       Leave the discretion in place. It is an option
                               available, the credit institution may compute N as 1/C1.                    for credit institutions, not for the competent
                                                                                                           authorities.
      108 § 49                 Credit risk mitigation on securitisation positions may be recognised in     Leave the discretion in place. It is an option
                               accordance with paragraphs 58 to 60.                                        for credit institutions, not for the competent
                                                                                                           authorities.
      109 § 51                  For securitisation involving retail exposures, the competent authorities   Leave the national discretion in place. I                             Further criteria requirements would be discussed later on.The
                               may permit the Supervisory Formula Method to be implemented using                                                                                 table referred to by H and v should be added in the annex.
                               the simplifications:H=0 and v=0
      110 § 52                 Credit risk mitigation on securitisation position may be recognised in      Leave the discretion in place. It is an option
                               accordance with paragraphs 58, 59 and 61, 65.                               for credit institutions, not for the competent
                                                                                                           authorities.




                                                                                                                                                                                         2a64dcc8-5046-4a0e-bba5-44f353517e65.xls\National discretions Seite 8/10
                                                                                             List of discretions analysed by the EGRBCD
No.        Cross-Reference if
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               otherwise:
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      111 § 54                     A conversion figure of 20% may be applied to the nominal amount of a         Leave the discretion in place. It is an option
                                   liquidity facility that may only be drawn in the event of a general market   for credit institutions, not for the competent
                                   disruption …                                                                 authorities.
      112 § 55                     A conversion figure of 0% may be applied to the nominal amount of a          Leave the discretion in place. It is an option
                                   liquidity facility that meets the conditions set out in paragraph 16.        for credit institutions, not for the competent
                                                                                                                authorities.
      113 § 56                     When it is not practical for the credit institution to calculate the risk-   Leave the national discretion in place.
                                   weighted exposure amounts for the securitised exposures as if they
                                   had not been securitised, a credit institution may, on an exceptional
                                   basis and subject to the consent of the competent authorities,
                                   temporarily be allowed to apply the following method for the calculation
                                   of risk-weighted exposure amounts for an unrated securitisation
                                   position in the form of a liquidity facility.
      114 § 57                     The highest risk weight that would be applied under Articles 78 to 83 to     Leave the discretion in place. It is an option
                                   any of the securitised exposures had they not been securitised may be        for credit institutions, not for the competent
                                   applied to the securitised position represented by the liquidity facility.   authorities.
                                   To determine the exposure value of the position a conversion figure of
      115 § 60                     When risk-weighted exposure amounts are calculated using the                 Leave the discretion in place. It is an option
                                   Ratings Based Method, the exposure value and/or risk-weighted                for credit institutions, not for the competent
                                   exposure amount for a securitisation position in respect of which credit     authorities.
                                   protection has been obtained may be modified in accordance with the
                                   provisions of Annex VIII as they apply for the calculation ....
      116 § 64                     If the credit risk mitigation covers the "first loss" or losses on a         Leave the discretion in place. It is an option
                                   proportional basis on the securitisation position, the credit institution    for credit institutions, not for the competent
                                   may apply the provisions in paragraphs 61 to 63.                             authorities.
      117 § 70                     The risk-weighted exposure amount of a securitisation position to            Leave the discretion in place. It is an option
                                   which a 1250% risk weight is applied may be reduced by 12.5 times            for credit institutions, not for the competent
                                   the amount of any value adjustments made ….                                  authorities.
      118 § 71                     The risk-weighted exposure amount of a securitisation position may be Leave the discretion in place. It is an option
                                   reduced by 12.5 times the amount of any value adjustments made by     for credit institutions, not for the competent
                                   the credit institution ….                                             authorities.
      119 § 72                     As provided in Article 66 (2), in respect of a securitisation position in    Leave the discretion in place. It is an option
                                   respect of which a 1250% risk weight applies, credit institutions may,       for credit institutions, not for the competent
                                   as an alternative to including the position in their calculation of risk-    authorities.
                                   weighted exposure amounts, deduct …
      120 § 73                     For the purpose of paragraph 73 (a) the exposure value of the position       Leave the discretion in place. It is an option
                                   may be derived from the risk-weighted exposure amounts …; (b) the            for credit institutions, not for the competent
                                   calculation of the exposure value may reflect eligible funded protection     authorities.
                                   in a manner constent …; (c)where the Supervisory Formula Method is
                                   used and ... the position may be treated as two positions ...


           Trading book
      121 Art 18.2 of 93/6/EEC     Conditions under which a TB may be considered small: "(..)                   Leave the discretion in place. Important to a
                                   competent authorities may allow institutions to calculate the capital        number of Member States.
                                   requirements for their trading book business in accordance with art 75
                                   (a) of Directive 2000/12 and … rather than in accordance with
                                   Annexes I and II of directive 93/06 where the size of the trading book
                                   business meets the following requirements (..)
      122 Art 19.2 of 93/6/EEC     Specific risk requirements for covered bonds: "by derogation to § 3          Leave the discretion in place. Important to a
                                   and 14 of Annex I,Member States may set a specific risk requirement          number of Member State.
                                   for any bonds falling…
      123 Directive 93/6,          subject to competent authorities discretion, long and short positions in     Remove the discretion by adding criteria on      add "which are (i) considered by the institutions      The text of §15 a) needs to be clarified so that it specifies what is
          Annex I, § 15d           assets issued by institutions subject to the capital adequacy                solvency and liquidity                           concerned to be sufficiently liquid and (ii) whose     meant by "investment grade": what credit quality step
                                   requirements set forth in dir 2000/12, to be considered as qualifying                                                         investment quality is according to the institution's   does"investment grade" refer to?
                                   item                                                                                                                          own discretion, at least equivalent to that of the
                                                                                                                                                                 assets refered to under a) above
      124 Annex I § 35 of          Reduced specific risk requirement for certain portfolios of equities         Leave the discretion in place. Important to a
          93/6/EEC                                                                                              number of Member States.
      125 Annex I § 52 of          Recognition of third country CIUs                                            Leave the discretion in place. Important to a
          93/6/EEC                                                                                              number of Member States.


           Operational
           risk

      126 Directive 93/6           Limited licence exemption from explicit OpR charge                           Leave the discretion in place. Important to a
          Art. 20 (2) and (3)                                                                                   number of Member States.




      127 Directive 93/6           Consolidated calculation using EBR for limited licence groups              Leave the discretion in place. Important to a
          Art. 24                                                                                             number of Member States.
      128 Directive 93/6 art 25.   Exemption of art 24 above: "by derogation to art 2(2), competent           Leave the discretion in place. Important to a
                                   authorities may exempt investment firms from the consolidted capital       number of Member States.
                                   requirements established there, provided that all the investment firms
                                   in the group fall within the investment firms in art 20(2) and (3) and the
                                   group does not include credit institutions.
      129 Article 102.4-           Competent Authorities may allow credit institutions to use a                 Leave the discretion in place. Important to a
          Directive 2000/12        combination of approaches in accordance with Annex X, Part 4.                number of Member States.



      130 Article 104.3            For certain business lines, the competent authorities may under certain Leave the discretion in place. Important to a                                                                Members requested clearer reference to Annex X.
                                   conditions authorise a credit institution to use an alternative indicator number of Member States.
                                   for determining its capital requirement for operational risk.


      131 Article 105.4            Where an EU parent institution and its subsidiaries or an EU parent          Leave the discretion in place. Important to a
                                   financial institution and its subsidiaries use an Advanced                   number of Member States.
                                   Measurement Approach on a unified basis for the parent and its
                                   subsidiaries, the competent authorities may allow the qualifying criteria
                                   set out in Annex X, Part 3 to be met by the parent and its subsidiaries
                                   considered together.




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                                                                                         List of discretions analysed by the EGRBCD
No.        Cross-Reference if
             not mentioned
               otherwise:
               Document                                                                                       EG RBCD proposal to proceed after
                                                   Text of the directive (summary)                                                                          Drafting proposals                Additional comments
            MARKT/1050/04                                                                                          meeting September 10




          Annex X, Part 1: Basic indicator approach
      132 § 3                   Calculation of the relevant indicator: When audited figures are not        Leave the discretion in place. It is an option
                                available, business estimates may be used.                                 for credit institutions, not for the competent
                                                                                                           authorities.
      133 § 6                   These elements may need to be adjusted to reflect the qualifications … Leave the discretion in place. It is an option
                                                                                                       for credit institutions, not for the competent
                                                                                                       authorities.

          Annex X, Part 2: Standardised approach
      134 § 5                   Calculation of the relevant indicator: When audited figures are not        Leave the option in place. It is an option for
                                available, business estimates may be used.                                 credit institutions, not for the competent
                                                                                                           authorities.

      135 § 7                   Competent authorities may authorise a credit institutions to calculate     Leave the national discretion in place.
                                its capital requirement for operational risk using an alternative          Important to a number of Member State.
                                standardised approach, as set out in paragraphs 9 to 16.
      136 § 8 (d)               Credit institutions may use internal pricing methods to allocate the       Leave the option in place. It is an option for
                                indicator between business lines. Costs generated in one business line     credit institutions, not for the competent
                                which are imputable to a different business line may be reallocated to     authorities.
                                the business line to which they pertain, for instance by using a
                                treatment based on internal transfer costs between the own business
      137 § 9                   lines.
                                The competent authorities may authorise the credit institution to use an   Leave the discretion in place. Important to a
                                alternative indicator for the business lines: retail banking and           number of Member State.
                                commercial banking
          Annex X, Part 3: Advanced measurement approaches
      138 §11                   Correlations in operational risk losses across individual operational risk Leave the discretion in place. It is an option
                                estimates may be recognised only if credit institutions can demonstrate for credit institutions, not for the competent
                                to the satisfaction of the competent authorities that their systems for    authorities.
                                measuring correlations are sound, implemented with integrity, and take
                                into account the uncertainty surrounding any such correlation
                                estimates (...)"

          Annex X, Part 4: Combined use of different methodologies
      139 § 1                   A credit institution may use an Advanced Measurement Approach in           Leave the discretion in place. Important to a
                                combination with either the Basic Indicator Approach or the                number of Member State.
                                Standardised Approach, subject to the following conditions: ...
      140 § 2                   On a case by case basis, the competent authority may impose the            Leave the discretion in place until the
                                following additional conditions: …                                         European Commission has indicated to
                                                                                                           what extent the text of the directive derives
                                                                                                           from the Basel II New Accord and why.
      141 § 3                   A credit institution may use a combination of the Basic Indicator          Leave the national discretion in place.
                                Approach and the Standardised Approach only in exceptional                 Important for a number of Member States.
                                circumstances such as the recent acquisition of new business which
                                may require a transition period for the roll out of the standardised
                                approach




          Supervisory review process
      142 Art. 124.4            Frequency/intensity/scope of the Evaluation Process                        Leave the national discretion in place.
                                                                                                           Important for a number of Member States.


          Market discipline
      143 Art. 72.3             Exemption of EU subs of third-country groups from P3 disclosures: "        Leave the national discretion in place.
                                the competent authorities responsible for exercising supervision on a      Important for a number of Member States.
                                consolidated basis pursuant to articles 125 to 131 may decide not to
                                apply in full or in part § 1 &2 to the credit institutions which are
                                included within comparable disclosures provided on a consolidated
                                basis by parent undertaking established in a third country".




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Description: Evaluation of Credit Quality Assessment of Loans document sample