Article 36
Deductions from Common Equity Tier 1 items
1.
Institutions shall deduct the following from Common Equity Tier 1 items:
(a)
losses for the current financial year;
(b)
intangible assets with the exception of prudently valued software assets the value of which is not negatively affected by resolution, insolvency or liquidation of the institution;
(d)
for institutions calculating risk-weighted exposure amounts using the Internal Ratings Based Approach (the IRB Approach), the IRB shortfall, where applicable, calculated in accordance with Article 159;
(e)
defined benefit pension fund assets on the balance sheet of the institution;
(f)
direct, indirect and synthetic holdings by an institution of own Common Equity Tier 1 instruments, including own Common Equity Tier 1 instruments that an institution is under an actual or contingent obligation to purchase by virtue of an existing contractual obligation;
(g)
direct, indirect and synthetic holdings of the Common Equity Tier 1 instruments of financial sector entities where those entities have a reciprocal cross holding with the institution that the competent authority considers to have been designed to inflate artificially the own funds of the institution;
(h)
the applicable amount of direct, indirect and synthetic holdings by the institution of Common Equity Tier 1 instruments of financial sector entities where the institution does not have a significant investment in those entities;
(i)
the applicable amount of direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1 instruments of financial sector entities where the institution has a significant investment in those entities;
(j)
the amount of items required to be deducted from Additional Tier 1 items pursuant to Article 56 that exceeds the Additional Tier 1 items of the institution;
(k)
the exposure amount of the following items which qualify for a risk weight of 1 250 %, where the institution deducts that exposure amount from the amount of Common Equity Tier 1 items as an alternative to applying a risk weight of 1 250 %:
(i)
qualifying holdings outside the financial sector;
(ii)
securitisation positions, in accordance with point (b) of Article 244(1), point (b) of Article 245(1) and Article 253;
(iii)
free deliveries, in accordance with Article 379(3);
(iv)
positions in a basket for which an institution cannot determine the risk weight under the IRB Approach, in accordance with Article 153(8);
(l)
any tax charge relating to Common Equity Tier 1 items foreseeable at the moment of its calculation, except where the institution suitably adjusts the amount of Common Equity Tier 1 items insofar as such tax charges reduce the amount up to which those items may be used to cover risks or losses;
(m)
the applicable amount of insufficient coverage for non-performing exposures;
(n)
for a minimum value commitment referred to in Article 132c(2), any amount by which the current market value of the units or shares in CIUs underlying the minimum value commitment falls short of the present value of the minimum value commitment and for which the institution has not already recognised a reduction of Common Equity Tier 1 items.
2.
EBA shall develop draft regulatory technical standards to specify the application of the deductions referred to in points (a), (c), (e), (f), (h), (i) and (l) of paragraph 1 of this Article and related deductions referred to in points (a), (c), (d) and (f) of Article 56 and points (a), (c) and (d) of Article 66.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
3.
EBA shall develop draft regulatory technical standards to specify the types of capital instruments of financial institutions and, in consultation with the European Supervisory Authority (European Insurance and Occupational Pensions Authority) (EIOPA) established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 ( 27 ), of third country insurance and reinsurance undertakings, and of undertakings excluded from the scope of Directive 2009/138/EC in accordance with Article 4 of that Directive that shall be deducted from the following elements of own funds:
(a)
Common Equity Tier 1 items;
(b)
Additional Tier 1 items;
(c)
Tier 2 items.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
4.
EBA shall develop draft regulatory technical standards to specify the application of the deductions referred to in point (b) of paragraph 1, including the materiality of negative effects on the value which do not cause prudential concerns.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
5.
For the sole purpose of calculating the applicable amount of insufficient coverage for non-performing exposures in accordance with paragraph 1, point (m), of this Article, by way of derogation from Article 47c and after having notified the competent authority, the applicable amount of insufficient coverage for non-performing exposures purchased by a specialised debt restructurer shall be zero. The derogation set out in this subparagraph shall apply on an individual basis and, in the case of groups in which all institutions qualify as specialised debt restructurers, on a consolidated basis.
For the purposes of this paragraph, ‘specialised debt restructurer’ means an institution that, during the preceding financial year, complied with all of the following conditions on both an individual and on a consolidated basis:
(a)
the main activity of the institution is the purchase, management and restructuring of non-performing exposures in accordance with a clear and effective internal decision process implemented by its management body;
(b)
the accounting value measured without taking into account any credit risk adjustments of its own originated loans does not exceed 15 % of its total assets;
(c)
at least 5 % of the accounting value measured without taking into account any credit risk adjustments’ of its own originated loans constitutes a total or partial refinancing, or the adjustment of relevant terms, of the purchased non-performing exposures that qualifies as a forbearance measure in accordance with Article 47b;
(d)
the total value of the assets of the institution does not exceed EUR 20 billion;
(e)
the institution maintains, on an ongoing basis, a net stable funding ratio of at least 130 %;
(f)
the sight deposits of the institution do not exceed 5 % of the total liabilities of the institution.
The specialised debt restructurer shall notify the competent authority, without delay, if one or more of the conditions set out in the second subparagraph are no longer met. Competent authorities shall notify EBA at least on an annual basis of the application of this paragraph by institutions under their supervision.
EBA shall establish, maintain, and publish a list of specialised debt restructurers. EBA shall monitor the activity of specialised debt restructurers and shall report by 31 December 2028 to the Commission on the results of such monitoring and, where appropriate, shall advise the Commission as to whether the conditions to qualify as ‘specialised debt restructurer’ are sufficiently risk-based and appropriate in view of favouring the secondary market for non-performing loans, and assess if additional conditions are necessary.
( 27 ) OJ L 331, 15.12.2010, p. 48.