1.   Where the merged or acquired entities or activities have not established or maintained a loss data set because they fall not under the scope of Article 317 of Regulation (EU) No 575/2013, the acquiring institution may use the following formula to calculate the annual operational risk loss referred to in Article 316 of that Regulation:

where:

reported losses = the annual operational risk loss of the entities or activities able to report the annual operational risk loss;

coverage of reported losses =

business indicator of the institution = the business indicator resulting from the consolidation of the acquiring institution including the acquired or merged entities, or activities.

2.   The acquiring institution may use the formula set out in paragraph 1 to calculate the annual operational risk loss for up to ten financial years prior to legal finalisation of the acquisition or merger.

3.   By way of derogation from paragraph 2, where the merged or acquired entities or activities fall under the scope of Article 317 of Regulation (EU) No 575/2013, but the acquiring institution is not able to promptly adjust their loss data set, that acquiring institution may use the formula set out in paragraph 1 of this Article to calculate the annual operational risk loss referred to in Article 316 of that Regulation for up to two years following the legal finalisation of the acquisition or merger.

4.   Where the acquiring institution is not able to promptly allocate the annual operational risk loss for part or all of the acquired or merged institution or activities according to the mapping of historical loss data referred to in Article 317(7) of Regulation (EU) No 575/2013, that acquiring institution shall allocate, for a maximum of two years following the legal finalisation of the acquisition or merger, losses according to the distribution of losses in the reporting institution.