Article 465
Transitional arrangements for the output floor
1.
By way of derogation from Article 92(3), first subparagraph, and without prejudice to the derogation set out in Article 92(3), second subparagraph, institutions may apply the following factor x where calculating TREA:
(a)
50 % during the period from 1 January 2025 to 31 December 2025;
(b)
55 % during the period from 1 January 2026 to 31 December 2026;
(c)
60 % during the period from 1 January 2027 to 31 December 2027;
(d)
65 % during the period from 1 January 2028 to 31 December 2028;
(e)
70 % during the period from 1 January 2029 to 31 December 2029.
2.
By way of derogation from Article 92(3), first subparagraph, and without prejudice to the derogation set out in Article 92(3), second subparagraph, institutions may, until 31 December 2029, apply the following formula where calculating TREA:
For the purposes of that calculation, institutions shall take into account the applicable factor x referred to in paragraph 1.
3.
By way of derogation from Article 92(5), point (a)(ii), and without prejudice to the derogation set out in Article 92(3), second subparagraph, institutions may, until 31 December 2032, assign a risk weight of 65 % to exposures to corporates for which no credit assessment by a nominated ECAI is available and provided that those institutions’ estimates of the PD of those obligors, calculated in accordance with Part Three, Title II, Chapter 3, are no greater than 0,5 %.
EBA and ESMA, in cooperation with EIOPA, shall monitor the use of the transitional treatment laid down in the first subparagraph and assess, in particular:
(a)
the availability of credit assessments by nominated ECAIs for corporates and the extent to which that affects institutions’ lending towards corporates;
(b)
the development of credit rating agencies, barriers to entry to the market for new credit rating agencies, the rate of uptake by corporates choosing to be rated by one or more of those agencies, and impediments to the availability of credit assessments for corporates by ECAIs;
(c)
possible measures to address the impediments, taking into account differences across economic sectors and geographical areas and the development of private or publicly led solutions such as credit scoring, private ratings mandated by institutions, as well as central bank ratings;
(d)
the appropriateness of the risk-weighted exposure amounts of unrated corporate exposures and their implications for financial stability;
(e)
the approaches of third countries concerning the application of the output floor to corporate exposures and long-term level playing field considerations that could arise as a result;
(f)
compliance with related internationally agreed standards developed by the BCBS.
EBA and ESMA, in cooperation with EIOPA, shall submit a report with their findings to the Commission by 10 July 2029.
On the basis of that report and taking due account of the related internationally agreed standards developed by the BCBS, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal by 31 December 2031.
4.
By way of derogation from Article 92(5), point (a)(iv), and without prejudice to the derogation set out in Article 92(3), second subparagraph, institutions shall, until 31 December 2029, replace alpha by 1 in the calculation of the exposure value for the contracts listed in Annex II in accordance with the approaches set out in Part Three, Title II, Chapter 6, Section 3 where the same exposure values are calculated in accordance with the approach set out in Part Three, Title II, Chapter 6, Section 6 for the purposes of the total un-floored risk exposure amount.
5.
By way of derogation from Article 92(5), point (a)(ii), and without prejudice to the derogation set out in Article 92(3), second subparagraph, and provided that all conditions set out in paragraph 8 of this Article are met, Member States may allow institutions to assign:
(a)
until 31 December 2032, a risk weight of 10 % to the part of the exposures secured by mortgages on residential property up to 55 % of the property value determined in accordance with Article 125(1), first subparagraph; and
(b)
until 31 December 2029, a risk weight of 45 % to any remaining part of the exposures secured by mortgages on residential property up to 80 % of the property value determined in accordance with Article 125(1), first subparagraph, provided that the adjustment to own funds requirements for credit risk referred to in Article 501 is not applied.
6.
For the purposes of paragraph 5, point (a), where an institution holds a junior lien and there are more senior liens not held by that institution, to determine the part of the institution’s exposure that is eligible for the 10 % risk weight, the amount of 55 % of the property value shall be reduced by the amount of the more senior liens not held by the institution.
Where liens not held by the institution rank pari passu with the lien held by the institution, to determine the part of the institution’s exposure that is eligible for the 10 % risk weight, the amount of 55 % of the property value, reduced by the amount of any more senior liens not held by the institution, shall be reduced by the product of:
(a)
55 % of the property value, reduced by the amount of more senior liens, if any, both held by the institution and held by other institutions; and
(b)
the amount of liens not held by the institution that rank pari passu with the lien held by the institution divided by the sum of all pari passu liens.
7.
For the purposes of paragraph 5, point (b), where an institution holds a junior lien and there are more senior liens not held by that institution, to determine the part of the institution’s exposure that is eligible for the 45 % risk weight, the amount of 80 % of the property value shall be reduced by the amount of the more senior liens not held by the institution.
Where liens not held by the institution rank pari passu with the lien held by the institution, to determine the part of the institution’s exposure that is eligible for the 45 % risk weight, the amount of 80 % of the property value, reduced by the amount of any more senior liens not held by the institution, shall be reduced by the product of:
(a)
80 % of the property value, reduced by the amount of more senior liens, if any, both held by the institution and held by other institutions; and
(b)
the amount of liens not held by the institution that rank pari passu with the lien held by the institution divided by the sum of all pari passu liens.
8.
For the purposes of paragraph 5 of this Article, all of the following conditions shall be met:
(a)
the exposures qualify for the treatment pursuant to Article 125(1);
(b)
the qualifying exposures are risk weighted in accordance with Part Three, Title II, Chapter 3;
(c)
the residential property securing the qualifying exposures is located in the Member State that has exercised the discretion;
(d)
over the last eight years the institution’s losses in any given year, as reported by the institution pursuant to Article 430a(1), points (a) and (c), or pursuant to Article 101(1), points (a) and (c), in the version of those points applicable on 27 June 2021, on the part of the exposures secured by mortgages on residential property up to the lower of the pledged amount and 55 % of the property value, unless otherwise determined under Article 124(9), do not exceed on average 0,25 % of the sum of the exposure values of all outstanding exposures secured by mortgages on residential property;
(e)
for the qualifying exposures the institution has the following enforceable rights in the event of the default or non-payment of the obligor:
(i)
a right on the residential property securing the exposure or the right to take a mortgage on the residential property in accordance with Article 108(5), point (g);
(ii)
a right on other assets and income of the obligor either contractually or by applicable national law;
(f)
the competent authority has verified that the conditions set out in points (a) to (e) are met.
9.
Where the discretion referred to in paragraph 5 has been exercised and provided that all conditions set out in paragraph 8 are met, institutions may assign the following risk weights to any remaining part of the exposures secured by mortgages on residential property referred to in paragraph 5, point (b), until 31 December 2032:
(a)
52,5 % during the period from 1 January 2030 to 31 December 2030;
(b)
60 % during the period from 1 January 2031 to 31 December 2031;
(c)
67,5 % during the period from 1 January 2032 to 31 December 2032.
10.
Where Member States exercise the discretion referred to in paragraph 5, they shall notify EBA and substantiate their decision. Competent authorities shall notify the details of all verifications referred to in paragraph 8, point (f), to EBA.
11.
EBA shall monitor the use of the transitional treatment laid down in paragraph 5 and shall submit a report with its findings on the appropriateness of the associated risk weights to the Commission by 31 December 2028.
On the basis of that report and taking due account of the related internationally agreed standards developed by the BCBS, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal by 31 December 2031.
12.
Any extension of any of the transitional arrangements referred to in paragraphs 3, 5 and 9 of this Article, and in Articles 495b(1), 495c(1) and 495d(1), shall be limited to four years, and shall be substantiated with an evaluation equivalent to those referred to in those Articles.
13.
By way of derogation from Article 92(5), point (a)(iii) or (b)(ii), and without prejudice to the derogation set out in Article 92(3), second subparagraph, for exposures that are risk weighted using the SEC-IRBA or the Internal Assessment Approach in accordance with Article 92(4), where the part of the standardised total risk-weighted exposure amount for credit risk, dilution risk, counterparty credit risk or for market risk arising from the trading book business is calculated using the SEC-SA in accordance with Article 261 or 262, institutions shall, until 31 December 2032, apply the following factor p:
(a)
p = 0,25 for a position in a securitisation to which Article 262 applies;
(b)
p = 0,5 for a position in a securitisation to which Article 261 applies.