Notice 2025 on the Calculation and Publication of Prudential Ratios under CRD4 and MREL Requirements

SECRETARIAT GENERAL
International Affairs Department
Banking International Affairs Service
" NOTICE 2025 "
Calculation and Publication Methods of Prudential Ratios within the Framework of CRD4 and MREL Requirement (Version of December 17, 2025) Questions regarding this document should be addressed to the Banking International Affairs Service of the General Secretariat of the Prudential Control and Resolution Authority (email: 2773- UT@acpr.banque-france.fr). The document is downloadable on the ACPR website – Professional Communication section

Introduction 4
1.1 Purpose of this document 4
1.2 Clarifications on applicability and monitoring rules 6
1.2.1 Entities subject to regulation 7
1.2.2 Prudential consolidation scope 12
1.2.3 Individual basis applicability and exemption conditions 13
1.3 Reporting modalities 16
1.3.1 General framework 16
1.3.2 Phased introduction of FRTB 18
Solvency Ratios 21
2.1. General principles 21
2.1.1. Reminder on ratio calculation principle 21
2.1.2 Process for authorizing internal approaches 21
2.2 Capital calculation methods 23
2.2.1 Introduction 23
2.2.2 Transitional implementation phase 27
2.2.3 Technical standards on capital 28
2.2.4 Main EBA questions-and-answers (Q&A) on capital 29
2.2.5 Financing companies 33
2.3 Solvency ratio denominator calculation methods 33
2.3.1 Output floor 33
2.3.2 Credit risk 34
2.3.3 Securitization 56
2.3.4 Counterparty risk 63
2.3.5 Market risks 65
2.3.6 Operational risk 74
2.3.7 Delivery-versus-payment risk 79
2.3.8 Credit valuation adjustment (CVA) risk 79
2.4 Main questions-and-answers (Q&A) regarding prudential reporting submissions concerning
the solvency ratio 80
Large Exposures 81
3.1 General principles 81
3.1.1 Calculation of exposure value 81
3.1.2 Definition of connected client groups 82
3.3 Declaration of large exposures 82
3.4 Calculation of additional capital requirements for large exposures in the trading book 83
3.5 Taking into account credit risk mitigation techniques 83
3.6 Exemptions 84
3.5.1 Exemptions provided for by the CRR 84
3.5.2 Exemptions resulting from national options or supervisor discretions 84
3.6 Supervisory equivalence and regulatory requirements for large exposures purposes 85
3.7 Main EBA questions-and-answers (Q&A) on large exposures 85
Leverage Ratio 86

Calculation and Publication Methods of Prudential Ratios within the Framework of CRD4IV and MREL Requirement – 20254 General Secretariat of the Prudential Control and Resolution Authority 3
4.1 General principles 86
4.2 Measurement of total exposure (denominator of the leverage ratio) 86
4.2.1 Main exemptions 87
4.3 Main EBA questions-and-answers (Q&A) on the leverage ratio 88
5. Minimum Requirement for Own Funds and Eligible Liabilities (MREL) 89
5.1 General principles 89
5.2 Applicable provisions and competent authorities 90
5.3 Subject entities 90
5.4 Calibration of the global MREL requirement 94
5.5 Subordination requirements 94
5.6 Eligibility rules 96
5.7 "Daisy chains" regime applicable to intermediate entities 96
5.8 Consequences of MREL insufficiency 97
5.9 Reporting modalities 98
5.10 Applicable technical standards and EBA questions-and-answers (Q&A) 99
6. Liquidity and Funding Requirements 101
6.1 LCR 101
6.1.1 LCR: Liquid Assets (« High Quality Liquid Assets » – HQLA) 102
6.1.2 Cash Inflows and Outflows 106
6.2 NSFR 108
6.2.1 Introduction to NSFR 108
6.2.2 Main applicable weightings 109
6.2.3 Simplified NSFR 114
6.3 Applicable technical standards for liquidity-related requirements 114
6.4 Main EBA questions-and-answers (Q&A) on liquidity 115
7. Interest Rate Risk in the Banking Book (Interest rate risk in the banking
book, IRRBB) and Credit Spread Risk in the Banking Book (Credit spread risk in the banking book, CSRBB) 117
7.1 Main EBA questions-and-answers (Q&A) on Interest Rate Risk in the Banking
Book 118
8. Financial Communication under Pillar 3 119
8.1 General principles 119
8.2 Clarifications on information to be published 121
8.2.1 Financing companies 122
8.3 Pillar 3 Data Hub Project 122

Calculation and Publication Methods of Prudential Ratios within the Framework of CRD4IV and MREL Requirement – 20254 General Secretariat of the Prudential Control and Resolution Authority 4

Introduction
1.1 Purpose of this document
This document (the “Notice”) is intended, in the interest of transparency and predictability1, to indicate how the Prudential Control and Resolution Authority (“the ‘‘ACPR’’) intends to monitor compliance with regulations relating to the monitoring of solvency, large exposures, leverage, liquidity, and the declaration of charges encumbering assets. These requirements stem from Directive 2013/36/EU (the “CRD4”) and Regulation (EU) No 575/2013 (the “CRR”), amended notably by Regulation (EU) 2019/876 (the “CRR2”) and Directive (EU) No 2018/878 (the “CRD5”)2 and by Regulation (EU) No 2019/2033 (“IFR”) and Directive (EU) No 2019/2034 (“IFD”)3 which constitute the body of “CRD4” texts transposing Basel Committee standards and guidelines into European law. This Notice now also includes the main provisions of the new banking package, composed of Regulation (EU) 2024/1623 (the “CRR3”) and Directive (EU) 2024/1619 (the “CRD6”), finalizing the transposition of Basel III agreements into EU law4. The Notice also includes, along with delegated or implementing regulations, decisions of the European Commission or still guidelines and recommendations of the European Banking Authority (“the ‘‘EBA’”). The Notice finally also includes developments relating to the minimum requirement for own funds and eligible liabilities (MREL) set out in the EU Directive on the recovery and resolution of credit institutions 2014/59/EU as amended by Directive 2019/879/EU (“BRRD”) insofar as this requirement relies on definitions contained in the CRR. This Notice has an explanatory character and cannot prevail over the provisions of the applicable regulation. CRD4, as well as the new banking package CRD6/CRR3, contain a number of national options and discretions designed to allowpermettant the adaptation of European rules to the specifics of each national market for measures of general scope or to the specifics of each institution or group for measures of individual scope. Within the framework of the Single Supervisory Mechanism (“SSM” or Single Supervisory Mechanism - “SSM”) and pursuant in particular to Regulation (EU) No 1024/2013 conferring specific tasks on the European Central Bank (the “ECB”) pertaining to prudential supervision policies of credit institutions, the ECB has become, pursuant to Articles 4 and 6 of the aforementioned regulation, the competent authority for credit institutions considered important (so-called “significant”) since November 4, 2014. The ECB is therefore directly responsible for the implementation of options and discretions falling under the competent authority5 for these institutions. For entities not falling within the scope of direct ECB supervision, the competent authority remains the ACPR. For institutions falling under the Single Supervisory Mechanism and not falling under the direct supervision of the ECB, the latter ensures indirect supervision aimed at ensuring convergence of national approaches, notably through the development of common
methodologies and supervisory standards, as well as, where appropriate, recommendations on the treatment of individual cases. The Notice aims to clarify the regulation applicable to credit institutions, concerned investment firms6, financing companies, third-country branches and financial holding companies (“the Institutions”), without prejudice to positions taken by the ECB. As regards Institutions subject to CRR/CRD4 and falling under its supervision, the ACPR intends in principle to act on the basis of these explanations in a manner 1 Cf. ACPR Transparency Policy 2 Regulation No 2019/876 (the “CRR2”) and Directive No 2019/878 (the “CRD5”) (together the “CRDV Legislative Package”) modify respectively the CRR and CRD4. They were adopted on May 20, 2019 and entered into force on June 27, 2019. Most new provisions apply as of December 29, 2020 for CRD5 and June 28, 2021 for CRR2. 3 Regulation (EU) No 2019/2033 (“IFR”) and Directive (EU) No 2019/2034 (“IFD”) were adopted on November 27, 2019 and entered into force on December 26, 2019. Most new provisions apply as of June 26, 2021 for IFR and IFD-transposed provisions. 4 Most provisions of CRR3 entered into application on January 1, 2025. The end of the CRD6 transposition deadline is set for January 11, 2026. 5 Options at the disposal of the Member State are implemented by legislative or regulatory means. 6 See section 1.2.1 ‘‘entities subject to regulation’’

Calculation and Publication Methods of Prudential Ratios within the Framework of CRD4IV and MREL Requirement – 20254 General Secretariat of the Prudential Control and Resolution Authority 5 proportionately, taking into account recommendations, decisions and other requirements imposed by the ECB in its role as supervisor.
Following the adoption of the CRD6/CRR3 banking package, the ECB updated the regulatory instruments related to the implementation of national options and discretions (“O&D”), designed to adapt the application of European regulation to national specifics, and whose implementation is left to the discretion of competent authorities. The final version of these O&D instruments was published on July 25, 2025. The O&D instruments for Significant Institutions (SI) are applied directly by the ECB within the framework of its supervisory activities. For Less Significant Institutions (LSI), the ACPR translates the guideline (general scope) and recommendation (individual scope) for institutions falling under its direct competence by, respectively, Decision 2025-C-33 (which repeals and replaces Decision 2022-C-21) and this present Notice on prudential ratios. The ECB published in March 2022 Guideline (EU) 2022/508 and Recommendation ECB/2022/13 on the implementation of national options and discretions for credit institutions that do not fall under its direct supervision, thereby updating the 2017 guideline and recommendation with the new provisions of CRR2. This ECB Recommendation ECB/2022/13 is largely aligned via cross-references to the SSM Guide on options and discretions applicable to Significant Institutions, also updated in March 2022 with the new provisions of CRR2. Unless otherwise stated, the elements of the Guide detailed in this Notice apply to both Significant and Less Significant Institutions. Credit institutions not falling under the direct supervision of the ECB and other entities subject to regulation refer to ACPR College Decision No 2022-C-21 of July 13, 2022 repealing Decision 2021-C-237. For general scope exemptions provided concerning the treatment of certain exposures as large exposures, France opted for the application of Article 493 of the CRR, derogating from Article 400, paragraphs 2 and 3. The application modalities of Article 493 are carried out in accordance with the Order of December 23, 2013. In the context of the narrower national margin of appreciation resulting from the uniform European rulebook (Single Rulebook) constituted by the entire body of texts of the CRD4 legislative package, the Notice clarifies the ACPR’s positions regarding provisions left to the discretion of competent authorities and brings to the attention of entities subject to regulation the ACPR’s views on the treatment to be reserved for the specifics of the French market. The Notice also lists binding technical standards (Binding Technical Standards – “BTS”) published on the EBA website8, which complement or implement CRD4: Regulatory Technical Standards (“RTS”) and Implementing Technical Standards (“ITS”). It also presents a selection of structural questions-and-answers extracted from the EBA Questions & Answers (“Q&A”) site, the Q&As aiming to ensure harmonized application of regulatory provisions in Europe. BTS adopted by the European Commission take the
form of delegated regulations or implementing regulations which are directly applicable throughout the European Union. BTS published on the EBA website and transmitted to the European Commission for adoption10, although not legally binding, are considered a reference for the ACPR as long as the European Commission has not issued a negative opinion and except for BTS related to prudential reporting and financial information. As for BTS in draft state and not yet published, the current approach of the ACPR applies, according to a principle of continuity. EBA guidelines are issued to competent authorities or financial bodies, which make every effort to comply with them. EBA guidelines listed in Annex D are related to the calculation methods of prudential ratios within the framework of CRD4: the EBA “Comply or Explain” procedure obliges competent authorities to specify to the EBA their intention to comply or not with these guidelines. The 7 This paragraph will be updated in early 2025, following the adoption by the ECB of new instruments on CRR3 Options and Discretions, in consultation at the time of this Notice. 8 BTS for which hyperlinks appear in the Notice have the status “Draft Final” (finalized by the EBA but awaiting adoption by the European Commission), or “Final” (adopted by the European Commission). Non-finalized BTS are simply mentioned, without hyperlink. BTS under development can be consulted on the EBA website. 9 Competent authorities apply the answers given to Q&As whose official reference is the EBA website. A list of EBA technical standards is presented in Annex E. At the date of publication of this Notice, the revision of Q&As published by the EBA to ensure that their application continues to be relevant with the modifications introduced by CRR2, CRD 5, IFR and IFD is underway – The most up-to-date information is on the EBA website. 10 Status “Final draft adopted by the EBA and submitted to the European Commission” on the EBA website.

Calculation and Publication Methods of Prudential Ratios within the Framework of CRD4IV and MREL Requirement – 20254 General Secretariat of the Prudential Control and Resolution Authority 6 compliance notifications or intentions of the ACPR and the ECB to the EBA are published by the EBA on its website. Those decided by the ACPR also appear on the ACPR website, as well as, where appropriate, decisions extending to financing companies. Finally, under the conditions provided for in Article 4(3) of Council Regulation (EU) No 1024/2013 of October 15, 2013, the ECB has the possibility in particular to adopt regulations directly applicable to all or part of French credit institutions, whether they are said to be “significant” or not, as well as decisions, recommendations and guidelines. The main publications and provisions adopted in this framework by the ECB in connection with the calculation and publication methods of prudential ratios within the framework of CRD5 are reproduced in Annex F of this Notice. The elements contained in this summary document are published for general information purposes; they do not prejudge individual decisions that could be taken by the ACPR or the ECB, based on the particular situations they might be called upon to examine. They do not cover all aspects of the calculation of the aforementioned ratios, but deal with points for which explanations appeared desirable. Its content, which relies on questions that have been transmitted by Institutions to the General Secretariat of the Prudential Control and Resolution Authority (the “SGACPR”) or dealt with at the European level, is therefore not exhaustive. It consequently aims to evolve over time and to be completed according to questions that will arise with the progressive implementation of the regulation and the development of banking and financial practices. It should be noted, moreover, that the different categories of information that supervisors must publish to ensure transparency in the implementation of the CRR and CRD4 pursuant to Article 143(1) of CRD4 and Regulation (EU) No 650/2014 are centralized by the EBA on its website, under the tab ‘supervisory disclosure’. Entities subject to regulation will find there notably the lists of public sector actors (mentioned in Article 116(4) of the CRR) treated as exposures to regional or central administrations, the lists of derogatory weightings applied in certain jurisdictions for the calculation of capital requirements for credit risk, the transposition tables of the CRD4 directive or still transition rules for the application of CRR and other options and discretions exercised by supervisors. The Notice primarily addresses clarifications relating to Pillar 1 (calculation of solvency, large exposure, leverage and liquidity ratios). The elements related to the implementation conditions of Pillar 2 (the “prudential supervision process”) are fixed by the Order of November 3, 2014 relating to the prudential supervision and
risk assessment process of banking service providers and certain concerned investment firms. This notice does not detail the expectations of entities subject to regulation regarding ICAAP (Internal Capital Adequacy Assessment Process) and ILAAP (Internal Liquidity Adequacy Assessment Process) nor the prudential evaluation methodology (SREP – Supervisory Review and Evaluation Process). It presents the broad lines of the framework applicable to interest rate risk management in the banking book (IRRBB) and the various elements published by the EBA or the ECB on this subject. Regarding Pillar 3 (Financial Communication), only a reminder of applicable texts is reproduced in this Notice. The Notice also addresses requirements relating to the minimum requirement for own funds and eligible liabilities (MREL) stemming from the BRRD and Regulation 806/2014/EU associating a single resolution mechanism (SRM) with CRD4 IV (the “SRM Regulation”). The Notice details certain modifications introduced by “Daisy Chains II” in the SRM Regulation, entered into force in 2024 and transposed in France in 2025. The notable Q&As mentioned in this Notice were adopted under the empire of CRR1 and 2. Under CRR3, they remain a priori applicable until the EBA has repealed or replaced them if necessary. This Notice 2025, adopted by the ACPR College on December 15, 2025, replaces as of the day following its publication in the ACPR official register its previous version published by the SGACPR on December 30, 2024. The Notice is downloadable on the ACPR internet site – (professional communication section).
1.2 Clarifications on applicability and monitoring rules
The level of application of requirements regarding solvency, large exposures, leverage ratio, liquidity and declaration of charges encumbering assets is defined in Part 1, Title II of the CRR whose Chapter 1 clarifies the application of requirements on an individual basis and whose Chapter 2 clarifies the application of requirements on a consolidated basis as well as the methods and scope of prudential consolidation. Section 1.2.2 clarifies the notion of prudential consolidation scope.

Notice 2025 on the Calculation and Publication of Prudential Ratios under CRD4 and MREL Requirements

General Secretariat of the Prudential Control and Resolution Authority

In principle, supervised entities must be subject to dual supervision, on an individual and consolidated basis where applicable, but the CRR provides, under certain conditions, possibilities for competent authorities to grant exemptions from individual requirements. The procedures for exemptions regarding solvency ratios, large exposures, and leverage are specified in sections 1.2.3.1 and 1.2.3.2. The procedures for exemptions regarding liquidity (formation of liquidity sub-groups) are specified in section 1.2.3.3.

Establishments must submit their requests for individual options to the ACPR, which will process these requests in light of the conditions provided for by European regulation. This is particularly the case for:

exemptions from various prudential requirements on an individual basis for the credit institutions and investment firms concerned (Articles 6, 7, 8, 10 and 11 of the CRR);
the derogation from the requirement to deduct holdings in insurance undertakings for financial conglomerates (Article 49(1) of the CRR);
preferential treatments in liquidity (Part VI of the CRR and the LCR Delegated Regulation);
and the possibility of being classified as a "Small and Non-Complex Institution" (see section 1.2.1.8).

The scope of application of the MREL requirement is defined in Article 1 of the BRRD and Article 2 of the MRU Regulation.

1.2.1 Supervised Entities

1.2.1.1 Supervised entities under CRR
The framework established by the CRR applies to entities subject to supervision under the CRD, namely credit institutions and certain investment firms concerned as defined in Article 4(1) and Article 2.5 of the CRR. By exception, the CRR/CRD IV do not apply to the entities listed in Article 2(5) of the CRD IV.

1.2.1.2 "Investment Firms"
The legislative package composed of Directive (EU) 2019/2034 (IFD) and Regulation (EU) 2019/2033 (IFR) aims to adapt supervisory tools to the specificities and heterogeneity of investment firms. Since its entry into application on June 26, 2021, the supervision of these firms is based on a classification system that maintains certain investment firms within the prudential framework provided by the CRR and CRD4 and specified by this Notice, while other firms fall under a new tailor-made regime with specific prudential requirements.

Thus, the largest and most complex investment firms (so-called "Class 1") are integrated into the new definition of credit institution in Article 4.1(1) of the CRR, due to their systemic importance, and are required in France to obtain a credit and investment institution authorization (Article 8 bis of the CRD IV and Article L.516-1 of the Monetary and Financial Code (CMF)). In application of Regulation (EU) No 1024/2013 on the Single Supervisory Mechanism (SSM) and the SSM Framework Regulation No 468/2014, they are supervised by the ECB. Other types of large and complex investment firms ("Class 1 bis") are also treated as Institutions (Article 2.5 of the CRR) and apply the CRD IV when their size or activities present risks to stability (Article 1.2 of the IFR) or on a voluntary basis (opt-in in application of Article 1.5 of the IFR). These latter differ from Class 1 firms in that they remain under national supervision and retain their status as investment firms. The provisions applicable to other categories of investment firms outside of Class 1 and Class 1 bis are not addressed by this Notice.

The following table sets out a classification of investment firms under the CRR/CRD:

This classification applies to all investment firms providing services 3 or 6 of Annex I Section A of the MiFID Directive, excluding commodity dealers and emission allowance market participants, collective investment undertakings, and insurance companies.

Types of Firm & Thresholds	Conditions
Class 1 Investment Firm (alternative criteria) - Authorized as a credit and investment institution – CRR Article 4.1.1.b	1. The total value of the firm's consolidated assets established in the Union, including all its subsidiaries and branches established in a third country, reaches or exceeds 30 billion euros.
	2. The total value of the firm's assets established in the Union, including all its subsidiaries and branches established in a third country, is less than 30 billion euros, and the firm is part of a group in which the total value of consolidated assets of all firms in this group established in the Union, including all their subsidiaries and branches established in a third country, which each taken individually have total assets less than 30 billion euros and which carry out any of the activities referred to in Annex I, Section A, points 3 and 6, of Directive 2014/65/EU, reaches or exceeds 30 billion euros.
	3. The total value of the firm's assets established in the Union, including all its subsidiaries and branches established in a third country, is less than 30 billion euros and the firm is part of a group in which the total value of consolidated assets of all firms in the group carrying out any of the activities referred to in Annex I, Section A, points 3 and 6, of Directive 2014/65/EU reaches or exceeds 30 billion euros.
	Subject to the decision of the consolidated supervisory authority, in concert with the college of supervisory authorities, to take such a decision in order to address possible risks of circumvention and potential risks to the financial stability of the Union.
Class 1 bis Investment Firm (a) (alternative criteria) - Subject to CRD IV and IFR/IFD (treated as Institutions under CRR Article 2.5) and IFD	1. The total value of the consolidated assets of the investment firm reaches or exceeds 15 billion euros, excluding the value of individual assets of any subsidiary established outside the Union carrying out any of the activities referred to in Annex I, Section A, points 3 and 6, of Directive 2014/65/EU.
	2. The total value of consolidated assets of the investment firm is less than 15 billion euros and the investment firm is part of a group in which the total value of consolidated assets of all firms in the group, which each taken individually have total assets less than 15 billion euros and which carry out any of the activities referred to in Annex I, Section A, points 3 and 6, of Directive 2014/65/EU, reaches or exceeds 15 billion euros, excluding the value of individual assets of any subsidiary established outside the Union carrying out any of the activities referred to in Annex I, Section A, points 3 and 6, of Directive 2014/65/EU.
	3. The total value of consolidated assets of the investment firm reaches or exceeds 5 billion euros, and the firm carries out any of the activities listed in Annex I, Section A, points 3 and 6, of Directive 2014/65/EU.
	At the decision of the ACPR (Article 5.2 of the IFD), when one or more of the following criteria apply:

the failure or difficulties of the investment firm could lead to systemic risk;
the firm is a clearing member;
the competent national authority considers this justified taking into account (i) the importance of the IF for the economy, (ii) the importance of their cross-border activities and (iii) their interconnection with the financial system. |
| Class 1 bis Investment Firm (b) - Subject to CRD4 (treated as Institutions under CRR Article 2.5) and IFR/IFD: Opt-in (IFR Article 1.5) | Not falling under any of the cases above. Part of a group comprising a credit institution and subject to consolidated supervision under the CRR, at the request of the IF and provided that this has no negative impact on own funds and is not motivated by regulatory arbitrage. |

1 The method for calculating the 30 billion EUR threshold is defined in the draft EBA RTS/2021/17 standard drafted in application of the IFR (pending adoption by the Commission).

1.2.1.3 Financial Holding Companies and Mixed Financial Holding Companies

Certain financial holding companies (FHCs) or mixed financial holding companies (MFHCs) are now placed directly within the scope of supervisory powers provided for by the CRD4 and CRR to ensure compliance with consolidated requirements.

Article 21bis of the CRD4 Directive provides for:

A specific approval procedure for the FHC/MFHC by the consolidated supervisory authority (within the meaning of Article 111 of that Directive), transposed into Section III of Chapter VII of Title I of Book V of the CMF;
The direct responsibility of the identified FHC/MFHC for consolidated requirements (L. 517-1 and L. 517-4-1 of the CMF);
An exemption regime from the approval procedure (L. 517-14 of the CMF).

In order to ensure consistency of the regulation applicable to an investment firm and, where applicable, the investment holding company that owns it, CRR III corrects, with application from entry into force, Article 10a of the CRR to clarify that parent investment holding companies of investment firms subject to the CRR/CRD under Articles 1(2) and 1(5) of the IFR must be considered as FHCs for the application of consolidated prudential requirements.

Establishments controlled by a parent FHC or MFHC in a Member State not requiring approval continue to comply with CRR obligations based on the consolidated situation of the FHC.

CRR III brings modifications to certain definitions that may impact the qualification of FHCs:

The definition of financial holding companies (Article 4(1)(20) of the CRR) is clarified to:

Clarify that the criteria are indeed alternative: the qualification must be retained as soon as the financial establishments of the group represent more than 50% of the own funds, assets, revenues or personnel of the company on the basis of its consolidated situation;
Allow authorities to ignore one of the criteria if the indicator in question does not give a true and fair view of the main activities and main risks of the group. Before taking such a decision, the authority must consult the EBA.

The definition of financial institution (Article 4(1)(26)) is modified and now includes ancillary service firms: these must therefore now be taken into account as financial institutions to verify the qualification thresholds for financial holding companies under Article 4(1)(20) of the CRR.

Note that certain provisions related to the transposition of CRD6, not yet published, could affect FHCs or MFHCs regarding their prudential consolidation scope. These provisions will be included in the next update of the Notice.

1.2.1.4 Intermediate Parent Undertakings (IPU)

The requirement to implement a European intermediate parent undertaking for third-country groups (Intermediate Parent Undertaking or IPU) is set out in Article L. 517-4-2 of the CMF (Article 21ter of the CRD4) when they operate through more than one establishment in the Union and the total value of assets in the Union of the third-country group reaches 40 billion EUR (threshold mentioned in Article L. 517-11 of the CMF).

Instruction No. 2021-I-16 (taken in compliance with the EBA guideline EBA/GL/2021/08 to which the ACPR has decided to comply) regarding the monitoring of the threshold constituting an IPU specifies that the concerned Establishments must evaluate, prospectively and at least once a year, whether the total value of assets of the third-country group to which they belong in the Union is likely to cross this threshold for four consecutive quarters. Said Instruction also specifies the conditions under which the concerned Establishments must notify the competent authorities in case of prospective or actual crossing of the threshold.

Exceptionally, it is possible to establish two IPUs (Article L 517-11 paragraph 2 of the CMF) in case (1) of incompatibility with activity separation obligations imposed by the authorities of the third country in which the ultimate parent company of the group is located or (2) if it is demonstrated that the establishment of two IPUs allows for improving the efficiency of a potential resolution.

On October 27, 2022, the EBA adopted an opinion (EBA/Op/2022/12) to clarify Article 21ter of the CRD and the GL (EBA/GL/2021/08) on threshold monitoring and cooperation between authorities, including:

The evaluation criteria that should be applied by competent authorities in case of a request to establish two IPUs, highlighting that its approval is subject to a restrictive interpretation;
The application process, including the identification of applicants and the competent authority authorized to receive the application, information requirements and the content of the application;
The dialogue processes between competent authorities and other authorities involved in the process, such as the third-country home authority, and resolution and market authorities;
Expectations regarding governance, risk management and outsourcing outside the European sub-group, highlighting the importance of having adequate local risk management capabilities.

The opinion recalls that establishments should not systematically or substantially carry out back-to-back transactions whose origin is an exposure in the EU. It recalls how the CVA risk associated with intragroup transactions should be capitalized.

1.2.1.5 Overseas Establishments

Credit institutions and investment firms concerned in New Caledonia, French Polynesia, and the Wallis and Futuna Islands as well as in Saint Pierre and Miquelon are subject to:
o The provisions of the CMF taken for the transposition of CRD4, under the conditions and with the adaptations provided for in Book VII of the CMF; o The provisions of the CRR, under the conditions fixed by the Order of December 15, 2023 setting the conditions for the application of European Union law in banking and financial matters in Saint Pierre and Miquelon, New Caledonia, French Polynesia and the Wallis and Futuna Islands.

1.2.1.6 Branches of Credit Institutions from Non-EEA Countries ("Third Countries")

In accordance with the Order of September 11, 2015, branches established on French territory by credit institutions having their registered office in a State that is not a member of the European Union nor a party to the Agreement on the European Economic Area, are required to comply with the provisions applicable to credit institutions under the CRR. Thus, these branches must be considered as supervised entities within the meaning of this Notice.

However, branches of credit institutions from third countries may, under the conditions provided for in II of Article L. 511-41 of the CMF, benefit from a total or partial exemption regarding solvency, liquidity, leverage, large exposures and "Pillar III" requirements.

Note that CRD6 recasts the prudential regime for third-country branches, with distinct minimum capital and liquidity requirements from those provided by the CRR for credit institutions. The revision of the French framework, currently under development, will be reflected in the next update of the Notice in 2026 – the entry into force of the provisions being planned for 2027.

1.2.1.7 Financing Companies

The prudential provisions applicable to financing companies are defined in the Order of December 23, 2013, modified by the Order of September 11, 2015 regarding the prudential regime for financing companies and more recently by the Order of April 24, 2019. Financing companies are subject to all CRR requirements and regulations and decisions of the European Commission adopted under the CRR and CRD IV regarding solvency and large exposures, with the exception of certain components of own funds taken from previous national provisions and adapted to take into account the specificities of financing companies (mutual guarantee funds, special depreciation allowances and latent credit lease reserves, off-balance sheet assets and commitments granted to directors and major shareholders).

They are not subject to the leverage and liquidity ratios defined in the CRR but are subject to the liquidity coefficient defined in the Order of May 5, 2009 modified by the Order of November 3, 2014 and by the Order of April 24, 2019.

Furthermore, insofar as the provisions of the CRD IV Directive have been extended to financing companies in the context of the transposition of this Directive, they are notably subject to various requirements regarding own funds buffers.

The regulatory reporting obligations of financing companies stem from ACPR Instruction No. 2014-I-10 modified by Instruction No. 2015-I-23.

In accordance with Article 11 of the aforementioned Order of December 23, 2013, for the application of paragraph 5 of Article 119 and paragraph 1 of Article 129 of the CRR, "the prudential requirements to which financing companies are subject are deemed comparable in terms of solidity to those applicable to institutions".

In the context of EBA Q&A No. 620, the criterion provided for in Article 81(1)(a) of the CRR is met, financing companies being subject to the CRR under national regulation. Thus, minority interests from subsidiaries of financing companies can be taken into account in the consolidated own funds of the establishment or the parent financing company, subject to compliance with criteria (b) and (c) of said Article and provided that the own fund items in question comply with the eligibility rules provided by the CRR.

Special case of Financing Companies with dual authorization:

Financing Companies also holding an investment firm authorization: if these firms are subject to the IFR and IFD, they must satisfy the prudential requirements of both the CRD IV and the IFR/IFD.
The same applies to Financing Companies that also hold a payment institution authorization: they must satisfy the prudential requirements of both the CRD IV and the Order of October 29, 2009 on the prudential regulation of payment institutions and the PSD2 Directive.

1.2.1.8 Small and Non-Complex Institutions

The criteria for defining a small and non-complex institution are set out in Article 4(1)(145) of the CRR. Establishments meeting all these criteria may, if they wish, benefit from this qualification by notifying the ACPR in advance. The ACPR will indicate to the establishment the procedure to follow to benefit from this qualification and will confirm the qualification based on an analysis of the size, interconnection, complexity or risk profile of the Establishment, in accordance with Article 4(1)(145)(i) of the CRR. The qualification of small and non-complex institutions is applicable at the consolidated and individual levels. Small and non-complex institutions must notify the ACPR of any change calling into question this qualification.

Small and non-complex institutions benefit from simplified financial communication rules and may, if they wish and with prior authorization from the ACPR, proceed to the simplified calculation of their Net Stable Funding Ratio (NSFR) according to Chapters 6 and 7 (see part 6.2.3 of this Notice). To benefit from this derogation, small and non-complex institutions must submit a request for NSFR application to the ACPR in accordance with Article 428sexter of the CRR. The request for application submitted to the ACPR must be signed by one of the responsible directors and must conform to the model shown below (to be adapted in case the request concerns an Establishment on an individual basis only).

11 Directive (EU) 2015/2366 of November 25, 2015 (PSD2) concerning payment services in the internal market;

« As a follow-up to the notification received on [date] from the General Secretariat of the Prudential Control and Resolution Authority, we acknowledge the qualification of [name of the CONSOLIDATING INSTITUTION] and [NAME OF SUBSIDIARY(IES)] as small and non-compliant institutions, as defined in Article 4.1(145) of Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) 575/2013.

Consequently, wishing to benefit [name of the CONSOLIDATING INSTITUTION], as well as [NAME OF SUBSIDIARY(IES)], from the provisions of Article 428 sextricies of the aforementioned regulation, we request the prior authorization of the Prudential Control and Resolution Authority to derogate from Chapters 3 and 4 of Title IV, Sixth Part of the same regulation and to proceed with the simplified calculation of its Net Stable Funding Ratio.

In the event of agreement, we will of course inform you in advance of any change calling into question the classification of [name of the CONSOLIDATING INSTITUTION] and/or [NAME OF SUBSIDIARY(IES)] as small and non-compliant institutions.

In this case, the authorization will cease to have effect definitively on the date on which the Prudential Control and Resolution Authority finds that [name of the CONSOLIDATING INSTITUTION] and/or [NAME OF SUBSIDIARY(IES)] no longer meet(s) the said definition. »

Furthermore, this declaration must be submitted for prior approval by the deliberative body, when the responsible signatory manager does not have the necessary delegations to sign such an undertaking without specific prior authorization from the deliberative body. Consequently, depending on the case in which the institution finds itself, the declaration must end with one of the following two mentions:

“We confirm to you that we have obtained the approval of the board of directors/supervisory board on this declaration.” or: “We confirm to you that we have the delegations allowing us to make this declaration and have informed the board of directors/supervisory board.”

The EBA is mandated to propose reporting relief applicable to Small and Non-Complex Institutions beyond the sole subject of the NSFR. It has developed, in accordance with CRD4, Article 84(5), a simplified standard methodology for the assessment and monitoring of interest rate risk in the banking book (IRRBB) that only small and non-compliant institutions can use, if the ACPR does not object (see Part 7 on IRRBB).

The EBA’s implementing technical standards regarding IRRBB prudential reliefs, applicable from September 2024, also include a simplified set of reliefs for small and non-compliant institutions.

1.2.2 Scope of prudential consolidation

Prudential requirements on a consolidated basis apply to Parent Institutions in France, including CFH and CFHM approved in accordance with Section 3 of Chapter VII of Title I of Book V of the CMF. In the case of CFH or CFHM not subject to this approval or certain temporary CFH or CFHM covered by L. 517-16 3° of the CMF, it is the institutions designated by the ACPR that comply with obligations based on the consolidated situation of their CFH or CFHM.

The scope of prudential consolidation is defined in Chapter II of Part 1 of the CRR. It relies both on the articulation of:

The activity of subsidiaries and holdings, since only Institutions and financial institutions (which include, following the modifications made by CRR3, auxiliary service companies12) as defined by the CRR in points 1, 2, 3, 18 and 26 of Article 4(1) enter the scope of prudential consolidation and;
Characteristics of control, a parent company and a subsidiary being respectively defined in points 15 and 16 of Article 4(1) of the CRR.

Holdings other than consolidated subsidiaries may be subject to specific treatments in deduction from own funds or risk weighting under Articles 36, 56, 66, 89, 90 and 142 of the CRR in particular: therefore, their classification as an institution, financial institution, financial sector entity, auxiliary service company or conversely as a holding outside the financial sector is important for the calculation of prudential ratios.

12 The definition has been clarified in particular to explicitly cover simple leasing activities. CRRIII CRR3 (Article 4(5) CRR) gives the EBA a mandate to develop Guidelines to clarify the criteria for identifying auxiliary activities. The Guidelines were subject to public consultation, which ended on October 7, 2025, and are to be published in Q1 2026. The ACPR will specify its intention to comply once the Guidelines are published.

The possible consolidation methods applicable immediately or with the authorization of competent authorities are described in Article 18 of the CRR and in Regulation (EU) 2022/676 on the scope of prudential consolidation adopted by the European Commission on December 3, 2021.

Thus, the prudential scope may differ from the accounting scope, both in terms of consolidated entities and consolidation methods. Furthermore, the prudential scope applicable for liquidity ratio purposes may differ from the scope applicable for the calculation of other prudential requirements, since certain paragraphs of Article 18 do not apply to the specific case of liquidity-related requirements and only full integration is possible for liquidity needs (EBA Q&A 2013_483).

In particular, competent authorities may extend prudential consolidation also to certain non-financial companies in the event of substantial risk of unanticipated support to a subsidiary (step-in risk). In this regard, the regulation includes several risk indicators that competent authorities must take into account to assess whether a company should be consolidated, fully or proportionally, for prudential purposes.

Non-consolidated subsidiaries must be equity-accounted unless derogated by the ACPR under the conditions and modalities specified in Section II, Chapter 1, points 8 and 9 of the ECB Guide.

In matters of prudential consolidation, several EBA Q&As clarify how the scope of prudential consolidation is approached or the applicable consolidation methods. This concerns in particular holdings in the insurance sector, operating leasing companies, or purely industrial financial holding companies (Q&As 383, 367, 1644, 857, 310 and 3762) which must therefore be valued as equity participations. Q&A 1530 revisits the case of certain securitization vehicles. The case of collective management funds of the UCITS type as defined by Article 1(2) of Directive 2009/65/EC and securitization vehicles is clarified in Q&As 2383 and 1530 and in the EBA report that prepared Regulation 2022/676 (see the “feedback table” pages 38 and 59).

This EBA report also includes on page 10 a diagram presenting the cases envisaged to determine the scope of prudential consolidation and the link that may exist with IFRS accounting treatment if applicable.

Finally, it is recalled that cases of exclusion from the consolidation scope are detailed in Article 19 of the CRR and rely on materiality elements or prior authorization from the ACPR, the criteria being approached on an individual and aggregated basis of the subsidiaries and holdings concerned. The ACPR recommends that Institutions wishing to apply the derogation provided for in Article 19(2) of CRR document their request by following the criteria and list of documents to be provided described in Section II, Chapter 1, point 8 or point 9, as the case may be, of the ECB Guide.

It is recalled for information that the scope and consolidation modalities applicable to investment undertaking groups under the application of IFR are provided for by a dedicated RTS 2023/03, currently being adopted by the Commission.

1.2.3 Individual supervision and exemption conditions

Institutions are subject to prudential requirements on an individual basis under the conditions set by CRR and can only be exempted subject to being followed on a consolidated basis in CRD IV4. The exemption conditions are defined in Articles 7 (solvency ratios, large exposures, liquidity and leverage) and 8 (liquidity ratios) of CRR and specified below.

Article 10 provides a specific exemption for the requirements provided for in Parts 2 to 8 of CRR for credit institutions affiliated as defined in Article L.511-31 of the CMF permanently to a central body.

1.2.3.1 Exemption conditions for consolidated entities regarding solvency ratios, large exposures and leverage ratio

The exemption conditions for solvency and large exposure ratios are defined in Article 7 (1) of the CRR. For the implementation of this article, the ACPR recommends that Institutions wishing to benefit their subsidiaries from an exemption from individual supervision document their request by following the criteria and list of documents to be provided described in Chapter 1, point 3 of the ECB Guide.

Institutions wishing to benefit their subsidiaries from an exemption from individual supervision must in particular send to the ACPR the list of subsidiaries concerned and an undertaking in accordance with point b) of Article 7(1) of the CRR. The declaration sent to the ACPR, which must be updated in the event of a change in the list of subsidiaries concerned, must be signed by one of the responsible managers of the Institution and must conform to the model shown below.

“Wishing to benefit the subsidiaries listed in the attached list from the provisions of Article 7 (1) of Regulation (EU) n° 575/2013, we declare to the Prudential Control and Resolution Authority to provide these subsidiaries with our support ensuring their overall solvency and liquidity.

We will also ensure that they are managed prudently within the meaning of current banking regulations.

We will of course inform you in advance of any change calling into question this declaration vis-à-vis any subsidiary that we would no longer wish to benefit from Article 7 (1). In this case and with regard to the subsidiary concerned, this declaration will cease to have effect definitively on the date on which the Prudential Control and Resolution Authority finds that this subsidiary satisfies individual or sub-consolidated supervision.”

Furthermore, the deliberative body must be informed of this declaration. However, this declaration must be submitted for prior approval by the deliberative body, when the responsible signatory manager does not have the necessary delegations to sign such an undertaking without specific prior authorization from the deliberative body.

Consequently, depending on the case in which the Institution finds itself, the declaration must end with one of the following two mentions:

For the leverage ratio, Article 6 (5) of the CRR provides that Institutions that have benefited from the exemption under Article 7 (1) are also exempt from the leverage ratio requirement on an individual basis.

In addition, given its nature and in accordance with Article 436 (h) of the CRR which provides for the publication of information referred to in Title II of the CRR (level of application of requirements), the declarations required under the exemption request must be subject to information as part of the Pillar 3 publications of the parent company (see section 8 of the Notice).

These provisions are also valid when the parent company is a CFH or a CFHM under the conditions provided for in Article 7(2) of the CRR.

1.2.3.2 Exemption conditions for parent companies regarding solvency ratios, large exposures and leverage ratio

The exemption conditions from individual supervision for parent companies, for solvency and large exposure ratios, are defined in Article 7 (3) of the CRR which provides that two conditions must be met:

there is no significant obstacle, actual or foreseen, in law or in fact, to the rapid transfer of own funds or the rapid repayment of liabilities to the parent Institution in a Member State;
the risk assessment, measurement and control procedures useful for consolidated supervision cover the parent Institution in a Member State.

For the implementation of this Article 7(3) of the CRR, the ACPR recommends that Institutions wishing to benefit from the exemption document their request by following the criteria and list of documents to be provided described in Chapter 1, point 3 of the ECB Guide and to establish the list of criteria characterizing obstacles to the transfer of own funds from subsidiaries to the parent company, the approach to the significance or non-significance of an obstacle as well as the modalities for applying the scheme.

The criteria retained by the ACPR to characterize obstacles to the transfer of own funds from subsidiaries to the parent company are as follows:

« Exchange controls and political instability risk that may constitute significant obstacles to the transfer of own funds from subsidiaries located in third countries outside the European Economic Area.
»
This criterion concerns third countries outside the European Economic Area. It indeed appears that States party to the Agreement on the European Economic Area should not be subject to this criterion insofar as the Community legal system prohibits any restriction on the freedom of capital movements.
« Legislation of the countries where foreign subsidiaries are established that does not ensure the parent company a level of protection at least equivalent to that offered by the mechanisms for the transfer of own funds governed by French company law »
French law allows recourse to different categories of mechanisms for the transfer of own funds or internal solidarity between group companies: mechanisms for which the transfer does not require consideration, namely the distribution of dividends and partial advance asset sharing; mechanisms for which solidarity requires consideration or a common interest, namely cash pooling, cash advances and debt forgiveness.
« Existence of statutory or contractual clauses preventing the upward transfer of own funds from subsidiaries to controlling companies »
In addition to issues related to public policy provisions, it is necessary to ensure that there is no particular mechanism specific to the statutes or shareholder agreement provisions that would prevent parent companies from bringing up own funds from their subsidiaries. In particular, in the case of jointly controlled subsidiaries, the modalities for exercising this joint control must not prevent the upward transfer of own funds.
« Non-compliance by a subsidiary with the own fund requirements of the country where it is established. »
This criterion is a direct consequence of individual prudential supervision that may be exercised by the competent authority of the country where an Institution is established. In this regard, non-compliance by a subsidiary with its seat abroad with local capital standards may constitute an obstacle to the transfer of own funds or the repayment of liabilities.

Only obstacles of a significant nature are retained within the framework of the own funds transferability scheme. Thus, the criteria must be taken into account at the group level to assess the situation of the parent company with regard to the application or not of management ratios on an individual basis. For example, the compliance by a small subsidiary with one of the criteria proposed above would not be sufficient in itself to meet the conditions for the existence of a significant obstacle to the transfer of own funds from subsidiaries to the parent company. In this regard, given the diversity of situations, the ACPR has not defined a priori a quantitative criterion of significance. Any situation likely to modify the meaning of the assessment made on the adequacy of the parent company's own funds will thus be considered significant.

Regarding the modalities for applying the scheme, the Institutions concerned declare, in a letter signed by one of the responsible managers, that they fall within the scope of the prescriptions of Article 7 (3) of the CRR, based on the aforementioned criteria and approach. This declaration is sent only upon the entry into force of the scheme. It will naturally be reviewed in the event of a significant modification affecting the transferability of own funds from subsidiaries to the parent company. It is not accompanied by a detailed list by country, the Institutions keeping the results of their analysis and their assessment of the significance threshold available to the SGACPR.

For the leverage ratio, Article 6 (5) of the CRR provides that Institutions that have benefited from the exemption under Article 7 (3) are also exempt from the leverage ratio requirement on an individual basis.

1.2.3.3 Exemption conditions for individual liquidity requirements

In application of Article 8 of the CRR, the ACPR may exempt certain entities from the requirements to calculate and report liquidity and stable funding as long as they are included in liquidity sub-groups and all the conditions provided for in said article are met.

For the implementation of this article, the ACPR recommends that Institutions wishing to benefit from the exemption document their request by following the criteria and list of documents to be provided described in Section II, Chapter 1,

Modalities for the calculation and publication of prudential ratios within the framework of CRD IV and MREL requirements – 2025 General Secretariat of the Prudential Control and Resolution Authority 16

point 4 of the ECB Guide. This also applies to financing companies included in the consolidation scope of an institution subject to CRR or to their parent company, which wish to benefit from the full or partial exemption from the application of the decree of May 5, 2009 relating to the identification, measurement, management and control of liquidity risk (article 3-1 of the decree).

In particular, the ECB Guide details the conditions for examination by the supervisor and the documentation modalities for exemption requests for liquidity requirements for groups established in several Member States; in the latter case, the ACPR will assess compliance with all requirements provided for in Article 8, paragraphs 1 and 3 of the CRR, applying the specificities related to this assessment found in Section II, Chapter 1, paragraph 4, of the ECB guide. For Less Significant Institutions, the quantitative requirement to maintain LCR and NSFR ratios greater than 75% for entities of the cross-border liquidity sub-group is not applicable.

1.3 Reporting Modalities
1.3.1 General Framework

Within the framework of CRD IV, a harmonized reporting framework at the European level is defined by Commission Implementing Regulations and EBA Guidelines: forms, instructions, unique data definition (« Data Point Model »), taxonomy, validation rules. These technical standards cover the following aspects: own funds and capital requirements, large exposures, leverage, liquidity (within the framework of COREP); financial information is covered by FINREP forms. Reporting forms relating to asset encumbrances, the identification of Global Systemically Important Institutions (G-SII), investment firms, remuneration, additional liquidity monitoring elements (NSFR and LCR), losses from loans secured by real estate (IP losses), FRTB, IRRBB, MREL and TLAC, and benchmarking portfolio elements in internal approaches complete these modules.

For the purposes of Article 430bis of the CRR, Institutions are expected to include in their IP losses declarations the losses generated by their exposures on secured loans concerning residential and commercial real estate.

Regarding annual reporting related to information to be communicated by Institutions for the purposes of Article 78 (« Benchmarking exercise ») of CRD IV by Institutions using internal approaches for credit and/or market risk: the reporting templates and instructions are adopted by way of a regulation adopted by the European Commission on a proposal from the EBA and modified each year. They are available on the EBA website. The EBA has also published a « Handbook on supervisory benchmarking » which provides explanations and links to important documents related to this exercise. It will be regularly updated and includes links to published Q&As.

The EBA Guidelines on harmonized models and definitions for credit institution funding plans apply, on a consolidated basis, to the largest credit institutions according to the asset volume criterion. Their coverage represents at least 75% of the consolidated assets of the banking system of a country under Title II of the Guidelines. The level of application was defined in ACPR Instruction No. 2017-I-19 of November 22, 2017, modified by ACPR Instruction No. 2020-I-06 of May 6, 2020, in accordance with Decision No. 2023/1680 of August 17, 2023 within the framework of the SSM, and concerns only Significant Institutions at the highest level of consolidation in France.

Regulation (EU) 2021/763 of April 23, 2021, modified by Regulation 2024/1618 of June 6, 2024, specifies the technical reporting standards relating to Total Loss-Absorbing Capacity (TLAC) and the Minimum Requirement for Own Funds and Eligible Liabilities (MREL) as well as general rules concerning their publication by resolution entities (see § 5.3 below for more details). The eSurfi site, in the « Resolution » theme, specifies the reporting modalities, including the specificities of the XBRL format to be respected.

Branches of banks from countries outside the EEA submit the same forms as European Institutions, unless a derogation is granted by the ACPR in accordance with the provisions of Article L. 511-41 of the Monetary and Financial Code.

13 Search | European Banking Authority

The collection of reports from financing companies falls under ACPR Instruction No. 2024-I-07. The reporting elements related to the application of the Liquidity Ratio are defined by Instructions No. 2021-I-03 repealed by Instruction No. 2024-I-17 and Instruction No. 2015-I-08 modified by Instruction No. 2015-I-24 of the ACPR (the forms RUBA COEF_LIQ RB.35.01 and INFO_LIQ RB.01.01).

The collection of information relating to remuneration under CRD IV is detailed in Instruction No. 2023-I-16, which repealed and replaced Instruction No. 2016-I-27 of December 20, 2016, modifying Instruction No. 2014-I-13 of September 29, 2014, also repealed.

The eSurfi site is undergoing a redesign. A new version of this tool will be available in early 2025. The forms and instructions related to RUBA reporting will remain accessible on this site. The instructions and tables of FINREP and COREP reporting forms are linked to the EBA website from the eSurfi site. The Reporting Time Traveller application made available on the EBA site allows users to consult previous versions of forms and instructions. eSurfi users can still consult dates, deadlines, and reporting frequencies on this site.

To ensure a harmonized application of regulatory provisions in Europe, questions related to reporting should be consulted or asked on the Single Rulebook Q&A page of the EBA website.

Within the framework of BRRD, a harmonized reporting framework at the European level is also defined by Commission Implementing Regulations and EBA Guidelines: forms, instructions, unique data definition (« Data Point Model »), taxonomy, validation rules.

The EBA has materialized the reporting requirements for the supervision of interest rate risk in the banking book (IRRBB) through ITS 2023/03 based on the provisions of Article 430, paragraph 7, of Regulation (EU) 575/2013, modified by Regulation (EU) 2019/876 (« CRR »). The ACPR has extended this requirement to financing companies via ACPR Instruction No. 2024-I-107.

European Regulation 2023/1114 of May 31, 2023 on crypto-asset markets (MiCA), in force as of June 29, 2023, will be fully applicable as of December 30, 2024, except for issuers of electronic money tokens and issuers of asset-referenced tokens for which it has been applicable since June 30, 2024. This derogation is expressed in Article 149.3 of this regulation. Ordinance No. 2024-936 of October 15, 2024 relating to crypto-asset markets aims to adapt French law to the entry into application of this regulation. The EBA has also produced guidelines concerning the reporting expected from these institutions and an ITS specifying the reporting modalities for certain crypto-assets (ARTs and EMTs): Implementing Technical Standards on the reporting on ARTs and EMTs denominated in a non-EU currency under MiCAR. This reporting is under consultation by the European Commission since June 19, 2024 (Implementing Technical Standards on the reporting on ARTs and EMTs denominated in a non-EU currency under MiCAR | European Banking Authority).

In December 2023, the EBA opted for a harmonized approach by integrating the collection related to Intermediate Parent Undertakings (IPU) into its taxonomy. Institutions must not perform individual collections; data related to the IPU is accessible via other collections (FINREP/RUBA); the first collection was carried out on June 30, 2024.

Directive (EU) 2021/2167 (« CSD » or « NPL Directive ») of the European Parliament and of the Council of November 24, 2021 on credit servicers and credit purchasers was transposed into French law in December 2023. The new provisions introduce new obligations for credit institutions, and for companies that previously operated under the national status of collection agencies. Instruction 2024-I-06 published on April 19, 2024, mentioned the forms that these regulated entities must submit under this new directive. It was replaced by Instruction No. 2024-I-18 regarding credit purchasers. Other regulated entities under Instruction 2024-I-06 must now refer to the « RUBA » Instruction No. 2024-I-17.

Finally, CRR3 introduced by point 1h of Article 430 imposes the obligation to report to competent authorities information relating to their exposures to ESG risks, including existing and new exposures to entities in the fossil fuel sector and exposures to physical and transition risks.

The EBA plans to publish the public consultation on the ITS related to ESG reporting in late 2025, for a final publication expected in mid-2026, the goal being to respect the deadline for presenting these standards to the European Commission by July 10, 2025 at the latest. The reporting forms related to ESG will be largely inspired by those that will be used in the context of information disclosure (Pillar 3).

1.3.2 Phased Introduction of FRTB

The requirements of the Fundamental Review of the Trading Book (« FRTB ») are introduced by CRR2 in the form of reporting obligations only at this stage.

Given the uncertainty surrounding the implementation of Basel III and FRTB in other jurisdictions, particularly in the United States, regarding both the schedule and the substance, the European Commission published in the Official Journal of the European Union on October 31, 2025, a delegated act in application of Article 461a of CRR3, postponing by an additional year, to January 1, 2027, the entry into application of FRTB approaches for the calculation of capital requirements for market risk. Its publication is accompanied by a communication (Q&A) from the European Commission clarifying certain auxiliary points regarding the calculation of the output floor, reporting and publication requirements, the non-postponement of the CVA framework, and the transitional provision on the profit and loss attribution test. Regarding in particular the calculation of the output floor, the Commission's communication specifies that, for institutions subject to the reporting requirement under the Alternative Standardized Approach (ASA), the calculation of the output floor will be done by comparing the amount of capital requirements based on the ASA with the amount calculated, either with the CRR2 internal model approach (if currently used for the calculation of capital requirements) or with the CRR2 standard approach.

Following the publication of the delegated act, the EBA published on August 8, 2025, a statement to renew its No-Action Letter of August 2024, also postponing by one year the application of FRTB provisions relating to the trading book / banking book boundary. This publication was necessary because these provisions were not covered by the mandate of the delegated act, and the implementation of the new boundary would have required a review of internal models, valid for a duration of only one year. The EBA had moreover already taken a similar decision in February 2023 to record a first postponement of FRTB under CRR2. The EBA attached to its August No-Action Letter a technical communication specifying the implications of the postponement on other provisions, such as operational risk or exemptions for structural hedges of foreign exchange risk.

1.3.2.1 Reporting Requirements under the Alternative Standardized Approach (ASA)

Institutions whose balance sheet and off-balance sheet size subject to market risk (evaluated on a monthly basis) is greater than 10% of the total assets of the institution or 500 million euros must comply with the provisions detailed in Chapter 1bis of Title IV of Part 3 of CRR, supplemented by Delegated Regulation (EU) 2021/424 concerning the ASA for market risk, applicable since September 30, 2021, and by Implementing Regulation (EU) 2021/453 defining specific reporting requirements for market risk. The first reference date for the reporting requirements associated with this regulation is September 30, 2021.

The EBA also published in January 2024 the draft implementing technical standards ITS/2024/02 revising the specific reporting requirements for market risk of the aforementioned Implementing Regulation 2021/453, introducing more granular reporting requirements for the ASA, reporting requirements on the banking book / trading book boundary, and reporting requirements for the Alternative Internal Models Approach (AIMA).

The EBA published three regulatory technical standards coming to clarify certain aspects of the ASA (adopted by the Commission): Delegated Regulation 2022/2328 clarifies the scope of the so-called « Residual Risk Add-On » charge; Delegated Regulation 2022/2257 specifies the modalities for calculating capital requirements for default risk; Delegated Regulation 2022/1622 specifies the list of jurisdictions to be considered as having an advanced economy for the calculation of capital requirements for equity risk.

1.3.2.2 Reporting Requirements under the Alternative Internal Models Approach (AIMA)

Institutions that wish to ultimately benefit from the Alternative Internal Models Approach for the calculation of their capital requirements are invited to inform their supervisor and to take note of the developments regarding the introduction of the Alternative Internal Models Approach for market risk, as detailed in Chapter 1ter of Title IV of Part 3 of the CRR.

The EBA has also published six regulatory technical standards (adopted by the Commission) specifying certain aspects of the AIMA: Delegated Regulation 2022/2058 specifies liquidity horizons; Delegated Regulation (EU) 2022/2059 provides the technical details of post-hoc control requirements (« backtesting ») and the profit and loss attribution test requirements; Delegated Regulation (EU) 2022/2060 specifies the criteria for assessing the modelability of risk factors within the framework of the internal models approach as well as the frequency of this assessment; Delegated Regulation 2023/1577 concerns the treatment of foreign exchange risk and commodity risk outside the trading book; Delegated Regulation 2023/1578 specifies the default probabilities and loss given default of the internal model for default risk (« default risk charge (DRC) »); and Delegated Regulation 2024/397 details the calculation of the risk measure according to a stress scenario (« stress scenario risk measure »).

The EBA has also published a draft regulatory technical standard relating to the AIMA: RTS/2023/05 concerning the method for competent authorities to control internal market risk models (AIMA).

The ACPR has declared itself compliant with the EBA Guidelines (EBA/GL/2021/07) specifying the criteria relating to the use of input data in the internal market risk model referred to in Article 325quinquies of the CRR. The EBA Guidelines EBA/GL/2021/07 have been applicable since January 1, 2022.

Summary of Implementing Regulations relating to reporting modalities

The Commission Implementing Regulation (EU) 2021/451 of December 17, 2020 defining implementing technical standards for the application of the CRR regarding prudential information to be provided by institutions, and repealing Implementing Regulation (EU) 680/2014, was published in the Official Journal of the European Union on March 19, 2021.

This regulation, applicable from June 28, 2021, introduces modifications, particularly concerning own funds, credit and counterparty risk, large exposures, leverage ratio, and the NSFR, FINREP, and G-SII indicators.

The Commission Implementing Regulation (EU) 2021/453 published on March 15, 2021, defining implementing technical standards for the application of the CRR regarding specific reporting requirements for market risk, introduces initial elements related to FRTB. The first reference date for the reporting requirements associated with this regulation is September 30, 2021, and it continues to apply until January 1, 2026 as specified in the Q&A published by the Commission.

The Commission Implementing Regulation (EU) 2021/763 of April 23, 2021, modified by Regulation 2024/1618 of June 6, 2024, defines implementing technical standards for the application of the CRR and BRRD regarding reporting for supervisory purposes and publication of the minimum requirement for own funds and eligible liabilities.

Furthermore, elements relating to individual and consolidated declarations of financial information under national accounting reference have been the subject of an ECB regulation adopted on March 17, 2015 (ECB Regulation (EU) 2015/534) and modified on August 25, 2017 for adaptation to IFRS 9 standard (ECB Regulation (EU) No 2017/1538).

This regulation concerns all credit institutions, whether significant or not. An Instruction No. 2016-I-11 (modifying Instruction No. 2015-I-13) of the ACPR relating to the declaration of prudential financial information applicable to important and less important groups and entities was taken accordingly.

Finally, ECB Regulation (EU) 2017/1539 of August 25, 2017 defined a deferred application as of January 1, 2019, of the declaration of financial prudential information adapted to the IFRS 9 format for less important entities subject to national accounting standards and established in France and Germany.

The prudential reporting described also includes, in accordance with Article 78 of CRD IV and in application of Delegated Regulation (EU) 2017/180 of October 24, 2016 concerning benchmarking portfolio assessment standards and procedures for sharing these assessments, annual reporting requested from Institutions using internal approaches for credit and market risk. This concerns forms C101 to C110 available on eSurfi.

Notice 2025 on the Calculation and Publication of Prudential Ratios under CRD4 and MREL Requirements

General Secretariat of the Prudential Control and Resolution Authority

Solvency Ratios

2.1. General Principles

2.1.1. Reminder of the principle of ratio calculation

Pillar 1 of the solvency ratios defines the minimum capital requirements. In accordance with Article 92 of the CRR, the following risks must in principle be covered by 8% of own funds: credit risk, counterparty risk, and dilution risk, credit valuation adjustment risk, settlement risk, market risks, and operational risk.

Article 92(1) of the CRR sets a minimum Common Equity Tier 1 (CET1) ratio of 4.5% and a minimum Tier 1 (T1) ratio of 6%.

Articles 129, 130, 131, and 133 of CRD4 establish additional capital requirements consisting of four "capital buffers": the capital conservation buffer, the countercyclical buffer, the O-SII buffer, and the systemic risk buffer. These must consist exclusively of Common Equity Tier 1 capital.

The denominator of the solvency ratio corresponds to the aggregation (sum) of the risks mentioned in Section 2, expressed in terms of risk-weighted exposures for credit and dilution risk, and in terms of capital requirements, multiplied by 12.5 for operational risk, market risks, settlement-delivery risk, and credit valuation adjustment risk.

For the calculation of risk-weighted exposure amounts (credit risk) and capital requirements (market and operational risks), various methods or approaches with different degrees of sophistication are provided for by the CRR, the use of some of which is subject to prior authorization by the competent authority. The methods or approaches used by Institutions for each of the risks are independent of each other (for example, an Institution using the standard approach for credit risk may opt for an advanced measurement approach for market risk). One of the main developments of CRR3 consists of the introduction of an "output floor" which limits the possible reduction of risk-weighted exposures resulting from the use of internal models compared to risk-weighted exposures calculated according to the standard method (see details in section 2.3.1).

Generally, the move to a more sophisticated approach is subject to an essentially irreversible choice ("ratchet effect"): an Institution adopting an internal or advanced approach cannot decide to revert to a less sophisticated approach (cf. Article 149 of the CRR for credit risk) except for a duly justified reason and after authorization by the competent authority. Furthermore, under CRR2, a bank requesting authorization to use the IRB approach on a portfolio had to subsequently deploy the IRB across its entire banking book. Under CRR3 (modification of Article 150), the deployment of the IRB is carried out at the exposure class level. For example, a bank requesting authorization to use the IRB approach for a residential mortgage portfolio must deploy the IRB across all its residential mortgage portfolios.

Article 494d nevertheless authorizes banks using the internal approach for the calculation of their credit risk to revert to the standard approach on a derogatory basis.

2.1.2. Process for authorizing internal approaches

The use of internal ratings-based (IRB) approaches for credit risk (CRR Art. 143), the Advanced Measurement Approach (AMA) for operational risk (CRR Art. 312(2)), the internal model approach for market risk (CRR Art. 363), the internal model approach for counterparty credit risk exposure (CRR Art. 273(2)), the internal model approach for counterparty credit risk exposure under central counterparty agreements (CRR Art. 221), and the internal assessment approach for credit risk of securitization positions within ABCP programs or facilities (CRR Art. 265) is subject to prior authorization by the competent authority. This authorization is intended to ensure that applicant Institutions meet the minimum qualitative and quantitative requirements defined by regulation.

Applicant Institutions must submit a file to the competent authority.

Extensions and changes to credit risk and operational risk models must be assessed in light of Commission Delegated Regulation (EU) No 529/2014 of 12 March 2014 on the assessment of the significance of extensions and modifications to the internal ratings-based approach and the advanced measurement approach, which provides for a graduated approach (permission, prior notification, or post-event notification depending on the situation of the competent authority).

Extensions and changes to models for market risk must be assessed in light of Regulation (EU) 2015/942 of 4 March 2015 amending Regulation (EU) 529/2014.

The standards adopted by the EBA or the European Commission regarding the authorization of internal models are listed below:

The RTS "on the specification of the assessment methodology for competent authorities regarding compliance of an institution with the requirements to use internal models for market risk and assessment of significant share under points (b) and (c) of Article 363(4) of CRR" was published by the EBA on 22 November 2016. It concerns the criteria that competent authorities must take into account when assessing the appropriateness of internal modeling of market risks and positions excluded from it. This standard applies both a priori and ex post of the authorization to use internal approaches.

Delegated Regulation (EU) 2022/439 of 20 October 2021 specifies the assessment method that competent authorities must apply for the purpose of assessing the compliance of credit institutions and investment firms with the requirements regarding the use of the internal ratings-based approach for credit risk (IRB). It concerns in particular:

The assessment methods that competent authorities must apply when determining whether an Institution meets the requirements regarding the use of the IRB approach (assessment of debtor characteristics, decision-making processes, independent risk control unit, transaction monitoring);
The methods aimed at assessing the integrity of the process for assigning and regularly and independently assessing risks (minimum requirements on internal rating systems);
The methods by which competent authorities assess, in accordance with Article 143, an Institution's methodology for estimating PD.

Delegated Regulation (EU) No 529/2014 of 12 March 2014, as amended, regarding the assessment of the significance of extensions and modifications to the internal ratings-based approach (IRB) and the advanced measurement approach (AMA), covers the conditions for the assessment by competent authorities of extensions and changes to internal models carried out in the context of operational risk and credit risk.

Three types of extensions and changes to models are provided for in Article 1 of the Regulation:

Material extensions and modifications, which require permission from the competent authority;
Non-material extensions and modifications, which require prior notification at least 2 months before their implementation (ex ante notification);
Non-material extensions and modifications, which require notification after their implementation (ex post notification).

Article 4 of the Regulation specifies the thresholds that apply to determine whether the modification is material, and Article 5 gives the conditions for an extension to be subject to ex post notification.

Regarding modifications and extensions of internal market risk models, Regulation (EU) 2015/942 of 4 March 2015 amends Regulation (EU) 529/2014 and details the conditions for assessing the materiality of extensions and changes, which is done in three steps:

A qualitative assessment, based on Annex 3 of the Delegated Regulation. If the modification is listed in Annex 3 (Part I, Title I or Part II, Title I) of the Regulation, direct classification as a material modification/extension requiring validation;
If the modification/extension is not material according to Annex 3, the non-materiality threshold (<1%) is tested: if the modification/extension results in a change of less than 1% of the result of the modified/extended model calculated over one day, this modification/extension is estimated as non-material and thus subject to notification
- either ex ante: if listed in Annex 3 (Part I, Title II or Part II, Title II);
- or ex-post if not listed in Annex 3;
If the modification/extension is not "non-material" according to the 1% test, the 5% and 10% thresholds are tested: it is verified whether the modification/extension results in a change of less than 5% and 10% over a period of 15 days. If either of the two thresholds is exceeded, the modification/extension is classified as material. If none of the thresholds are exceeded during the 15 days, the modification/extension is classified as "non-material" and is subject to notification (ex-post if not listed in Annex 3, ex-ante if listed in Annex 3)
- the 5% threshold measures the impact of a modification/extension by taking the total risk-weighted exposures for market risk before and after modification/extension;
- the 10% threshold measures the impact of the modification/extension of the individual model that was modified/extended.

2.2. Calculation Methods for Own Funds

2.2.1. Introduction

2.2.1.1. Structure of Own Funds

The CRR has defined the structure of regulatory own funds to ensure their quality:

Common Equity Tier 1 (CET1) capital, defined in Article 50 of the CRR, corresponds to share capital and associated share premiums, reserves, undistributed profits, and general banking risk reserves. Total payment flexibility is required, and instruments must be perpetual. The list of all forms of capital instruments in each Member State eligible as Common Equity Tier 1 capital instruments is drawn up by the EBA and updated regularly. An EBA report, updated in December 2021, accompanies and complements this list.
Additional Tier 1 (AT1) capital, defined in Article 61 of the CRR, corresponds to perpetual debt instruments, free of any obligation or incentive for repayment (in particular, step-ups in remuneration). AT1 instruments are subject to a loss absorption mechanism that is triggered when the CET1 ratio falls below a threshold that must be set at a minimum of 5.125%. Instruments may be converted into shares or suffer a write-down of their nominal value. Total payment flexibility is required: automatic remuneration mechanisms are prohibited, and the suspension of coupon payments is at the discretion of the issuer. The quality of AT1 instruments issued in Europe is continuously monitored by the EBA. A best practices report on this subject is published and regularly updated by the EBA (the latest version is dated 27 June 2024). Institutions are expected to comply with the recommendations of this report for their future issuances of AT1 instruments. Furthermore, to facilitate the issuance of compliant instruments by Institutions, the EBA published a set of standardized clauses in 2016.
Tier 2 (T2) capital, defined in Article 71 of the CRR, corresponds to subordinated debt instruments with a minimum maturity of 5 years. Early repayment incentives are prohibited.

In its latest report (see paras. 149 et seq. of the AT1 report), the EBA specifies what reference value should be used for the inclusion of AT1 and T2 instruments in the calculation of solvency and leverage ratios. The EBA indicates that book value should be the reference, notably because this value reflects the actual loss absorption capacity in the event of conversion or reduction of the instrument. By way of derogation from this principle, the EBA tolerates the possibility of reflecting exchange rate variations not accounted for in accounting (case of AT1 instruments classified as equity) provided that a symmetric adjustment is applied to CET1, that the chosen approach is applied permanently, and finally that the Institution specifies these terms in its Pillar 3 communication (see paras. 156 et seq.).

In application of Article 26(3) of the CRR, Institutions must obtain prior authorization from the ACPR before classifying new issuances of capital instruments as CET1, with the exception of subsequent issuances of a form of instrument already authorized and whose provisions are substantially identical to those governing already authorized issuances, provided that the ACPR is notified at least 20 calendar days before classification as CET1. It is expected that the notification includes all information provided for in Section II, Chapter 2, point 3 of the ECB Guide. It is further specified that modifications to any profit and loss transfer agreements must be taken into account and that the provisions of new issuances against contributions in kind are in principle considered not to be substantially identical to the provisions of already authorized instruments.

Institutions are not required to request prior authorization from the ACPR to proceed with the inclusion in CET1 of own fund elements as defined in Article 26(1) of the CRR, other than capital instruments and associated share premiums. For clarification, municipal credit banks may include in their CET1 year-end surpluses as well as bonuses acquired by prescription after the realization of pledges to be allocated to capital contribution in application of Article L.514-4 of the Monetary and Financial Code, without requesting prior authorization from the competent authority. Any increase in other elements of the capital contribution of municipal credit banks remains subject to the prior authorization procedure of the ACPR.

In accordance with Articles 77 and 78 of the CRR, Institutions must obtain prior authorization from the ACPR before carrying out any operation to reduce, repurchase, or redeem capital instruments or to reduce, distribute, or repurchase share premium accounts related to these capital instruments under the conditions and according to the modalities provided for in said Articles, as specified in Section II, Chapter 2, points 8 and 9 of the ECB Guide. It is notably expected that Institutions demonstrate, as part of their requests, that, following the envisaged operation, they will continue to exceed over a three-year horizon (i) the overall capital requirements set out in the most recent applicable SREP decision, (ii) the MREL requirements set in application of the BRRD, and (iii) the leverage ratio requirement set out in Article 92(1)(d) of the CRR (including, where applicable, the additional capital requirement to address excessive leverage risk set out in the most recent applicable SREP decision).

Article 78 of the CRR also provides for the possibility for Institutions to request a general prior authorization to reduce, redeem, or repurchase capital instruments or eligible liabilities, regardless of the objective pursued. This general prior authorization is granted only for a fixed period not exceeding one year, after which it may be renewed. The general prior authorization is granted for a certain predetermined amount, fixed by the competent authority, within the limits of the amounts provided for in Article 78. The ACPR applies Section II, Chapter 2, point 11 of the ECB Guide and will limit general prior authorizations, for AT1 and T2 instruments in the first five years following their issuance, to the cases covered by Article 78(4) points (c) and (e), i.e., to instruments and associated share premium accounts benefiting from a grandfathering clause in application of Article 494ter of the CRR and to instruments repurchased for market-making purposes.

For information: the ECB published on 30 September 2020 an update of the public guidelines concerning the examination it conducts of the "qualification of capital instruments as Additional Tier 1 capital instruments and Tier 2 capital instruments" (originally published in June 2016) and the information requested in this regard from Significant Institutions. Institutions can rely on the self-assessment forms provided for by these guidelines to prepare their exchanges with banking supervision services in the context of AT1 or T2 issuances.

Differences on equity accounting for participations are distributed between reserves and retained earnings, on the one hand, and interim results, on the other, depending on the categories of equity from which they originate.

2.2.1.2. Inclusion of interim or year-end profits in own funds

Article 26(2) of the CRR provides for the necessity of obtaining prior authorization from the competent authority to include interim or year-end profits in CET1 own funds.

2.2.1.3. Capital buffers

Under the CRD Directive, Institutions may be subject to additional capital requirements, i.e., "capital buffers." There are four such buffers, which aim notably to take into account the cycle

Calculation and publication methods for prudential ratios under CRD4IV and MREL requirements – 20254 General Secretariat of the Prudential Control and Resolution Authority 25 economic risk or macroeconomic or systemic risk. They are entirely composed of CET1-eligible instruments. The decree of November 3, 2014, regarding capital buffers for banking service providers and investment firms other than portfolio management companies18, taken in application of articles L. 511-41-1 A, L. 533-2-1 and L. 612-1 of the Monetary and Financial Code (CMF), sets the conditions for implementing these requirements:

Conservation buffer: it concerns all Institutions and is mandatorily set at 2.5% of risk-weighted exposures.
Countercyclical buffer: it is put in place in case of excessive credit growth. It is imposed by discretionary decision of a designated authority of a jurisdiction on all exposures that Institutions have in that jurisdiction. In France, the countercyclical buffer rate is set by the High Council for Financial Stability (HCSF). This rate is, in principle, within a range of 0 to 2.5% (and can be set beyond this percentage, under certain conditions). While it was set at 0% following the Covid-19 crisis, the HCSF decided on April 7, 2022, to raise the countercyclical capital buffer rate to 0.50%, applicable from April 7, 2023. Furthermore, the HCSF decided on December 27, 2022, to raise this same rate to 1.0%, a new requirement applicable from January 2, 2024. Article 140 of the CRD provides that the buffer applicable to each Institution is calculated based on the average of countercyclical buffer rates applicable in the jurisdictions where the Institution has credit exposures, weighted according to the size of these exposures. An RTS by the EBA sets the method for the geographical localization of these exposures. The Basel Committee provides the list of decisions taken regarding countercyclical buffers by the jurisdictions it comprises19.
Buffer for Systemically Important Institutions: it aims to reduce the risk of failure of large Institutions by strengthening their capital requirements. It can be set between 1% and 3.5% for Global Systemically Important Institutions, and between 0 and 3% for other Systemically Important Institutions. In France, this capital buffer is set by the ACPR for Institutions and for other systemically important institutions.
Systemic Risk Buffer: it aims to prevent and mitigate macroprudential or systemic risks. It does not apply obligatorily to all risk-weighted exposures but may apply, for example, only to domestic exposures. It is not capped, but is a priori between 0.5% and 5%. Its application is decided in France by the High Council for Financial Stability. Following a decision by the HCSF of July 28, 2023, effective August 1, 2023, it was currently at 3%. A notice attached to the decision provides detailed information. This buffer applies to French systemically important credit institutions if the total amount of final exposure vis-à-vis the group of related clients represents, after risk mitigation, more than 5% of Tier 1 capital and if the non-financial group concerned is highly indebted. Note that the EBA published Guidelines20 aiming to harmonize the definition of sectoral exposure sub-sets to favor a common approach within the Union and allow for reciprocity21. By its decision of June 17, 2025, the HCSF abrogated its decision of July 28, 2023, which provided for a systemic risk buffer of 3%, considering that the concentration of exposures of French systemically important institutions towards large highly indebted companies had significantly decreased.

In application of article L511-41-1-A of the CMF, the decree of February 25, 2021, regarding distribution restrictions, and articles 61 to 64 of the decree of November 3, 2014, regarding capital buffers, which transpose articles 141 and 142 of the CRD, the downward breach of the overall capital buffer requirement, as defined in article L511-41-1-A of the CMF, does not render the institution insolvent but imposes:

An obligation to limit discretionary distributions to holders of CET1 and AT1 instruments, variable remuneration, or discretionary pension benefits. Institutions planning to make a distribution are required to calculate the maximum distributable amount in accordance with the provisions of the decree of February 25, 2021, and notify the ACPR of the information referred to in article 5 of said decree. This distribution limitation strengthens as the institution approaches the minimum regulatory Tier 1 capital requirement.

18 Modified notably by the decree of February 25, 2021, regarding distribution restrictions applicable to credit institutions, financing companies, and certain investment firms 19 See the Note of May 2018 and the Notice of September 2015 from the HCSF on the countercyclical capital buffer 20 See the EBA Guidelines on the definition of sectoral exposure sub-sets 21 See the Note and Notice of March 21, 2021 published by the HCSF on the systemic risk buffer

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An obligation for the Institution to draw up a capital conservation plan and transmit it for approval to the ACPR, at the latest 5 business days after the finding of non-compliance with the overall capital buffer requirement. A period of up to 10 additional days may be granted by the ACPR. The schedule for rebuilding capital buffers or, where applicable, leverage ratio buffers presented in the capital conservation plan must not extend beyond two years.

The HCSF has also communicated on the application of the principle of reciprocity of macroprudential measures taken in other countries, notably for countercyclical buffer rates, depending on whether they are EU Member States of the European Economic Area or third countries.

2.2.1.4 Valuation rules applicable to assets measured at fair value (prudent valuation)
The provisions of the CRR (articles 34 and 105) regarding prudent valuation rules are applied to all instruments measured at fair value, whether they belong to the Institution's trading book or not. As such, a prudent valuation adjustment (Additional Value Adjustment, AVA) must be calculated and deducted from CET1 capital. Delegated Regulation (EU) No 2016/101 of October 26, 2015, specifies the calculation methodologies for the AVA.

2.2.1.5 Deductions from own funds
Several elements must be deducted from own funds (participations in financial sector entities, deferred tax assets, minority interests, etc.) and are described in:

Section 3 of Chapter 2 of Title 1 of Part II of the CRR (art. 36 to 49) for CET1;
Section 2 of Chapter 3 of Title 1 of Part II of the CRR (art. 56 to 60) for AT1;
Section 2 of Chapter 4 of Title 1 of Part II of the CRR (art. 66 to 70) for T2;
Title 2 of Part II of the CRR (art. 81 to 88) for minority interests

The characteristics of the elements to be deducted from own funds, as well as the methods for these deductions, are explained in Delegated Regulation No 241/2014 of January 7, 2014 (see below).

The provisions of the CRR (article 36) provide special treatment for software assets, which were previously subject to the common regime of deductions applicable to intangible fixed assets. The Commission adopted on November 12, 2020, Delegated Regulation 2020/2176 on the prudential treatment of software assets, which relies on the definition of a prudential amortization applicable to all software, of a duration shorter than accounting amortization, with deduction of the supplementary amortization and 100% weighting of the residual value.

The provisions regarding the treatment of minority interests were modified by CRR3. Before CRR3, the rule, without possible exception, was to eliminate the amount of minority interests exceeding the capital requirements of the concerned subsidiary by taking the lowest amount between the subsidiary's "local" requirements and its contribution to group requirements (principle of minoritarian capping). CRR3 introduced in articles 84(1), 85(1), and 87(1) the possibility for the competent authority to allow, by derogation from the principle, the taking into account of the highest amount, subject to demonstrating that the additional amount of capital thus recognized in own funds is available to absorb losses at the consolidated level.

The ECB clarified the methods for assessing availability for loss absorption in its ECB Instruments O&D published on July 25, 202522]. In summary, a distinction is made according to situations:

22 https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.supervisory_guides202507_ond.en.pdf

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In the case where the contribution to group requirements exceeds the local capital requirements of the subsidiary: it is provided to take into account notably the existence of an undertaking to maintain at the subsidiary level a capital level at least equal to the amount of the subsidiary's contribution to group requirements and the fact that the subsidiary has a risk profile similar to that of the group;
In the case where local capital requirements exceed the contribution to group requirements of the subsidiary: it is considered that the amount cannot otherwise cover losses at the consolidated level and therefore an agreement from minority shareholders to absorb losses that may occur at the parent company level is required.

The new [ECB Guide] further clarifies the scope of article 49(1) and provides that the derogation from the deduction of participations in insurance subsidiary companies must apply, subject to compliance with other provided conditions, homogeneously to the entirety of capital instruments and not only to CET1 instruments.

2.2.2 Transitional implementation phase
To facilitate the compliance of credit institutions with the CRD/CRR framework, relaxations on the grandfathering clause and on the treatment of sovereign exposures in application of the 2020 Quickfix Regulation have been adopted:

The relaxations related to the grandfathering clause:
CRR2 Regulation (article 494 ter) introduced a grandfathering period which applied to additional Tier 1 capital instruments and Tier 2 capital23 issued before June 27, 2019. It ended on June 28, 2025. For the treatment of these instruments, it is expected that Institutions comply with the EBA's opinion on the prudential treatment of legacy instruments published on October 20, 2020 (Opinion on the prudential treatment of legacy instruments).

Other provisions:
The temporary treatment of sovereign exposures provided by the Quickfix Regulation (art 468) as well as the transitional measures for exposures to governments and central banks denominated in the currency of another Member State (art 468) ended on December 31, 2022. CRR III3 nevertheless provides for the reintroduction of this mechanism with a 100% filter applicable under the conditions provided in paragraphs (3) to (5) of the same article 468, from the entry into force of CRR3 III and until December 31, 2025. Institutions wishing to apply this newly reintroduced filter are therefore required to inform the competent authority at the latest 45 days before the date of submission of the impacted regulatory statements.

23 Note that this grandfathering period provided by article 494ter of CRR also concerns eligible commitments.

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2.2.3 Technical standards regarding own funds
Delegated Regulation (EU) No 241/2014 of January 7, 2014, modified by Delegated Regulation (EU) No 2015/488 of September 4, 2014, and supplementing the CRR with regulatory technical standards concerning capital requirements applicable to Institutions, defines important notions such as foreseeable dividend, direct and indirect financing, or repayment incentive. It also specifies, among other things:

Limits on the repayment of capital instruments issued by mutual and cooperative Institutions;
Methods for reconstructing the nominal value after a reduction of an additional Tier 1 capital instrument;
Procedures to follow for any capital reduction operation of an Institution; and
Identification of mutual and cooperative Institutions.

Regarding the notion of direct financing, defined by article 8 of the delegated regulation, any instrument meeting this definition must be excluded from own funds. In this regard, the scope of elements deducted under article 6 ter of Regulation No 90-0224 is broader than that of elements not recognized under direct financing. Article 8 of the regulation provides two scenarios in which direct financing can be characterized:

Direct financing is characterized when the institution grants a loan or any other form of financing to the investor for the acquisition of a capital instrument. The purpose of the loan is known in this case. A direct correlation between the financing and the acquisition of the capital instrument can be established and allows for the disqualification without further condition of the instrument from the institution's regulatory own funds (article 8 (2) of the regulation);
Direct financing can also be characterized without the purpose of the financing being known and without a direct link between this financing and the acquisition of the instrument being established (article 8 (3) of the regulation). When an instrument is held by a legal or natural person who holds a qualifying holding in the institution (cf. article 4 (1) (36) of the CRR for the definition of qualifying holding) or is considered a related party, it cannot be recognized in the institution's own funds if the following two conditions are met:
o the conditions of the financing(s) are not similar to those applied to transactions with third parties; o the holder person is dependent on the remuneration or sale of the capital instruments they hold in the lending Institution to pay interest or repay the loan.

Delegated Regulation (EU) No 2015/923 of March 11, 2015, on own funds (consolidated in Delegated Regulation (EU) No 241/2014) defines, in accordance with articles 36 (2), 73 (7), 84 (4) of the CRR, the nature and scope of indirect and synthetic holdings that must be deducted from the own funds of Institutions. It also defines the notion of broad market index, to which the remuneration of certain capital instruments refers. Finally, it specifies the methods for calculating minority interests on a sub-consolidated basis.

Delegated Regulation (EU) No 2015/850 of January 30, 2015 (consolidated in Delegated Regulation (EU) No 241/2014) frames, in accordance with article 28 (5) of the CRR, multiple dividend distributions so that they do not constitute a disproportionate burden on own funds. It also defines the notion of preferential distribution.

Delegated Regulation (EU) No 2020/2176 of November 12, 2020 (consolidated in Delegated Regulation (EU) No 241/2014) provides the specific regime applicable to the deduction of software assets from Tier 1 capital.

Delegated Regulation (EU) No 2023/827 of October 11, 2022 (consolidated in Delegated Regulation (EU) No 241/2014) extends the eligibility criteria for capital instruments to eligible commitments. It also defines the

Derived from a Basel principle, article 6 ter of Regulation No 90-02 imposed the deduction of loans and commitments granted by a subsidiary to its directors and main shareholders. This deduction as such was not included in CRD IV4 and has not been applicable since January 1, 2018. However, the CRR does not allow the recognition of capital instruments directly financed by the Institution. This rule applies to all capital instruments.

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practical methods for implementing prior authorization mechanisms for the repurchase, repayment, or reduction of capital instruments or eligible commitments.

Technical standard on prudent valuation
Delegated Regulation (EU) No 2016/101 of October 26, 2015 (prudent valuation) specifies, in accordance with articles 105 and 34 of the CRR, that a prudent valuation mechanism must be put in place to calculate Additional Value Adjustments (AVAs) which will be deducted from CET1 capital.

This mechanism applies to all assets and liabilities measured at fair value, from the banking book and the trading book. However, the RTS allows excluding certain positions insofar as a change in their fair value does not impact regulatory capital (notably positions to which a prudential filter is applied, transactions treated under hedge accounting, identical and perfectly offsetting positions).

The RTS defines two approaches for calculating AVAs, a simplified approach and a main approach (core approach). The simplified approach can be applied by Institutions whose portfolio of assets and liabilities measured at fair value does not exceed 15 billion euros. A single AVA is calculated by taking 0.1% of the aggregated absolute amount of positions measured at fair value. The main approach must be used by all Institutions exceeding the 15 billion euro threshold and can be applied by other Institutions if they wish. Under this approach, all individual AVAs listed in article 105 (10) of the CRR must be determined according to methods specified in the RTS.

2.2.4 Main EBA Questions & Answers (Q&A) regarding own funds
Grandfathering applicable to capital instruments and material change of contractual terms and conditions of an instrument A material change occurring in the contract of a pre-existing instrument is a limit to the applicability of grandfathering. A material change in the contractual terms and conditions of a pre-existing instrument (Q&A 16) and, in particular, a change in the nominal amount (Q&A 18), must be considered as the issuance of a new instrument. The retention of this instrument in own funds is conditioned by the compliance of the new contractual terms and conditions with all eligibility conditions for additional Tier 1 capital or Tier 2 capital (Q&A 46). In this case, care must be taken to ensure that the instrument does not contain an obligation to pay or not pay dividends (dividend pusher and dividend stopper) which impacts payment flexibility. Conversely, contractual amendments exclusively related to the implementation of benchmark reform are not considered to bring a material change to the contract of the concerned instrument (Q&A 4568). The minimum duration before any repayment must likewise be five years again from the date of the material change.

The provisions governing Tier 2 capital instruments may contain a coupon cancellation or deferral clause in cases where no coupon or dividend is paid on Tier 1 basic or additional capital instruments. Such a clause, if it does not call into question the eligibility of the instrument as Tier 2 capital, is however considered as restricting payment flexibility on Tier 1 capital instruments (basic or additional) when it establishes an obligation and not a simple option to cancel or defer payments (Q&A 21 and Q&A 54). The eligibility of basic or additional Tier 1 capital instruments will then be called into question by such a clause.

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Repayment incentives are prohibited for Additional Tier 1 or Tier 2 capital instruments. A fixed-rate instrument with a call option after which the rate becomes variable but cannot be lower than the initial fixed rate contains a repayment incentive and is therefore ineligible for capital (Q&A 2988). Additionally, Q&A 2848 clarifies how to analyze subsequent "tap" issuances on an existing base to determine if they contain a repayment incentive.

Q&A 3299 addresses the continuity of "grandfathering" rules in the event of a change of debtor following a merger.

Q&A 2019-49 clarifies, for Additional Tier 1 capital instruments and Tier 2 capital instruments, the interaction between the two "grandfathering" periods provided for in Articles 494 bis and 494 ter of the CRR, which end respectively on December 31, 2021, and June 28, 2025.

The CRR regulation stipulates that Tier 2 capital instruments must be subordinated to claims resulting from eligible commitments. It is not necessary to modify the terms and conditions of Tier 2 capital instruments if the creditor hierarchy is otherwise provided for by applicable legal or regulatory provisions or by contract (Q&A 4950).

Fiscal impact of the reduction of principal or conversion of Additional Tier 1 capital instruments

The provisions governing Additional Tier 1 eligible capital instruments must provide for the conversion of said instruments or a reduction in their nominal value when a trigger event occurs (cf. Article 54(1)(a) regarding the definition of the trigger event). In the event of a nominal reduction, an exceptional result equivalent to the reduction is generated. The taxation of this result may lead to a reduction in the amount of Common Equity Tier 1 (CET1) capital induced by the nominal reduction. Article 54 of the CRR requires recognizing in Additional Tier 1 capital only the minimum amount of CET1 capital that would be effectively generated by the nominal reduction or conversion. This requires taking into account any potential tax charges that could reduce this amount. It is then up to each competent authority (Q&A 29) to assess the amount that can be recognized at issuance, taking into account in particular local fiscal treatment and the group structure. In this regard, the ACPR pays particular attention to the estimation of the fiscal impact, and in particular to the probability that the institution records significant losses at the time of the nominal reduction.

Prior authorization from the competent authority required before any buyback, redemption, or reduction of capital instruments or eligible commitments:

Article 77 of the CRR requires that an Institution request prior authorization from the competent authority before any reduction, buyback, or redemption of capital instruments, in compliance with national law provisions, including in cases of reductions motivated by losses or not, and also in cases where the Institution's solvency ratios are not affected by the operation (Q&A 1815).

The deduction of capital related to an authorization for the reduction of capital or eligible commitments by the supervisor must be carried out as soon as the authorization is granted. However, when the Institution implements a buyback option provided for in the capital instrument or eligible commitment contract, the deduction of capital or eligible commitments occurs at the time of the announcement of the buyback operation to the market (Q&A 3277, Q&A 7036). When the Institution proceeds with a replacement of capital instruments, the deduction occurs at the time of the issuance of the new instrument (Q&A 6791). When an Institution proceeds with a share buyback, the amount to be deducted from CET1 is to be determined according to Q&A_6886. Furthermore, in the case of share buybacks provided for under a remuneration policy, the Institution must apply the same prudential treatment as dividends (Q&A_6887). The modalities for the deduction of eligible commitments are specified by Q&A 6651.

The competent authority (Article 78(1) of the CRR) or resolution authority (Article 78a(1) of the CRR) may also grant a prior general authorization for buybacks up to a predetermined amount, the calculation modalities of which are specified by Q&A 2852. Institutions must deduct from their capital and eligible commitments

25 The regime applicable to "tap" issuances, as provided for by Q&A 2848, was clarified by the AT1-MREL Monitoring Report (2023).

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the total amount for which they have obtained a prior general authorization for buyback as soon as they have obtained this authorization (Q&A 3174, Q&A 2392, Q&A 1352). The modalities for the reintegration into capital and eligible commitments of the portion of instruments that have not been bought back are specified by Q&A 5615.

Deduction of exposures to entities in the financial sector:

Q&A 2785 details the conditions to be met for long and short positions on CET1 instruments of the financial sector to be offset and not give rise to a deduction of capital under Article 36(1)(h) or (i) of the CRR.

A reduction in the amount of holdings in the financial sector to be deducted from capital due to a hedging operation (Articles 45(a), 59(a) or 69(a) of the CRR) can only occur, in particular, if the hedge is effective from the first losses (Q&A 3132).

Q&A 3464 clarifies the notion of "same underlying exposure" in the context of calculating exposures to entities in the financial sector, and Q&A 2785 the offsetting rules to apply.

Q&A 3292 deals with the synthetic holding of capital of a financial sector entity.

Capital instruments of the parent company subscribed by a life insurance subsidiary:

Capital instruments issued by its parent company and subscribed by an insurance subsidiary to place them in life insurance account units cannot constitute capital of the parent company under Article 63(b) of the CRR (Q&A 1687). Indeed, even if the economic risk is in some cases transferred to the client, these instruments remain the legal property of the subsidiary and are recorded on its balance sheet. As long as the subsidiary holds these instruments, they cannot be recognized in the parent company's capital.

Treatment of Goodwill

Q&A 6374 clarifies that institutions are indeed required under Article 37(b) to assess the presence of Goodwill and, if applicable, to deduct the Goodwill included in the valuation of all holdings representing significant investments, whether in entities in the financial sector or not. In practice and given the definition of Goodwill provided in Article 4(1)(113), Article 37(b) applies only to holdings accounted for using the equity method in the considered prudential scope. (Q&A 6374)

Q&A 6211 clarifies that under Article 36(1)(b) and 37(b) and regarding insurance subsidiaries, the goodwill included in the valuation of significant investments to be deducted corresponds to the difference between the acquisition price and the net asset value of the entity on the date of acquisition (without prejudice to its possible future impairment). The goodwill generated by any subsequent acquisitions of the insurance subsidiary is not taken into account at the consolidated level. Q&A 6211 also clarifies that the implementation of the provisions of Article 49(1) of the CRR by Institutions does not exempt them from deducting the goodwill identified within their insurance subsidiaries when determining the value of their holding.

Minority interests:

Minority interests arising from a financial holding company (Q&A 2652) may be included in capital, provided that the holding company in question is subject to the CRR on a sub-consolidated basis and subject to compliance with the calculation modalities of Article 84. Furthermore, Q&A 3567 states that Institutions may not include minority interests of a subsidiary in the consolidated capital of the parent company unless a capital requirement is applicable to the subsidiary in question.

Deductions determined at the consolidated level due to the consolidation of the subsidiary are not taken into account for the calculation of minority interests (Q&A 2155). Regarding the method of calculating minority interests, see also Q&A 3111.

The question of the inclusion of minority interests held in third-country subsidiaries is addressed in Q&A 4775 and in Q&A 5711. Q&A 3329 clarifies the treatment applicable in the case of Financial Holding Companies (mixed).

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Q&A 3658 clarifies that for the purpose of calculating minority interests to be included in the CET1 of the parent company, the amount of Pillar 2 recommendations applied to the subsidiary must not be taken into account.

Inclusion of profits and distributions:

Adjustments to the value of exposures are recognized only if they have been reflected in the CET1 capital calculations (Q&A 2629 and Q&A 3330 for its corollary on asset exposures). Furthermore, additional amounts resulting from the increase in the value of an asset subject to deduction must be deducted as soon as they are recorded, without waiting for their inclusion in end-of-quarter or end-of-year profits (Q&A 2544).

Symmetrically, Tier 2 capital related to general credit risk adjustments is recognized only if the period's adjustment amount is deducted from CET1 capital (Q&A 2087).

Declaration of capital and capital buffers:

Q&A 1136 and Q&A 2699 clarify how Institutions notified of a Pillar 2 decision must fill in the regulatory reporting form CA3.

Regarding capital buffers, Q&A 3088 details the "stacking order" of capital requirements as described in the EBA opinion.

Q&A 3342 and Q&A 2607 deal with the application level of O-SII buffers, Q&A 3229 with the additivity of systemic risk buffers, and Q&A 3037, Q&A 3055, Q&A 3050, Q&A 4220 and Q&A 4474 with their calculation modalities.

Prudent valuation:

Q&A 1715 clarifies how the threshold below which Institutions can apply the simplified method for calculating prudent fair value is assessed. It is thus clarified that instruments valued under IFRS as fair value option and available-for-sale enter both into the determination of the threshold below which the simplified method is applicable and into the calculation of the prudent valuation adjustment. Partial hedging of risks is admitted and reduces the calculation base for the exemption threshold and the value adjustment if it is reflected in CET1, whereas this is not the case for so-called economic hedging operations, treated separately.

Regarding the calculation of the threshold to apply the simplified approach: "exactly matching, offsetting assets and liabilities" are excluded from the threshold calculation when future contractual cash flows are identical. This does not mean, however, that the counterparty is necessarily identical (Q&A 2756).

The prudent valuation adjustment related to expected losses (EL) includes all adjustments on financial instruments for which a credit risk impairment has been made, whether these adjustments arise from credit risk or market risk (Q&A 1835).

Q&A 2658 clarifies that the deduction of prudent valuation from capital is done without associated deferred tax effect.

Q&A 4458 indicates that the deferral of day one gains and losses does not constitute a fair value adjustment with regard to the different categories of additional valuation adjustment (AVA) recognized.

Prudential treatment of software assets

Q&A 5567 clarifies the articulation between Article 13 bis of Delegated Regulation No. 241/2014 of January 7, 2014, allowing software assets not to be fully deducted, and Article 37(a) of the CRR, which provides that deducted amounts are reduced by certain deferred tax liabilities. The EBA indicates that the deduction cannot be less than zero and that the amount of software asset to be deducted from CET1 should only be reduced by the portion of deferred tax liabilities that applies to the deducted amount and not to the total amount of the software asset's deferred tax liability. The interactions between the treatment of software assets and the tax deductibility of amortization are specified by Q&A 5171.

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2.2.5 Financing Companies

The decree relating to the prudential regime of financing companies, adopted on December 23, 2013, introduces derogations from the CRR, notably regarding the definition of capital.

The derogations relating to the elements included in regulatory capital concern:

Common Equity Tier 1 capital: Article 3 of the decree of December 23, 2013, allows the inclusion of mutual guarantee funds, subject to their compliance with the eligibility conditions set out in Articles 28 and 29 of the CRR, with the exception of the one relating to accounting classification as equity (Article 28 1. c) of the CRR).

Tier 2 capital:
A principle of continuity has been retained for mutual guarantee funds registered until now in supplementary capital, which will be eligible as Tier 2 capital of financing companies; Also included in Tier 2 capital are exceptional amortizations as well as latent reserves from credit-leasing or hire-purchase operations for Institutions that are not subject to capital calculation on a consolidated basis.

The derogations relating to deductions: beyond the deductions to be applied on capital as provided for by the CRR, financing companies must deduct, under certain conditions, loans and commitments to directors or major shareholders, in continuity with the application of Article 6 ter of Regulation No. 90-02.

2.3 Modalities for calculating the denominator of the solvency ratio

Unless otherwise indicated, the regulatory references in this part of the document refer to Part 3 of the CRR relating to capital requirements applicable to credit institutions and investment firms concerned, and to Part 5 relating to exposures to transferred credit risk.

2.3.1 Output floor

2.3.1.1 Modalities for calculating the output floor

The output floor constraint, defined in Article 92(3) of the CRR, applies only to institutions that use internal methods for calculating exposures to one or more risks and consists for these institutions in establishing a floor for RWAs calculated on the basis of the RWAs that would apply if the institution were in the standard method for all risks (for institutions that use only standard methods, the amount of RWAs corresponds to the "U-TREA" amount as specified below).

The calculation of the output floor is performed at the aggregated asset level, not risk by risk. Thus, and for the concerned institutions only, the total exposure amount (TREA) for the purpose of solvency ratios corresponds to the maximum between:

i) the total exposure amount without application of the floor (U-TREA), i.e., the amount of RWAs calculated using, as appropriate, standard methods or internal model methods for which the institution is duly authorized;

ii) the total exposure amount using the entity's standard approaches (counterfactual SA, or S-TREA), i.e., the amount of RWAs calculated by applying the standard method for all risks, multiplied by 72.5% (i.e., the factor x below):

The level of the 72.5% multiplier is subject to a gradual phase-in. Institutions may apply the following factor x to calculate the total exposure amount:

o 50% during the period from January 1, 2025 to December 31, 2025;

o 55% during the period from January 1, 2026 to December 31, 2026;

o 60% during the period from January 1, 2027 to December 31, 2027;

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o 65% during the period from January 1, 2028 to December 31, 2028;

o 70% during the period from January 1, 2029 to December 31, 2029.

Other transitional transpositions are provided regarding the calculation of the counterfactual in the standard approach concerning i) credit risk, ii) counterparty risk, and iii) securitization:

i) Under Article 465(3) of CRR3, a transitional measure is introduced for unrated companies, consisting of applying a preferential risk weighting for the purpose of calculating the output floor of 65% for unrated companies but considered as "investment grade26" (versus 100% in the standard approach). This transitional measure for unrated companies, whose exercise is at the discretion of the institutions, is applicable in the standard approach only for the purpose of calculating the output floor, i.e., only for institutions using the IRB approach on this type of exposure. This transitional measure is in place until December 31, 2032. Furthermore, another transitional measure ("hard test residential mortgage output floor") provided for in Article 465(5) of CRR3, at the discretion of the Member State, has been activated by a decree of the Ministry of the Economy, published on December 3, 2024. To benefit from this measure, institutions must prove compliance with CRR3 conditions at their level;

ii) Institutions using the internal model approach (IMM) for calculating their exposure to derivatives will apply, until December 31, 2029, an alpha factor of 1 (instead of 1.4) in the context of using the standard approach for counterparty credit risk (SA-CCR) for the purpose of calculating the output floor (Article 465(4) of CRR3);

iii) Regarding securitization, the capital non-neutrality factor p in the SEC-SA approach can be divided by two in the context of calculating the counterfactual, until December 31, 2032.

2.3.1.2 Level of applicability

The output floor applies at the individual level by default. The Member State may, however, under a national option, choose to apply it at the highest level of domestic consolidation (Article 92(3)(b) of the CRR). A decree of the Ministry of the Economy of December 3, 2024, activated this option.

2.3.2 Credit Risk

2.3.2.1 Common elements to standard and internal ratings approaches

2.3.2.1.1 Default of a debtor (Article 178 of the CRR)

Article 178 of the CRR defines the cases characterizing the default of a debtor in standard and internal approaches. In line with the historical position of the ECB and the ACPR, a single 90-day past-due period for the exposure categories provided for in Article 178(1)(b) of the CRR. The ECB, in the ECB Regulation (EU) No 2016/445 of March 14, 2016 on the exercise of the options and discretions, set a single 90-day period for the definition of default for credit institutions supervised directly by the ECB, from December 31, 2016 (art. 4). The ACPR adopts the same treatment in its decision No. 2021-C-23 of June 28, 2021, repealing decision No. 2017-C-79 of December 21, 2017 (treatment maintained with Decision No. 2022-C-21 of July 13, 2022) which applies to Institutions as well as credit institutions not under the direct supervision of the ECB, as well as financing companies and investment firms concerned: Institutions must provide for a single 90-day past-due period for the exposure categories provided for in Article 178(1)(b) of the CRR. The Commission Implementing Regulation (EU) 2021/451 of December 17, 2020, amending the Reporting Regulation, sets the definition of default at 90 days in the context of the definition of non-performing exposures for the purpose of homogeneous reporting of financial information.

The definition of default implies for the competent authority to define a materiality threshold beyond which past-due payments must be taken into account to assess the occurrence of a default event (Article 178(2)(d) of the

26 A company is qualified as "investment grade" if the probability of default (PD) is less than or equal to 0.5% (which corresponds to the "investment grade" rating).

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CRR). Commission Delegated Regulation (EU) 2018/171 of 19 October 2017 specifies the conditions under which authorities set this threshold. It provides that competent authorities must comply with the new materiality threshold. Since 1 January 2019, Institutions must consider a payment arrears to be material when it exceeds simultaneously the following two thresholds, unless specific circumstances demonstrate that the arrears are due to causes unrelated to the debtor's situation (ACPR Decision No. 2025-C-33 of 16 October 2025 abrogating Decision No. 2022-C-21 of 13 July 2022, maintaining the treatment of Decision ACPR No. 2021-C-23 of 28 June 2021 which abrogated Decision No. 2018-C-84):

For retail exposures:

100 euros of arrears (absolute component)
A ratio [arrears/total exposures] of 1% (relative component)

For other exposures:

500 euros of arrears (absolute component)
A ratio [arrears/total exposures] of 1% (relative component).

Furthermore, the EBA published Guidelines (GL 2016/07) to clarify the scope of the default definition, in accordance with Article 178(7) of the CRR. In particular, these Guidelines clarify the application of the default definition for retail exposures, elements on the calculation of materiality thresholds for payment arrears, contagion rules, return to sound status, or the use of external data. The ACPR complies with these Guidelines and expects them to be implemented by credit institutions, financing companies, and investment firms other than portfolio management companies, both for exposures weighted via the IRB approach (the Guidelines cover the entirety of Article 178 of the CRR) and for exposures weighted using the standardised approach to credit risk (Article 127 of the CRR refers to this Article 178).

The definition of default for the calculation of capital requirements (either directly in the risk weighting applied to assets, or for the modelling of PD, LGD, and CCF parameters) and in the internal risk management of the Institution for Institutions using the internal ratings-based approach is in accordance with Article 171(1)(c) of the CRR and Article 19(1)(b) of Commission Delegated Regulation (EU) 2022/439 of 20 October 2021 (method for assessing requirements for the use of internal models-based approach to credit risk). In particular, the occurrence of a debtor's default under Article 178 of the CRR constitutes an important element of assessment to be taken into account before deciding to grant this debtor a new credit, as well as a restructuring or renewal of a credit line. This decision is based, where applicable, on additional analyses supported by other elements.

2.3.2.1.2 Treatment of credit risk adjustments

In accordance with Article 110(4) of the CRR, Commission Delegated Regulation (EU) No 183/2014 of 20 December 2013 (amended by Commission Delegated Regulation (EU) No 2022/954 of 12 May 2022) specifies the calculation of general and specific credit risk adjustments arising from accounting standards. For this reason, the calculation is limited to the amounts of credit risk adjustments that reflect losses exclusively linked to credit risk and which reduce the Institution's Common Equity Tier 1 (CET1) capital. Furthermore, due to the implementation of the IFRS 9 accounting standard, the EBA published an opinion27 on 6 March 2017 in which it specifies that all provisions for expected credit losses constituted in application of the IFRS 9 accounting standard should constitute specific credit risk adjustments and that the aforementioned implementing regulation should be read accordingly. One of the main reasons is that these provisions, which concern specific assets, individually or collectively, are not freely and fully available to cover losses that would materialise subsequently.

The EBA also adopted guidelines on credit risk management practices and the recognition of expected credit losses by credit institutions (EBA/GL/2017/06). The ACPR published a compliance notice for these guidelines on 17 November 2017 concerning credit institutions. Furthermore, the ACPR extended to financing companies the implementation as of 1 January 2018 of the sections of the EBA guideline that specify best practices in credit risk management in the context of the implementation and continuous application of accounting standards relating to expected credit losses through a Notice published on 5 February 2018.

Under the IRB approach, the current treatment of accounting provisions is as follows:

27 EBA Opinion on IFRS 9 of 6 March 2017

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o Calculation of capital requirements based on gross exposures to credit risk for the coverage of unexpected losses (UL); and expected losses (EL) according to the following mechanism:
if EL > total accounting provisions → shortfall deducted from CET1, if EL < total accounting provisions → surplus taken up in Tier 2 with a cap at 0.6% of RWA (risk-weighted exposures).

The treatment of accounting provisions under the standardised approach has not been modified during the Basel II or Basel III agreements. Thus, the treatment remains as follows:

o Calculation of capital requirements based on exposures to credit risk net of specific provisions; and the take-up of general provisions in Tier 2 with a cap at 1.25% of RWA.

The CRR is amended by Regulation (EU) No 2019/630 of 17 April 2019 regarding the minimum coverage of losses on non-performing exposures (the new "prudential backstop" or backstop: prudential provisioning requirements, Article 47c of the CRR). This text applies to exposures arising or modified after 26 April 2019 (Article 469a of the CRR). The objective sought by this new framework is aligned with that sought by the ECB in its Guidelines on non-performing loans, published on 20 March 2017, and an Addendum published on 15 March 2018.

Furthermore, the EBA published on 31 October 2018 guidelines on the management of non-performing exposures and restructured exposures (EBA/GL/2018/06), to which the ACPR declared itself compliant by a notice published on 3 June 2019 and which therefore apply to credit institutions as of 30 June 2019.

2.3.2.1.3 Recognition of third countries

In the context of credit risk and large exposures, exposures to entities (including, among others, institutions, or investment firms) in third countries cannot benefit from a treatment similar to those located in the Union from a prudential standpoint unless the third country applies to these entities prudential and supervisory requirements at least equivalent to those applied in the Union. The list of third countries deemed equivalent is established by the European Commission in Implementing Decision (EU) No 2021/1753 of 1 October 2021 on the equivalence of regulatory and supervisory requirements of certain third countries and territories for the treatment of exposures in accordance with the CRR, for the purposes of Articles 107(4), 114(7), 115(4), 116(5), 142(2) and 391, repealing the previous Implementing Decision (EU) No 2014/908 of 12 December 2014, within the framework of an ongoing programme in which the equivalence of the third-country regime will be regularly (re)examined (Q&A 469, 1989, 1991, 470 and 529).

2.3.2.1.4 Preferential treatment for SME exposures

Article 501 of the CRR extends the scope of the so-called "support factor", under both the standardised and internal approaches, to all exposures to small and medium-sized enterprises (SMEs) classified in the "retail", "corporate", or "secured by a mortgage on immovable property" categories, but excluding ADC exposures: support factor of 0.7619 up to a total amount due28 of 2.5 million euros, additional support factor of 0.85 beyond that, with the calculation of a weighted average support factor applicable to total risk-weighted exposure amounts (as calculated before the application of the support factor). Defaulted exposures are excluded from this preferential treatment.

An SME is defined in accordance with Article 5, point 9) of the CRR as a company, corporation, or enterprise whose annual turnover, according to its most recent consolidated accounts, does not exceed 50,000,000 EUR.

The turnover criterion must be met continuously and permanently (Q&A 343). Off-balance sheet exposures are not included in the calculation of the total amount due. Thus, in the case of a credit line, only the used amount must be accounted for in the calculation of the total amount due. Conversely, the entire exposure, including the unused amount, is eligible for the application of the support factor, provided that all eligibility criteria are met (Q&A 416). The application of credit risk mitigation techniques with substitution effects leading to the reclassification of an exposure from "retail", "corporate", or "secured by a mortgage on

28 Excluding claims secured by residential immovable property, for the calculation of the total amount due.

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immovable property" into another exposure category for prudential purposes does not modify its eligibility regarding the application of the support factor (Q&A 565).

2.3.2.1.5 Preferential treatment for infrastructure

Article 501bis of the CRR introduces a support factor for infrastructure financing, according to which capital requirements for credit risk calculated in accordance with Title II of Part Three of the CRR are multiplied by a factor of 0.75, subject to a number of conditions. Exposures "to entities that operate or finance physical structures or equipment, systems and networks that provide or support essential public services" are concerned. For exposures originated after 1 January 2025, CRR3 introduces an obligation for the debtor to carry out an assessment showing (i) that the financed assets contribute positively to one or more of the environmental objectives set out in Article 9 of Regulation (EU) 2020/852 (the "EU Taxonomy") and do not cause significant harm to other objectives set out in that Article or (ii) that the financed assets do not cause significant harm to any of the environmental objectives set out in that Article.

2.3.2.1.6 Grouping of related clients

The EBA published guidelines on the grouping of related clients in the context of large exposures (Part IV of the CRR) in November 2017 (GL 2017/15). The notion of "groups of related clients" being mentioned in other parts of the CRR (see notably Part 3 of this Notice), the guidelines provide that it is indeed applicable to the entirety of the CRR, in particular for the classification of retail clients (Article 123.c and 147.5.a.ii), the rating system (Article 172.1.d) and the SME support factor (Article 501.1 of the CRR). The ACPR published a compliance notice for these guidelines on 5 June 2018 concerning credit institutions and certain investment firms. Furthermore, the ACPR extends by this Notice to financing companies the implementation as of 1 January 2019 of these EBA guidelines. On 20 December 2022, the EBA published its final draft RTS specifying the circumstances in which the conditions are met to form client groups under Article 4(4) of the CRR, following the public consultation concluded on 8 September 2022. A delegated regulation published in the Official Journal of the European Union on 18 June 2024 now legally enshrines these clarifications. Sections 4, 6 & 7 of the aforementioned guidelines should soon be repealed, as anticipated in the draft RTS, their substance now being taken up and consolidated directly in the delegated regulation.

2.3.2.1.7 Participatory loans or subordinated bonds supported by the State (PPSE)

Under the Decree of 25 March 2021 relating to State guarantee, Institutions distributing PPSE may cede 90% of their outstanding amount to a fund guaranteed by the State to the extent of 30%, the remaining part staying on the balance sheet of the banks that granted the loans.

The following paragraphs specify the prudential treatment applied to the part appearing on the balance sheet of Institutions in application of the applicable accounting rules.

Subject to the terms actually retained in the contracts, the cession is considered as outright, and under this hypothesis, the part of the ceded claims (i.e. 90%) is derecognised from the balance sheet (both under French standards and IFRS) of the Institutions that granted the PPSE.

Standardised Approach (SA)

Participatory loans are subject to a weighting of 150% in accordance with Article 128 of CRR3 relating to subordinated debt.

Furthermore, participatory loans granted to companies being classified as subordinated debt exposures in SA, they cannot benefit from the supplementary factor provided for by Article 501bisa of CRR3 (and applicable in advance, after the entry into force of Regulation (EU) No 2020/973 of 24 June 2020). Indeed, the latter only applies to exposures to SMEs included in the "retail" category.

Internal Ratings-Based Approach (IRB)

29 Decree No 2021-318 of 25 March 2021 relating to State guarantee published on 26 March 2021 in the Official Journal

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Participatory loans are classified into one of the exposure categories corresponding to the nature of the borrower, as listed by Article 147 of the CRR, for Institutions using the internal ratings-based approach (IRB). Thus, participatory loans granted to companies will be classified as exposures to companies. The risk weighting will depend on the approach used (IRB-F or IRB-A) and the risk parameters used.

In the case of exposures to companies, for institutions using the Foundation Internal Ratings-Based approach (IRB-F), "losses given default" (LGD) are set at 75% according to Article 161 of the CRR, for unsecured subordinated exposures, of which participatory loans are part. The "probability of default" (PD) parameter is modelled by the institutions, according to their internal models.

For Institutions using the Advanced Internal Ratings-Based approach (IRB-A), the PD, LGD, and maturity parameters are modelled according to the internal models of each Institution. The possibility for an institution to use the IRB-A approach for the participatory loans it will grant depends on the characteristics of the authorised model. The inclusion of claims in the scopes of the IRB-A models of each Institution is defined on a case-by-case basis according to the authorisation criteria of each model. Whereas a case-by-case examination of the conditions defined in the model, relating to the LGD of the claims included in the model, and having received authorisation for the use of the IRB-A approach, will be necessary to validate their use, it is possible that these loans, due to their subordination relative to other loans of the same nature and in the absence of sufficient data, be excluded from the IRB-A approach by construction. In this case, participatory loans must be treated under IRB-F, i.e., with an LGD of 75%.

Furthermore, exposure amounts for non-defaulted participatory loan exposures to SMEs may benefit from the supplementary factor applicable since the entry into force of Regulation (EU) No 2020/973 of 24 June 2020 and be multiplied by 0.7619 up to a total amount due of 2.5 million euros and by 0.85 beyond that, if the SME's turnover does not exceed 50 million euros.

2.3.2.1.8 Provisional weighting of crypto-assets

Article 501d of CRR3 enters into application in advance, at the time of the entry into force of CRR3 (i.e., upstream of the bulk of the provisions of the regulation which will enter into application in January 2025). This article introduces a provisional treatment of exposures to crypto-assets:

o tokenised traditional assets are weighted as the traditional assets they represent, provided that the value of the latter is not linked to other crypto-assets;

o asset-referenced tokens whose issuers are compliant with Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 (MiCA) and which reference one or more traditional assets are weighted at 250%;

o other exposures to crypto-assets are weighted at 1250%.

2.3.2.1.9 Assimilation of guaranteed credit to mortgage credit

In line with the Basel III30 Agreement, CRR3 introduces the possibility for institutions to treat, under conditions, residential mortgage loans guaranteed by an eligible protection provider as exposures secured by a mortgage on immovable property (Articles 108(4)-108(5) of CRR3). This assimilation is authorised only subject to (i) compliance with criteria relating to the functioning of the national residential mortgage credit market defined in Article 108(4), points (a), (b) and (c) and (ii) the eligibility conditions of the guarantor protection providers as defined in Article 108(5) points (d), (e), (f) and (g). The criteria relating to the functioning of the national residential mortgage credit market are considered by the ACPR as met for the French territory. Furthermore, the list of protection providers meeting the conditions of Article 108(5), points (d), (e), (f) and (g), is accessible in Annex A of this Notice. Subject to compliance with the additional conditions of Article 108(5), points (a), (b) and (c), institutions thus have the possibility to exercise this assimilation individually for each of the eligible protection providers, both for institutions under the standardised approach and for institutions under the internal models approach. In application of Article 108(6), institutions that make use of this assimilation for an eligible protection provider are required to do so for all their exposures to natural persons guaranteed by that same protection provider under this mechanism.

30 Basel III Agreements (2017), § 21 (internal models), footnote n°3 and § 60 (standard), footnote n°35.

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Standardized Approach (SA)
In the event that a credit institution using the SA assimilates an eligible provider of protection, the applicable risk weight is that of the category of exposures secured by a residential mortgage (Article 125 CRR3).
In the absence of such assimilation, guaranteed loans must be treated as exposures secured by unfunded credit protection, allowing the substitution of the risk weight applicable to the debtor with the risk weight applicable to the provider of protection.

Internal Ratings-Based Approach (IRB)
In the event that a credit institution using the IRB assimilates an eligible provider of protection, guaranteed real estate loans must be classified as "retail exposures" in the sub-portfolio of "retail exposures secured by real estate collateral." The Loss Given Default (LGD) used may be adjusted to take into account recoveries from the guarantee. In accordance with the classification "retail exposures secured by real estate collateral," the LGD adjustment is not constrained by the risk-weighted asset floor described in Article 183(4) of the CRR3.

In the absence of assimilation of the eligible provider of protection, credit institutions using the IRB approach may still take into account the effect of the guarantee in their LGD modeling, but it must be treated as unfunded credit protection. Consequently, the LGD receives a minimum weight corresponding to the weight of a direct exposure to the guarantor.

When a credit institution chooses to assimilate the guaranteed loan to the mortgage loan in IRB, this assimilation applies to these same exposures treated under the standardized approach for the calculation of the output floor, to which the requirements applicable to mortgage loans under the standardized approach must therefore apply, including those of Articles 208 and 229(1) CRR3.

Regarding the reporting modalities of Article 101 of the CRR, it is further expected that Institutions include in their reports the losses generated by their exposures to guaranteed loans concerning residential real estate.

2.3.2.2 Standardized Approach

2.3.2.2.1 Additional Classification of Off-Balance Sheet Items
Article 111(1) of the CRR, which defines the CRR risk exposure value, refers to Annex I of the CRR for the classification of off-balance sheet items according to their classification as high, medium, moderate, or low risk.
CRR3 modifies the classification of off-balance sheet items (Annex 1 CRR) and the associated credit conversion factors (CCF). In replacement of the 4 categories currently in force which were in force under CRR2 31, five new categories of off-balance sheet items have been defined 32. The definition of an "commitment" is also introduced, with strict conditions allowing certain contractual arrangements not to be considered as commitments.

A transitional measure until December 31, 2032 for the CCF applicable to revocable commitments is introduced. The conversion factor is set at 0% until December 31, 2029, then increases in steps until December 31, 2032, reaching the Basel CCF of 10% on January 1, 2033.

Annex I indicates that additional off-balance sheet items may be taken into account by competent authorities and in this case must be notified to the EBA. A mandate is given to the EBA (Art. 111(8) CRR3) to specify in a technical standard several elements, allowing institutions to correctly assign their exposures 31 High Risk (CCF 100%), Medium Risk (CCF 50%), Medium/Low Risk (CCF 20%), Low Risk (0%).
32 Bucket 1 (CCF 100%), Bucket 2 (CCF 50%), Bucket 3 (CCF 40%), Bucket 4 (CCF 20%), Bucket 5 (CCF 10%).

Notice 2025 on the Calculation and Publication of Prudential Ratios under CRD4 and MREL Requirements General Secretariat of the Prudential Control and Resolution Authority 40 off-balance sheet to the different risk categories (deadline S1 2025), and in particular the criteria for assigning off-balance sheet items to the different risk categories, with the exception of off-balance sheet items already listed in Annex 1 CRR. The final EBA standard was published on August 18, 2025.

2.3.2.2.2 Exposures to Central Government
Article 500bis of the CRR on the temporary treatment of public debt issued in the currency of another Member State, introduced by Regulation (EU) 2020/873, provides for a derogation from the risk weight applicable under the standardized approach according to Article 114(2) of the CRR, in progressive steps until December 31, 2024. This derogation is extended by two years by Regulation CRR3 which amends Article 500bis of the CRR, with new progressive steps until December 31, 2026.

2.3.2.2.3 Exposures to Regional or Local Authorities
Article 115(2) of the CRR allows, under conditions and with the opinion of the competent authority, that exposures to regional or local authorities be treated as exposures to the central government. The ACPR College adopted on June 21, 2024 Decision No. 2024-C-18 allowing the assimilation to the French central government of municipalities, public establishments for inter-municipal cooperation (EPCI) with own taxation 33, departments, and regions 34 and public establishments for inter-municipal cooperation (EPCI) with own taxation 35. Local authorities with special status, created in place of certain of these regional or local authorities, are also assimilable to the central government 36. Consequently, Article 115(2) of the CRR applies to these French regional or local authorities, which may be subject to the 0% risk weight provided for in Article 114(4) of the CRR, for exposures denominated and financed in the national currency.

33 List and composition of EPCI with own taxation | collectivites-locales.gouv.fr 34 This decision covers the overseas collectivities, departments and regions within the meaning of Article 73 of the Constitution (so far, Guadeloupe, La Réunion, Martinique, Guyana and Mayotte). This decision does not however extend to the overseas collectivities within the meaning of Article 74 of the Constitution (Saint-Barthélemy, Saint-Martin, Saint-Pierre-and-Miquelon, Wallis and Futuna Islands and French Polynesia), New Caledonia, the French Southern and Antarctic Lands (TAAF) and Clipperton; municipalities and EPCI with own taxation located within their jurisdiction do not benefit, by exception, from the assimilation to the central government.. 35 List and composition of EPCI with own taxation | collectivites-locales.gouv.fr 36 These are local authorities with special status within the meaning of Article 72 of the Constitution (so far, the City of Paris, the Lyon Metropolis and the Collectivity of Corsica).

2.3.2.2.4 Exposures to Public Sector Entities
Article 4(1)(8) of the CRR defines the notion of public sector entity, distinguishing two types of entities that fall under central, regional, or local authorities: i) a non-commercial administrative body or ii) a non-commercial enterprise benefiting from explicit guarantees, including autonomous bodies governed by law and subject to public control.
To implement this definition, institutions may consider as "public sector entities" within the meaning of the CRR entities that (1) do not have a commercial character, and (2) are (i) public law legal persons or (ii) private law legal persons benefiting from an explicit guarantee from their central, regional, or local administration, which are classified by the National Institute of Statistics and Economic Studies (Insee) as part of the public administration sector 37, in accordance with the rules contained in the European System of National and Regional Accounts (cf. Regulation No. 549/2013 of May 21, 2013). To this end, institutions may rely on the lists of "various central administration bodies" (ODAC) and "various local administration bodies" (ODAL) published annually by Insee, as well as on data published by the Bank of France under the regulations for securities holding statistics.

37 To identify counterparties that are part of the public administration sector within the meaning of national accounting (ODAC, ODAL and ODASS in particular), institutions may rely on the lists of "various central administration bodies" (ODAC) and "various local administration bodies" (ODAL) published annually by Insee, as well as on data published by the Bank of France under the regulations for securities holding statistics (Protide database).

Notice 2025 on the Calculation and Publication of Prudential Ratios under CRD4 and MREL Requirements General Secretariat of the Prudential Control and Resolution Authority 41 published annually by Insee, as well as on data published by the Bank of France under the regulations for securities holding statistics.

Article 116(4) of the CRR allows, in exceptional circumstances and with the opinion of the competent authority, that institutions may treat their exposures to public sector entities as exposures to the central government, when there is no difference in risk between these exposures due to the existence of an appropriate guarantee from the central government.

In France, exposures to public sector entities falling under the categories below may be treated, due to the appropriateness of the State guarantee, as exposures to the central government under Article 116(4):

Within central public administrations, the following public law legal persons: administrative public establishments within the list of "various central administration bodies" established by the National Institute of Statistics and Economic Studies (Insee); and public establishments of a scientific, cultural and professional nature;
Within local public administrations, the public law legal persons that are State establishments or placed under State supervision: water agencies, chambers of agriculture, chambers of trades and crafts and chambers of commerce and industry;
Within social security administrations, the public law legal persons that are State establishments or placed under State control: public health establishments 38 and national social security bodies 39.

In addition to the entities falling under these categories above, exposures to the following public sector entities may also be treated, due to the appropriateness of the State guarantee, as exposures to the central government under Article 116(4): the Caisse des dépôts et consignations; the Overseas Issuing Institute (IEOM) 40; the Société des Grands Projets and the Union nationale interprofessionnelle pour l'emploi dans l'industrie et le commerce (Unédic).

Annex B1 of the Notice lists the public sector entities that may be treated as exposures to the central government under Article 116(4).

Article 4(1)(8) of the CRR defines the notion of public sector entity, while Article 116(4) of the CRR allows, in exceptional circumstances, that exposures to public sector entities be treated as exposures to the central, regional, or local government with the opinion of the competent authority. Annex B1 of the Notice lists French public sector entities assimilable to the central government and Annex B2 references French public sector entities treated as stipulated by Articles 116(2) or 116(1) of the CRR. These lists are not exhaustive.

38 This includes Assistance publique-Hôpitaux de Paris, Assistance publique-Hôpitaux de Marseille and Hospices civils de Lyon.
39 These are the National Health Insurance Fund (CNAM), the National Old Age Insurance Fund (CNAV), the National Family Allowance Fund (CNAF), the National Solidarity Fund for Autonomy (CNSA) and the Central Agency of Social Security Bodies (ACOSS), as well as the Social Debt Amortization Fund (CADES).
40 In the ZIEOM collectivities (CFP Franc emission zone), the IEOM may be considered a "central bank" within the meaning of the CRR Regulation and Delegated Regulation 2015/61.
41 Subject to compliance with the interaction between Article 120 and Article 131.

2.3.2.2.5 Exposures to Rated Institutions
Under Article 120 of the CRR, exposures to Institutions for which there is a credit assessment established by a designated external credit assessment institution (ECAI) receive a risk weight assigned in accordance with Table 1) or Table 2 41 of Article 120, which corresponds to the credit assessment established by the ECAI in accordance with Article 136 of the CRR.

The use of external ratings incorporating implicit government support (unless these are associated with public sector institutions) is prohibited, but CRR3 provides for a transitional measure that allows institutions to use such external ratings until December 31, 2029, with the authorization of competent authorities (Article 495c CRR3). In Regulation No. 2025/1520 of the ECB on options and discretions, the ECB has allowed credit institutions under its direct supervision to extend the use of these external ratings incorporating implicit government support until January 1, 2027. Under ECB Guideline No. 2025/1521 on options and discretions, the ACPR has also allowed credit institutions not under the direct supervision of the ECB to extend the use of these external ratings incorporating implicit government support until January 1, 2027. Where applicable, the exercise of this transitional measure will be indicated in the ECB Options and Discretions Regulation for G-SIs and in the corresponding ACPR Decision for L-SIs.

2.3.2.2.6 Exposures to Enterprises
The risk weights for rated enterprises depend on external ratings established by an ECAI, in accordance with Article 122 CRR3. Unrated enterprises are subject to a risk weight of 100% (Article 122(2) CRR3). As a reminder, exposures to small and medium-sized enterprises benefit from a support factor in accordance with Article 501 CRR3.

Under Article 465(3) CRR3, a transitional measure is introduced for unrated enterprises, consisting of applying a preferential risk weight for the calculation of the output floor of 65% for unrated enterprises but considered as "investment grade 42" (versus 100% under the standardized approach). This transitional measure for unrated enterprises, the exercise of which is at the discretion of institutions, is applicable under the standardized approach only for the calculation of the output floor, therefore only for institutions using the IRB approach on this type of exposure. This transitional measure is in place until December 31, 2032. The European Supervisory Authorities (ESA) are mandated to submit a joint report concerning the use and its impact on enterprise financing, on the availability of external ratings and the removal of obstacles opposing broader coverage of rated enterprises in Europe, to be submitted to the Commission by July 10, 2029 (Article 465(3)). Based on this report, the Commission may submit a legislative proposal (horizon December 31, 2031), which can only aim at a provisional extension of this transitional measure, and this for a period of maximum 4 years, with justifications (Article 465(5a)).

42 An enterprise is qualified "investment grade" if the probability of default (PD) is less than or equal to 0.5% (which corresponds to the "investment grade" rating).

2.3.2.2.7 Specialized Financing Exposures
A category "specialized financing exposures" is introduced under the standardized approach in the new Article 122a CRR3, with two general approaches for determining the applicable risk weights, one for exposures with an external rating and another for exposures that do not have one. Sub-categories of exposures "project finance," "asset finance," and "commodity finance" are also introduced under the standardized approach, in line with the same three sub-categories included under the IRB approach.

The risk weights applicable to rated SLE exposures are defined in Article 122a(2).

Unrated asset finance exposures that benefit from prudent and conservative financial risk management (HQOF 43 - high quality object finance) may benefit from favorable treatment (application of a risk weight of 80%). This measure is temporary, until December 31, 2032 (Art. 495b(3)). An EBA mandate is introduced in Article 495b(4) for the publication of a report by December 31, 2030; based on this report and international standards developed by the BCBS, the Commission may submit a legislative proposal by December 31, 2031.

Similar treatment is provided for unrated project finance that benefits from prudent and conservative financial risk management (HQPF 44 - high quality project finance) according to the project phase (weighting at 80% in the operational phase).

43 High quality object finance.
44 High quality project finance.

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In the standard approach, the preferential treatment provided for in the new Article 122a of CRR3 for exposures related to "high quality" project finance will only apply to exposures to which institutions do not already apply the "infrastructure support factor" treatment under Article 501a, in order to avoid a double reduction of capital requirements. Thus, the 80% risk weight for high-quality project finance is only accessible if the infrastructure support factor is not applied.

2.3.2.2.8 Exposures Secured by a Mortgage on Real Estate
The new Basel standard on real estate is transposed into CRR3, modifying the treatment of exposures on residential and commercial real estate, with the design of more risk-sensitive approaches.

Pursuant to Article 124(1) of CRR3, an exposure secured by a mortgage on real estate (excluding so-called "ADC" exposures on property under construction, see below) that does not meet all the conditions provided for in Article 124(3), or any part of such an exposure that exceeds the nominal amount of the mortgage on the real estate, is weighted according to its classification as income-producing real estate (IPRE). This exposure must therefore be weighted at the same rate as the counterparty if it is a non-IPRE exposure, or at 150%, if it is an IPRE exposure.

When all the conditions of Article 124(3) are met, the weighting of an exposure secured by a mortgage on real estate (non-ADC) differs between residential real estate and commercial real estate.

Regarding residential real estate, non-IPRE exposures benefit from the "loan splitting approach" defined in Article 125(1). In this case, the part of the exposure representing no more than 55% of the value of the property receives a risk weight of 20%. Regarding commercial real estate, non-IPRE exposures benefit from the "loan splitting approach" defined in Article 126(1). In this case, the part of the exposure representing no more than 55% of the value of the property receives a risk weight of 60%. Finally, concerning the treatment of residential or commercial IPRE, the final weighting depends on the fulfillment of certain conditions and the activation of hard tests.

2.3.2.2.8.1 Exposures on Real Estate Under Construction
With CRR3, loans granted to natural persons secured by residential real estate under construction can only be recognized when one of the two conditions of Article 124(3)(a)(iii) is met. The first condition provides that the real estate property comprises no more than four residential housing units and will be the debtor's main residence, and that the loan granted to the natural person does not indirectly finance ADC exposures. Regarding the second condition, the EBA is mandated to specify in a RTS what constitutes a "legal mechanism put in place to ensure that the property under construction will be completed within a reasonable time," according to Article 124(3)(a)(iii).

2.3.2.2.8.2 Real Estate Valuation Requirements
CRR3 introduces new requirements regarding the valuation of real estate. Thus, while the value of the property still relies on Article 208 of CRR, it is subject to new constraints defined in the new Article 229(1) of CRR3, providing for the use of conservative and prudent valuation criteria (exclusion of future appreciation expectations and taking into account that the current market value may be significantly higher than what would be the sustainable value of the property until the maturity of the loan, among others). The cap on the value of the property relative to the average value over a given period (6 years for residential and 8 years for commercial), for the real estate property or for a comparable property, applies when the valuation is reviewed (Article 229(1)(e)). The EBA is mandated to publish a RTS specifying the criteria and factors to be considered for the valuation of a "comparable property," by December 31, 2027.

2.3.2.2.8.3 Preferential Weightings for Residential and Commercial Real Estate
("Residential Rental Property Hard Test")

45 Income-Producing Real Estate.

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CRR3 introduces a specific treatment when the repayment of the loan depends on the income generated by the real estate property (IPRE46 – income-producing real estate), a treatment that differs according to the type of asset – residential (IPRRE47) or commercial (IPCRE) – and the phase in which the property is located (under construction or completed). By default, the "whole loan approach" applies to residential and commercial income-producing real estate; however, there is the possibility of applying the general "loan splitting approach" (more favorable) for IPRRE and IPCRE48, subject to the validation of the "residential rental property hard test." With CRR3, this "residential rental property hard test" is extended to exposures located in third countries that apply prudential regulation considered equivalent to that of the European Union, pursuant to an implementing decision of the European Commission taken under Article 107(4) of CRR3 (see section above).

More precisely, Articles 125(2) and 126(2) of CRR3 allow institutions to benefit from a preferential risk weight for exposures whose repayment depends significantly on the performance of the financed property (IPRE), when the competent authority of the Member State in which the real estate properties are located (for France, the ACPR) publishes annually the evidence attesting that the losses generated by loans secured by real estate properties (residential or commercial, respectively) do not exceed certain thresholds set by the regulation over the entire territory, based on data reported by institutions under Article 430a of CRR3. A similar treatment is provided for banks using the internal ratings-based approach in Articles 199(3) and 199(4) of CRR3. Data on historical loss rates of national real estate markets allowing institutions to exercise this preferential weighting are accessible on the ACPR website49.

2.3.2.2.8.4 Transitional Provisions Regarding Residential Real Estate Concerning the Capital Floor ("Output Floor Hard Test")
Article 465(5) of CRR3 allows banks modeling their credit risk using the internal ratings-based (IRB) approach to apply a preferential risk weight in the standard approach for the calculation of the output floor, for exposures secured by a mortgage on residential real estate. The "output floor hard test" is a national option falling within the competence of Member States; in France, the activation of this option was confirmed in a ministerial order of December 3, 2024.

When this option is activated at the national level, CRR3 provides for prior verification by the competent authority of the fulfillment of the conditions by institutions (Article 465(8)(f)), so that they can benefit from the preferential treatment. In particular, the activation by institutions of this hard test relies on a level of losses not to be exceeded at the level of each institution as defined in Article 465(8), point (d), based on data also collected through Article 430a of CRR3.

It should be noted that exposures benefiting from the "residential rental property" hard test in the standard approach will also be able to benefit from the "residential real estate output floor" hard test, for institutions using the internal models approach.

2.3.2.2.8.5 Macro-prudential Provisions
Pursuant to Article 124(9) of CRR3, based on data collected under Article 430bis of CRR and any other relevant indicator, the authorities designated under Article 124(1a) must evaluate at regular intervals, at least once a year if the risk weight provided for in Articles 125 and 126 applicable to exposures secured by a mortgage on residential or commercial real estate located on their territory is appropriate. This provision allows the designated authority to raise weightings up to 150%, on two criteria relating to the loss history of exposures secured by real estate, and the outlook for real estate market developments. A similar provision is provided for in Article 164 for banks subject to the internal ratings-based approach, allowing the competent authority to raise the minimum loss level in case of default. The EBA, in collaboration with the ESRB,

46 Income-Producing Real Estate.
47 Income Producing Residential Real Estate
48 Income Producing Commercial Real Estate
49 See, for the year 2024: i) for residential ACPR, Housing Finance in 2023, Analyses and Syntheses, No. 160, annex p. 43; ii) for commercial ACPR, Commercial Real Estate Financing by French Banks in 2023, Analyses and Syntheses No. 164, annex p. 55.

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is tasked with drafting regulatory technical standards to specify the types of factors to be taken into account to assess the adequacy of the risk weightings referred to in Article 124(9).

The HCSF published a recommendation (R-HCSF-2021-1) on January 27, 2021, revised by a decision of December 18, 2023 (D-HCSF-2023-6) addressed to credit institutions (whether in standard approach or internal ratings-based approach) regarding the conditions for granting residential real estate credit, in which they are invited, after taking into account the characteristics of the project and the borrowing household, to conform to established best practices, namely: i) a maximum effort ratio at origination of 35% of the borrower's net income; ii) a loan term not exceeding 25 years. Up to 20% of production may deviate from strict compliance with these criteria, of which at least 80% reserved for purchasers of their main residence and 30% reserved for first-time buyers. A notice precisely defines the criteria of the recommendation. The ACPR Instruction 2021-I-02 defines the reporting statements associated with this recommendation (CREDITHAB). The HCSF decision of September 29, 2021 regarding the conditions for granting real estate credit now makes these origination criteria binding.

The HCSF also wished to draw the attention of credit institutions to the importance of pricing residential real estate credit that does not weaken the French housing finance model, which implies appropriate coverage of costs and risks. In order to monitor institutions' practices in this area, the High Council asked the Prudential Control and Resolution Authority (ACPR) to set up detailed reporting, which was done by means of ACPR Instruction 2020-I-04 (RENTIMMO).

2.3.2.2.9 Exposures on Land Acquisition, Real Estate Development and Construction (ADC)
The notion of speculative financing of real estate is removed in CRR3 and replaced by a new category related to land acquisition for the development and construction of buildings, or the development and construction of buildings ("land acquisition, development and construction exposures," referred to as "ADC" exposures).

Article 126a of CRR3 provides for a default risk weight of 150% for these exposures, and a preferential treatment for these exposures when they concern residential real estate. This preferential treatment applies under certain conditions, including the existence of (i) sufficiently significant irrevocable pre-sale or pre-leasing contracts, with substantial cash deposits or financing secured equivalently, or sufficiently significant irrevocable sale/lease contracts; and (ii) substantial capital at risk for the borrower (which is represented as an appropriate amount of equity contributed by the debtor to the value of the residential real estate property once completed).

The EBA is mandated by July 10, 2025, to publish its Guidelines specifying the terms of these conditions, taking into account the specificities of loans granted by institutions in the area of public housing or to non-profit organizations throughout the Union, which are governed by law, have a social purpose and aim to provide long-term housing to tenants. These define the two alternative conditions mentioned above as follows: (i) 50% of the total number of contracts consists of pre-sale contracts (e.g., reservation contracts) with a cash deposit greater than or equal to 10% of the sale price, or pre-leasing contracts accompanied by a cash deposit equal to or greater than three times the monthly rent, or sale contracts (e.g., off-plan sales contracts (Véfa)); (ii) the borrower has substantial at-risk equity, i.e., equity contributed (according to the modalities defined in the Guidelines) represents at least 25% of the value of the residential real estate property at completion. Furthermore, the Guidelines provide for a specific treatment for social rental housing real estate projects, allowing them to meet the first condition if demand exceeds the supply of housing, including at the municipal level (for this purpose, data on social housing supply by municipality can be used in France). Finally, for these exposures on social rental housing real estate projects, the capital requirement is reduced to 20% and the scope of eligible capital has been widened to include committed grants, aid, and subordinated preferential loans.

2.3.2.2.10 Subordinated Debt Exposures
Subordinated debt exposures are weighted at 150% (unless they are deducted from capital), pursuant to Article 128 of CRR3. Under this article, the following are considered subordinated debt: debt exposures that are subordinated to the claims of another unsecured ordinary creditor, equity instruments that are not considered equity exposures, pursuant to Article 133 of CRR, and liability instruments that meet the conditions of Article 72b of CRR.

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2.3.2.2.11 Covered Bond Exposures50
Regulation (EU) 2019/2160 of November 27, 2019, which applies from July 8, 2022, modifies the CRR regarding covered bond exposures. Only covered bond issuances meeting all the requirements defined in Article 129 of CRR can benefit from a preferential prudential treatment.

Regulation (EU) 2024/1623 of May 31, 2024 also modifies CRR regarding the valuation of real estate in the context of covered bonds, complementing the requirements of CRBF No. 99-10 of July 9, 1999 regarding mortgage credit institutions and housing finance companies. Under Article 129(3) of CRR as amended, the requirements of Article 229(1)(e) of CRR as amended therefore apply for the purposes of valuing real estate, regarding loans secured by a first-ranking mortgage or a security interest conferring at least equivalent security.

Consequently, regarding loans secured by a first-ranking mortgage or a security interest conferring at least equivalent security included in the cover pool, when the property is revalued, the value of the property does not exceed the average value measured for this property or for a comparable property over the last six years for residential properties or the last eight years for commercial real estate, or the original value, the highest value being retained.

2.3.2.2.12 Exposures in the Form of Units or Shares of UCITS51
Article 132 of the CRR regulation on capital requirements for exposures in the form of units or shares of UCITS is amended by CRR2 (Articles 132 to 132-quater), which extends the scope, reviews the conditions for application, and provides for three revised calculation methods: the transparency approach, the mandate-based approach, and the alternative approach (risk weight of 1250%, more conservative than the old default approach which was 100%).

A credit conversion factor (CCF) of 20% for commitments given to UCITS in the form of capital or yield guarantees (minimum value commitments) is also provided for in the conditions of Article 132-quater. The draft RTS on the calculation of the risk-weighted exposure value of UCITS, published by the EBA on November 25, 2021, clarifies the treatment in the context of the mandate-based approach when one or more of the data necessary for this calculation are not available. A delegated regulation published in the Official Journal of the European Union on March 9, 2023 now legally enshrines these clarifications.

2.3.2.2.13 Equity Exposures
The CRR3 regulation modifies the framework applicable to equity exposures, notably by limiting the scope of IRB modeling, which is no longer authorized for these exposures.

Equity exposures must now be weighted according to the new standard approach in CRR3 (Article 133 of CRR3): a risk weight of 400% for speculative unlisted shares, 100% for exposures on shares in certain official programs, 250% for other equity exposures (long-term investments52, among others). The classification of long-term investments refers to a minimum holding period of three years, pursuant to the approval of the institution's management. Equity exposures on central banks remain subject to a risk weight of 0%.

A five-year transitional period for the progressive implementation of the new risk weights is provided for by Article 495a of CRR3, which establishes progressive milestones until December 31, 2029. The weightings cannot be lower than the weightings applicable under CRR2, with a cap set at 250% for "other equity exposures," reached from January 1, 2030.

50 Secured bonds ("covered bonds") are presented as standard bonds, at fixed or variable rates, but benefiting from enhanced protection. Secured by a portfolio of assets, consisting of real estate loans (mortgage loans or secured loans) or public sector claims, they offer the investor a double recourse, on the one hand, on the issuing entity, and on the other hand, on the portfolio of underlying claims. In France, there are three legal statuses for issuers of covered bonds: mortgage credit institutions (SCF), housing finance companies (SFH), and an ad hoc framework for the Housing Refinancing Fund (CRH). Article L.513 of the Monetary and Financial Code sets out the provisions relating to SCF and SFH. 51 Collective investment undertakings, as defined by Article 4(1)(7) of CRR. 52 The classification of long-term investments refers to a minimum holding period of 3 years (or a minimum intention to hold for 3 years).

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Under CRR3, a weighting of 100% is applicable for all participations within the same prudential consolidation perimeter (intra-group) or the same institutional protection scheme (intra-IPS), without this concern insurance participations within the same conglomerate.
A grandfathering clause ('grandfathering' – art. 495a CRR3) is provided for the treatment of historical and strategic investments held for more than 6 years, on which institutions exercise at least control or significant influence. This provision, optional and of indefinite duration, allows freezing the currently applicable risk weighting, and applies to any type of equity exposure, including insurance participations. As soon as the conditions are met (being a historical shareholder of the entity for more than 6 years as of October 27, 2021, and currently having control or significant influence), all exposures to this entity can benefit from grandfathering, including those resulting from recent capital increases. The notion of control or significant influence must be assessed at the level of the participations of the networks to which the institutions belong (and not solely at the level of the solo participations of the institutions), and the scope of grandfathering is extended to cases where institutions can appoint a member of the management body.

2.3.2.2.14 Mapping of External Credit Assessment Institutions (ECAIs)
Article 136 of the CRR Regulation requires that, for all External Credit Assessment Institutions (ECAIs), the mapping between the relevant credit assessments established by ECAIs and the credit quality steps ('CQS') provided for in Section 2 of Chapter 2 of Title 2 of said Regulation ('mapping') be specified.
For information, an ECAI is a credit rating agency registered or certified in accordance with Regulation No 1060/2009 or a central bank issuing credit ratings that are exempt from the application of said Regulation.
Thus, the European Commission adopted Implementing Regulation (EU) 2016/1799 detailing the mapping tables to apply, this mapping having the objective of appropriately attributing to the rating categories of an ECAI the risk weightings provided for by CRR. This Regulation was amended on April 24, 2018 by Regulation (EU) 2018/634 to update the list of accredited ECAIs and on November 29, 2019 by Regulation (EU) 2019/2028 to update the mapping tables, then by Regulation (EU) 2021/2005 of November 16, 2021, as well as Regulation 2024/1872, to update the list of accredited ECAIs and the associated mapping tables. These mapping tables are referenced in Annex C1 of the Notice. The use of external ratings is accompanied by a 'due diligence' obligation (article 113 CRR) aimed at verifying the adequacy of the external ratings of rating agencies. This obligation applies in the standard approach to all classes of exposures, except for certain public entities53. If the prior analysis leads to less favorable risk characteristics than those implied by the external rating tranche assigned to the exposure, the institution must assign a weighting that is at least in the upper tranche (CQS – credit quality step) than that determined by the external rating.

2.3.2.3 Internal Ratings Based ('IRB' or 'NI') approach to credit risk
Project for harmonization of internal ratings approaches (IRB repair) The project for harmonizing IRB rules launched by the EBA in 2016 to remedy the variability of internal models for calculating credit risk is now finalized (see the Progress Report on the IRB Roadmap published by the EBA in 2019):

Phase 1 made it possible to clarify via a RTS the methods for supervisory review of internal IRB models by the competent authority. This RTS on Assessment methodology was published on July 21, 2016 and adopted by the Commission via Delegated Regulation (EU) 2022/439 of October 20, 2021;
Phase 2 clarified the definition of default (article 178 of CRR), via a RTS and guidelines. The Guidelines on default definition (EBA/GL/2016/07) were published by the EBA on September 28, 2016. The ACPR declared its intention to comply with them during the college meeting of December 20, 2016 and the ECB did the same on November 30, 2017.
Institutions must comply with these guidelines since January 1, 2021.
Phase 3 aimed at estimating the risk parameters PD and LGD of internal models via a RTS and two guidelines.
o The EBA adopted guidelines relating to estimates of probability of default, estimates of losses upon default and the treatment of exposures on which there has been default (EBA/GL/2017/16). These guidelines detail, in particular, the method for estimating the probability of default, losses upon default and define the notion of economic losses and explain the calculations in the situation where exposures are already in default. They also specify the requirements regarding the use of data and the calculation of the margin of prudence. The ACPR published a compliance opinion on these guidelines on June 5, 2018 concerning credit institutions. Furthermore, the ACPR extends by this Notice to financing companies the implementation as of January 1, 2021 of these EBA guidelines. o The EBA also clarified the notion of economic slowdown in the context of estimating the 'LGD downturn' in a RTS published on November 16, 2018 applicable since January 1, 2021. This RTS was adopted by the European Commission on March 1, 2021 via Delegated Regulation 2021/930. It is moreover complemented by guidelines on the estimation of LGD downturn (EBA/GL/2019/03) to which the ACPR complies and expects, by virtue of this Notice, that credit institutions and Financing Companies comply with as of January 1, 2021. o In order to allow supervisors and Institutions more time to implement the necessary changes to the rating systems of Institutions, the EBA postponed the entry into application of these guidelines to January 1, 2022 in the general case and to January 1, 2024 in the specific case of LGD rating systems covering perimeters that will no longer be eligible for the advanced IRB approach within the framework of the final Basel III reform.
Phase 4 aimed at clarifying the treatment of credit risk mitigation techniques. The EBA produced a report on credit risk mitigation techniques of March 19, 2018 which focuses on the Standard (SA) and Foundation (F-IRB) approaches. In addition, the EBA adopted Guidelines on credit risk mitigation for Institutions applying the internal ratings approach with their own LGD estimates (EBA/GL/2020/05). The ACPR published a compliance opinion on these guidelines on October 14, 2020. Furthermore, the ACPR extends by this Notice to financing companies the implementation of these guidelines, as of January 1, 2022.

2.3.2.2.9 Definition of exposure categories
Each exposure treated under the internal ratings approach must be appropriately and consistently allocated over time to one of the categories defined in Article 147 of the CRR:
a) exposures to central governments and central banks; a bis) exposures to regional and local authorities and public sector entities, to be classified into the following exposure categories:
i) exposures to regional and local authorities; ii) exposures to public sector entities; b) exposures to Institutions; c) exposures to enterprises, to be classified into the following exposure categories:
i) general enterprises; ii) specialized financing exposures; iii) purchased corporate receivables; d) retail client exposures, to be classified into the following exposure categories:
i) eligible revolving retail exposures (QRRE); ii) exposures to retail clients secured by residential immovable property; iii) purchased retail receivables; iv) other exposures to retail clients; e) equity exposures; e bis) exposures in the form of units or shares of UCITS; f) elements representing securitization positions; g) assets other than credit obligations. Following the entry into application of CRR3, equity exposures must necessarily switch to the Standard approach, as specified in Article 150. In addition, exposures in the following categories must now be treated according to the 'Foundation' IRB approach (Article 151, paragraph 8):
a) exposures to Institutions;

Modalities for the calculation and publication of prudential ratios within the framework of CRD IV and MREL requirement – 2025 General Secretariat of the Prudential Control and Resolution Authority 49 b) exposures to entities in the financial sector unless these exposures are deducted from own funds or are subject to the treatment provided for in Article 72 sexies, paragraph 5, first subparagraph; c) exposures to large non-classified enterprises in the specialized financing exposure category.

2.3.2.2.10 Additional correlation coefficient for large financial sector entities and unregulated financial entities
The provisions of Article 153 (2) of the CRR impose an upward adjustment to the IRB weighting formula for exposures to large financial sector entities and unregulated financial entities by setting up an additional correlation coefficient of 1.25 for the calculation of risk-weighted exposure amounts.

2.3.2.2.11 Prudential parameters
The following items complete section 2.3.1.1.1 on debtor default but only apply in the Internal Ratings approach.

2.3.2.2.12 Reduction of the observation period for probability of default ('PD') (article 180 (3) of the CRR), loss given default ('LGD') (article 181 (3) of the CRR) and conversion factors ('CF') (article 181 (3) of the CRR)
Pursuant to Articles 180 (3) (a), 181 (3) (b) and 182 (4) (b) of the CRR, Delegated Regulation EU 2017/72 of September 23, 2016 specifies the authorization conditions allowing the observation period to be reduced to 2 years.

2.3.2.2.13 Loss Given Default ('LGD')
Under Article 164 (4) of the CRR, the weighted average amount of LGD applicable to exposures to retail clients on residential real estate cannot be less than 5% (against 10% previously) and 10% (against 15% previously) regarding commercial real estate.
Based on data collected pursuant to Article 430 bis of the CRR and any other relevant indicator and taking into account the evolution prospects of real estate markets, the designated authorities evaluate at least once a year whether the LGD values require or do not require re-evaluation.
Since 2014, loss data on exposures secured by real estate have been transmitted by Institutions to the competent authority, enabling it to evaluate the appropriate LGD floor level for mortgage loans from objective data.
The EBA published in 2021 a draft technical standard (RTS) – adopted by the Commission via Delegated Regulation 2023/206 – specifying the conditions that the designated authority must take into account when deciding to impose higher minimum LGD values, in accordance with Article 164(8). For now, the ACPR retains the LGD floor levels of 5% and 10% respectively for residential and commercial real estate of the retail client.
Article 164 of the CRR allows designated authorities, when appropriate, to impose higher minimum values of the weighted average amount of loss given default (LGD) applicable to exposures secured by real estate located in one or more parts of their territory.
Institutions of a Member State must apply the minimum LGD values that have been determined by the designated authority of another Member State to all their exposures secured by residential or commercial real estate located in one or more parts of that Member State.
By derogation from Article 181(1)(a) of the CRR on specific requirements for own LGD estimates, Article 500 of the CRR authorizes Institutions to take into account the effects of mass sales of defaulted exposures on effective LGD values up to a certain level, until June 28, 2022 and under conditions. This measure is extended until December 31, 2024 by Regulation CRR3 which amends Article 500 of the CRR.

Modalities for the calculation and publication of prudential ratios within the framework of CRD IV and MREL requirement – 2025 General Secretariat of the Prudential Control and Resolution Authority 50 Under Article 161 of the CRR, the weighted average amount of LGD applicable to exposures to enterprises cannot be less than 25% for exposures without financed credit protection, 10% for exposures fully secured by eligible financed credit protection of the type of receivables or residential or commercial real estate. By derogation from Article 161(4), the LGD floors applicable to specialized financing exposures treated under the NI approach when institutions use their own LGD estimates, will be applied progressively with the possibility of applying a factor of 50% to the 'input floor' which will increase progressively to 100% over a five-year period (until 2029). Finally, CRR3 also modifies certain LGDs applied in 'Foundation IRB' (Article 161(1)). The LGD for unsecured senior corporate exposures drops from 45% to 40%54. Similarly, the LGD for purchased corporate receivables of senior unsecured rank (when impossibility or insufficiency in PD and LGD estimation) drops from 45% to 40%. The LGD for dilution risk inherent in exposures coming from purchased corporate receivables rises from 75% to 100%. Other LGDs remain unchanged.

2.3.2.2.14 LGD and CCF downturn (Articles 181 (3) and 182 (4) of the CRR)
Two technical standards were to be published by the EBA at the end of 2014 for LGD downturn (calibration of LGD relative to anticipating an economic slowdown) and (internal) conversion factors (CCF) downturn. The two concepts will ultimately be grouped into a single text specifying the nature, severity and duration of losses in the event of an economic slowdown for both LGD and CCF parameters. The EBA published an RTS on November 16, 2018 adopted by the European Commission on March 1, 2021. This RTS is moreover complemented by guidelines on the estimation of LGD downturn55 (EBA/GL/2019/03) to which the ACPR complies and expects, by virtue of this Notice, that credit institutions and Financing Companies comply with as of January 1, 2021.

2.3.2.4 Credit risk mitigation techniques
A first EBA report on credit risk mitigation techniques (excluding advanced IRB approach) was published on March 19, 2018 and clarifies the regulatory framework. In addition, the EBA adopted Guidelines on credit risk mitigation for Institutions applying the internal ratings approach with their own LGD estimates (EBA/GL/2020/05). The ACPR published a compliance opinion on these guidelines on October 14, 2020. Furthermore, the ACPR extends by this Notice to financing companies the implementation of these guidelines, as of January 1, 2022. CRR3 brings several changes to credit risk reduction techniques, both in the standard approach and in the internal ratings approach in connection with the estimation of volatility adjustments. Under the general method based on financial collateral, the modifications are twofold: (i) the removal of Article 225 no longer allows institutions to estimate their own volatility adjustments (own-estimates approach) and (ii) the modifications of Article 224 introduce revisions in volatility adjustments according to the prudential approach, via a new table of applicable haircuts and notably the addition of a maturity interval greater than 10 years.
Article 230 CRR3 introduces a new calibration of the LGD applicable to exposures covered by financed credit protection for the NI approach (IRB-Foundation), by introducing a volatility factor on the value of the collateral in the formula.
Article 495c provides for progressive implementation, over 5 years (until December 31, 2029) of volatility adjustments to apply to leasing taken into CRM with the IRB-Foundation approach. The EBA is mandated to publish a report (deadline S1 2027) aiming to assess the appropriateness of a possible adjustment of the risk weightings applicable in the standard approach and the IRB risk parameters (LGD, volatility adjustment), which could be followed by a legislative proposal (deadline December 31, 2028) revising the treatment applicable to leasing. The
54 The LGD for exposures to central governments, central banks and financial sector entities is maintained at 45%.
55 Not applicable to the CCF parameter.

Modalities for the calculation and publication of prudential ratios within the framework of CRD4IV and MREL requirements – 20254 General Secretariat of the Prudential Control and Resolution Authority 51

legislative proposal can only refer to a temporary extension of this phase-in, and this for a period of 4 years maximum, with justifications (article 465(5a)). The scope of the EBA report is extended to leasing under the standard approach.

2.3.2.2.15 Guarantees granted by financing companies
Financing companies, within the meaning of II of Article L. 511-1 of the CMF, are eligible providers of unsecured credit protection under Article 201(1)(f) of the CRR.

2.3.2.2.16 Liquidity and stability of value of collateral
Article 194(3) of the CRR provides that Institutions may take into account secured credit protection for the calculation of the effect of credit risk mitigation only when the assets serving as protection meet the following two conditions:

They are listed in the lists of eligible assets for secured credit protections.
They are sufficiently liquid and their value remains sufficiently stable over time to provide an appropriate degree of certainty regarding the level of protection achieved, taking into account the approach used to calculate risk-weighted exposure amounts and the degree of recognition allowed.
CRR3 clarifies at Articles 207, 208, and 210 that ESG considerations must be taken into account in the assessment of financial, real estate, and physical collateral.

2.3.2.2.17 Guarantees granted by the Social Home Ownership Guarantee Fund (FGAS)
Pursuant to the decision of the ACPR College of June 19, 2014 taking into account the specificities of the FGAS guarantee mechanism56, the prudential treatment under CRR of exposures guaranteed by the FGAS for Institutions using the standard approach to measure credit risk is as follows:

for loan generations prior to 2007, guarantees received from the State under the FGAS can be taken into account by Institutions up to 100%, subject to a loss ratio below the applicable reference thresholds57;
for generations subsequent to 2007, guarantees received from the State can be taken into account by Institutions up to 50%, subject to a loss ratio below the applicable reference thresholds.
Institutions taking into account FGAS guarantees must transmit annually to the ACPR data concerning their level of loss ratio.

2.3.2.2.18 State guarantees on Covid-19 loans
As part of the support scheme for businesses affected by the COVID-19 health crisis put in place by the French government, the "State-guaranteed loan" (PGE) allows French companies, under certain conditions, to benefit from loans granted by credit institutions and financing companies, partially guaranteed by the State (between 70% and 90%), within a total available amount of 300 billion euros. The Order of March 23, 2020 granting State guarantee to credit institutions and financing companies, as well as to lenders mentioned in Article L.548-1 of the CMF under Article 6 of Law No. 2020-289 of March 23, 2020 on supplementary finance law for 202058, sets the conditions for the implementation of this guarantee.

56 The scheme provides that for generations prior to 2007, below the reference loss ratio threshold, the State alone indemnifies the losses observed; while for loans issued after 2007, losses are shared equally between the State and the institution when the loss ratio is below the applicable reference thresholds.
57 Set annually by the Board of Directors of the FGAS based in particular on the probability of loss ratio of the loan generation of the year.
58 In its version in force at the date of publication of the Notice as amended by the Orders of April 17, 2020, May 2, 2020, May 6, 2020, May 26, 2020, July 13, 2020, September 15, 2020, December 29, 2020, and March 19, 2021. Specific Orders for certain borrowers in the Covid context and for which the characteristics of the State guarantee are similar are assimilated to this Order for the calculation of prudential ratios of Institutions.

From a prudential perspective, the eligibility of the guarantee as a risk mitigation technique must be documented by institutions notably on two levels:

The eligibility of the protection provider: central administrations are listed as eligible providers in accordance with Article 201 of CRR;
The eligibility criteria for the guarantee, in accordance with Articles 213 to 215 of CRR. In the specific case of PGEs, and particularly regarding the provisions governing the guarantee provided by the State, the criteria of Article 215.2.a are considered met.
Consequently, the guarantee can be treated as a credit risk mitigation technique, in application of the rules of Chapter 4 of CRR for institutions using standard or Foundation IRB approaches or of Chapter 3 of CRR for institutions using the Advanced IRB approach59.
In the specific case of the PGE, given that the State guarantee cannot be called upon within two months following the disbursement of the loan, institutions are required to treat their exposure as unsecured (weighting applicable to the debtor) during these first two months, for the calculation of the capital requirement for credit risk as well as for large exposures.

2.3.2.3 Main EBA Questions and Answers (Q&A) related to credit risk
Standard Approach
Q&A 511 concerning the notion of "exposure in default" under the standard approach clarifies which exposures belong to this category.
Exposures guaranteed by a mortgage on residential real estate allowing, under condition of respect of criteria, the use of the 35% weighting can include exposures on secondary residences (Q&A 2641) and constructions in progress or planned (real estate development activity being excluded - Q&A 2304). However, it is recalled that all speculative financing of real estate assets is subject to a weighting of 150% under the standard approach, regardless of risk reduction techniques implemented (Q&A 3131) and notably in the absence of irrevocable sale of the financed assets (Q&A 3173). Speculative financing of real estate assets is defined in paragraph 79 of Article 4.1 of the CRR (see also Q&A 3012 on the SME support factor in this case). The reporting modalities for exposures guaranteed by a mortgage on real estate are illustrated in Q&A 1636, while Q&A 2560 clarifies the situations where an exposure can be 'split'. Q&A 4934 clarifies the treatment of reverse mortgages, notably depending on the borrower's ability to repay their loan based on sources other than the sale of the real estate asset. Q&A 2726 clarifies the case of the purchase of claims and the possibility, under condition, of applying to these claims the 35% weighting applicable to exposures guaranteed by a mortgage on residential real estate. Q&A 1918 clarifies how risk-weighted exposures are determined in the case of exposures in default and guaranteed by a mortgage. Q&A 2138 clarifies that an Institution treats as exposures on enterprises (CRR 107(2)(b)) the exposures for which the Institution is a client of an eligible CCP acting itself as a member of a non-qualified CCP. Q&A 4300 clarifies that exposures guaranteed by a real estate security do not fall within the scope of risk mitigation techniques of Chapter 4 of CRR for institutions using the standard approach, whereas they can be recognized under internal ratings approaches. Under the standard approach, exposures guaranteed by a mortgage on a real estate asset can nevertheless benefit from preferential weightings, as defined by Articles 124 to 126 of the CRR.

59 Note that institutions using the Advanced IRB approach are also subject to the requirements of Commission Delegated Regulation (EU) No 529/2014 of March 12, 2014 supplementing the CRR with regulatory technical standards for the assessment of the significance of extensions and modifications of the internal ratings-based approach and the advanced measurement approach.

Q&A 6774 clarifies the treatment of securities financing transactions and in particular the distinction between counterparty risk on the counterparty to the securities financing transaction and credit risk on the underlying asset of the securities financing transaction.
Q&A 6670 clarifies the modalities for the possible combination of the three approaches by transparency, by mandate, and alternative, for the treatment of exposures in the form of shares or units of UCITS.

Internal Approaches
Excess provisions on defaulted exposures cannot be used to compensate for deficits ("shortfall") of provisions on non-defaulted exposures. Nevertheless, it is not prohibited that an excess of provisions on non-defaulted exposures be used to compensate for a deficit of provisions on defaulted exposures (Q&A 573 and Q&A 2702).
Regarding the calculation of the haircut on assets acquired at a price different from the amount due by counterparties, see Q&A 2691.
The own estimation of conversion factors is limited to the items listed in Article 166(8) (Q&A 1263, Q&A 2663, Q&A 2397).
Q&A 3554 concerns the application of the floor relative to the weighted average of LGD (CRR art. 164) when part of the exposure is guaranteed by unsecured credit protection (UFCP).
Q&A 3650 on the application of the conversion factor to overdrafts, in the case notably of institutions using the IRB approach and systematically authorizing unauthorized overdrafts, clarifies that these overdrafts should be taken into account appropriately in the estimation of the conversion factor.
Q&A 3295 deals with unsecured risk mitigation guarantees for credit risk in specialized financing activities.
Q&A_4301 concerns the taking into account of "non-credit products" in the calculation of the default rate.
Q&A 4431 recalls that Chapter 9 of the Guidelines on the application of the default definition (EBA/GL/2016/07) concerning credit obligations attached applies to retail exposures but clarifies that it may also apply to credit obligations held jointly by retail debtors and non-retail debtors.
Q&A 4390 recalls the conditions for taking into account exposures in the equity category, treated under the standard approach for credit risk.
Q&A_4410 clarifies the application of the maturity calculation formula to be applied to instruments, at variable rates, subject to a cash flow schedule for institutions in IRB-A.
Q&A_4472 clarifies the use of the preferential weighting for a "sufficiently diversified" equity portfolio.
Q&A_4489 clarifies the authorization conditions for the use of permanent partial use (PPU) for exposures on equities.
Q&A 4598 concerns the rating to be used for the calculation of the default rate, in the case of an exposure on which unsecured credit protection (UFCP) applies, specifying that the substitution effects related to the treatment of UFCP must not be taken into account to assign a debtor or an exposure to a given segment for the calculation of the PD (1-year default rate). Q&A 4599 aims to determine whether it is possible to count a set of debtors as a single debtor for the calculation of the default rate when the default of these debtors is correlated at 100%. Q&A 4819 and 4824 concern Article 500 of CRR2 regarding the taking into account of the effects of mass transfers of non-performing loans in the calculation of their effective LGDs.

Q&A 4859 concerns the application of the 10% floor on the average LGD of exposures guaranteed by residential real estate (CRR art. 164(4)) at the consolidated level when an institution has exposures guaranteed by residential real estate in different member states. Q&A 4859 concerns the application of the 10% floor on the average LGD of exposures guaranteed by residential real estate (CRR art. 164(4)) at the consolidated level when an institution has exposures guaranteed by residential real estate in different member states. Q&A 5029 asks how to take into account rating overrides when developing a new PD model, i.e., when overrides have not yet been observed. Q&A 5029 asks how to take into account rating overrides when developing a new PD model, i.e., when overrides have not yet been observed. Q&A 5761 concerns the requirements of Article 171(2) CRR relating to conservatism in the allocation to a risk class. Q&A 5712 concerns the application of the Look-through approach for the calculation of RWA on UCITS shares in the case of an institution using the IRB approach, under Article 152(4) of CRR, when the IRB institution does not have sufficient information to apply its IRB model to the underlying exposure of the UCITS. Q&A 5712 concerns the application of the Look-through approach for the calculation of RWA on UCITS shares in the case of an institution using the IRB approach, under Article 152(4) of CRR, when the IRB institution does not have sufficient information to apply its IRB model to the underlying exposure of the UCITS. Q&A 2593 clarifies the use of the comparable direct weighting on the guarantor according to the approach applied to this guarantor.

Q&A 2468 clarifies what constitutes immaterial changes to rating systems used in internal approaches.
Q&A 6369 provides clarification on the notion of "private equity exposures in sufficiently diversified portfolios" appearing in Articles 155(2) and 155(3) of CRR.

Default
Q&A 2968 returns to the modalities for downgrade to default and contagion, notably in the case of "retail client" exposures. Q&A 4666 also clarifies the scope of the materiality threshold, the criterion of absence of likely payment, and downgrade to default for retail clients (at the level of the debtor, the credit facility, or the group of related clients). Q&A 5592 also clarifies the criteria for absence of likely payment when the default definition is applied at the credit facility level. Q&A 6045 concerns the application of the default definition in the case of a loan restructuring, when the restructuring consists of an extension of the loan duration at the prevailing market interest rate and when this market rate is lower than the original interest rate of the contract. Q&A 4504 and 4505 detail the calculation of the number of days of arrears of a debtor on a significant credit obligation, allowing to rule on default beyond 90 days in accordance with Article 178(1)(b) of CRR. Q&A 4505 applies to the specific case of factoring contracts. Q&A 4867 indicates that restructured non-performing exposures are subject to a probation period of one year before they can regain the status of performing exposures.

Off-Balance Sheet
Q&A_3918 concerns the classification, for credit risk purposes, of off-balance sheet products through which the bank guarantees the commitment of its client to pay a financial indemnity to a third party, under certain conditions.

Q&A 2916 details the conversion factors applicable to contingent obligations on payment transaction balances executed or in progress, Q&A 3171 deals with conversion factors applicable to letters of credit, Q&A 3279 with credits whose drawdown can only occur after a future date fixed contractually, and Q&A 3246 with those applicable to unconfirmed commitments, while Q&A 3332 clarifies how to take into account through the conversion factor eligible guarantees that will be taken before the drawdown of the credit line. Q&A 3366 distinguishes the duration during which the off-balance sheet commitment can be drawn, which corresponds to the initial duration of an off-balance sheet commitment, from the duration of the loan that can follow the off-balance sheet commitment; it is complemented by Q&A 5297 on the classification of off-balance sheet commitments according to their initial maturity and by Q&A 6432 on the classification of revolving credit facilities, which have no maturity date. Q&A 5471 clarifies the classification of off-balance sheet items, depending on whether they cover themselves balance sheet or off-balance sheet items. Q&A 6327 clarifies the credit conversion factor applicable to performance bonds. Directive 2014/17/EU of the European Parliament and of the Council of February 4, 2014 on credit agreements for consumers relating to immovable property (amending Directives 2008/48/EC and CRD4 and Regulation (EU) No 1093/2010) imposes, on any consumer, a reflection period before the conclusion of a real estate credit contract and a withdrawal period after the conclusion of said contract. In particular, Article 14 of this directive indicates that the offer binds the lender during these reflection or withdrawal periods. In this context, Q&A 3376 clarifies that these commitments must be treated as off-balance sheet items of moderate risk (weighting of 20%), in accordance with point (3)(b)(i) of Annex I of CRR, provided that the maturity is less than one year. Q&A 6239 clarifies the treatment of off-balance sheet credit lease exposures, generated by the delay between the order of the asset and the start date of the lease.

Risk Mitigation Techniques
Q&A 3576 establishes the eligibility of a guarantee whose principle is to compensate for the payment of each installment according to the schedule of the original credit (rather than reimbursing the total economic losses immediately upon the default of the original debtor), notably regarding the requirement of absence of a clause that could exempt the protection provider from the obligation to pay quickly, in the event of default of the original debtor (cf. Article 213(1)(c)(iii) of CRR). Q&A 1628 details the eligibility rules for securitization shares issued by the Group. Q&A 4765 clarifies that under the standard approach, exposures presenting a particularly high risk can benefit from unsecured credit protection as a credit risk mitigation technique. Q&A 5211 provides elements on cases where the collateral takes the form of securitization positions meeting the criteria of Article 197(1)h CRR. Q&A 4184, questioning the eligibility of an aggregated first loss clause as a credit risk mitigation technique, clarifies that the eligibility conditions of Article 213(1)(b) of CRR are met if the amount of the guarantee is clearly identifiable, even calculated globally at the level of a portfolio of exposures.

Equivalence of Third-Party Prudential Regimes
Several Q&As (Q&A 469, Q&A 1989, Q&A 1991, Q&A 470, Q&A 529, Q&A 3262) have been published to clarify the scope and modalities of application of third-country prudential regime equivalence mechanisms.

Modalities for the calculation and publication of prudential ratios under CRD4 and MREL requirements – 2025 General Secretariat of the Prudential Control and Resolution Authority

2.3.3 Securitization

2.3.2.1 Clarification on the notion of securitization for prudential purposes

Article 4(61) of the CRR defines the notion of securitization for prudential purposes. It is specified that credit risk must be subdivided into at least two tranches for the operation or structure to be qualified as securitization for prudential purposes. In particular, a financing vehicle (L. 214-166-1 of the French Monetary and Financial Code) or an equivalent entity that has issued only one class of shares without any subordination mechanism must not be qualified as securitization for prudential purposes but must be treated as an UCITS.

2.3.2.2 General presentation of the new securitization framework

A new framework applies to securitizations since January 1, 2019. It comprises two regulations published on December 12, 2017.

Regulation (EU) 2017/2402 ("Horizontal Securitization Regulation" or "STS Regulation") aims to harmonize definitions and specify common rules (due diligence, transparency, retention) for all financial sectors. It also develops the criteria (simplicity, transparency, standardization) allowing the identification of securitization operations benefiting from the "STS" label.

o The Horizontal Securitization Regulation defines a specific framework for Simple, Transparent, and Standardised (STS) securitizations and indicates the procedures for their notification to ESMA. Without mitigating their responsibility, originators may call upon the services of an "approved third party" (approved by a national competent authority – in France, the AMF since the adoption of the PACTE law) to assess the conformity of their securitizations with the STS criteria.

o Two sets of STS criteria are identified, one for operations other than ABCP (Articles 19 to 22 of the STS Regulation) and the other for ABCP operations, programs, and sponsors (Articles 23 to 26 of the STS Regulation).

o The ACPR complies with the EBA guidelines on STS criteria for ABCP securitization (EBA/GL/2018/08) and on STS criteria concerning securitizations other than ABCP (EBA/GL/2018/09) and expects investors and originators to respect these guidelines (ACPR opinion of May 31, 2019). It extends by this Notice the application of these guidelines to Financing Companies.

o The ESMA RTS disclosure (cf. infra) further specifies the formats to be used by originators to notify STS operations to it, documenting how each criterion is verified.

o Composite securitizations composed wholly or partially of assets already securitized ("re-securitizations") are prohibited except for "legitimate purposes" derogations (Recital 8 and Article 8 of the Horizontal Securitization Regulation).

Regulation (EU) 2017/2401 amends the CRR to implement in Europe the standards of the Basel Committee of December 2014 and July 2016 and defining the treatment applicable in solvency to investments in securitization tranches (STS or non-STS).

The securitization framework was amended via two regulations: Regulation (EU) 2021/557 and Regulation (EU) 2021/558 amending the Horizontal Securitization Regulation and CRR, in order to support the economic recovery after the COVID-19 crisis ("Capital Markets Recovery Package Regulation"), published on April 6, 2021. These texts provide for i) the creation of an STS framework for balance sheet synthetic securitizations (cf. infra) and ii) a dedicated prudential framework for non-performing loan (NPL) securitizations (cf. infra). A mandate for market surveillance of the NPL securitization market has also been entrusted to the European Banking Authority.

2.3.2.3 Assessment of the significance of the transfer of credit risk

Article 244 of the CRR (for classic securitizations) and Article 245 of the CRR (for synthetic securitizations) specify the minimum requirements allowing the originator of a securitization to take into account a significant transfer of credit risk.

In addition to the mechanical tests described in Articles 244 and 245 of the CRR, the originator and the competent authority examine the risk factors mentioned in the EBA Guidelines on Significant Risk Transfer ("SRT"), published on July 7, 2014, to assess the significance of the credit risk transfer. Indeed, even if the mechanical tests are respected, the transfer of credit risk may be called into question by certain structural characteristics of the transaction (such as the thickness of mezzanine tranches, certain call options, maturity mismatch, and the cost of protection in the case of synthetic securitizations, etc.), or by the relevance of the pre- and post-securitization credit risk estimation, whether it comes from the Institution or from rating agencies. The ACPR complies with these guidelines.

The ACPR also bases its judgment on the public guidelines of the ECB published on March 24, 2016 on the recognition of a significant risk transfer. In substance, the assessment of significant risk transfer seeks to validate the following points:

Is the risk transferred in such a way that losses effectively fall on the third party, and does that third party have the capacity to absorb them?
Is the risk transferred by the originating Institution at such a high cost that it de facto cancels the value of the protection?
Are there mechanisms (rebate, guarantee, etc.) that amount to reimbursing the third party to whom the risk is transferred for the losses it might have to absorb?
Does the transaction contain unusual clauses that would make the effective allocation of losses to a third party unlikely? Is there a risk of bank support towards the third party to whom the risk has been transferred (capital links, commercial links, implicit commitment, etc.)?

The EBA, which had received a mandate to conduct a detailed analysis of the market and supervisory practices regarding SRT, published a report on SRT on November 23, 2020.

This report includes recommendations aimed at harmonizing (i) the modalities for assessing SRT (operational process, quantitative and qualitative tests) and (ii) the interpretation and treatment of certain characteristics of securitization transactions likely to weaken the SRT. The key elements of the SRT report are:

Possibility of a fast-track procedure for the assessment of SRT for structures deemed simple: based on a formal request by the originator within three months before the intended issuance date, the competent authority notifies a no-objection decision and will have one month to confirm it in light of the final transaction.
The presence of certain structural characteristics prevents SRT or calls for a more detailed examination: the competent authority then has two additional months to notify its decision.
Amendment of existing quantitative "mechanical" tests (mezzanine test and first-loss test).
New tests to recognize the proportionality of the risk transfer (commensurate risk transfer).
Most recommendations could be implemented via a delegated act of the Commission, but the SRT report also recommends (i) that the EBA receive a mandate to specify certain points via guidelines and (ii) that certain provisions of the CRR be amended.

2.3.2.4 Securitizations eligible for STS risk weights (Article 243 CRR)

Securitizations meeting the requirements introduced in Article 18 of the STS Regulation are designated as STS securitizations. They are subject to publication on the ESMA website (Article 27 of the STS Regulation) under the responsibility of the originator or sponsor. A declaration must also be made when one of the STS criteria is no longer met.

Pursuant to Article 5(3)(c) of the STS Regulation, investors may rely, in a non-exclusive and non-mechanical manner, on the content of the notification to ESMA.

The STS label is not linked to the quality of the underlying assets and is not synonymous with low risk or high safety. On the other hand, it aims to ensure that the most important information in terms of risks will be highlighted for investors.

To benefit from the preferential treatment in terms of capital requirements for a securitization with the STS label, investors additionally verify the criteria introduced in Article 243 of the regulation amending the CRR.

Regulation EU 2021/557 published on April 6, 2021 extends the STS label to balance sheet synthetic securitizations. These securitizations are now subject to the same preferential treatment as classic STS securitizations but limited to senior tranches retained by the originator (section 2 bis of said regulation) if they meet the criteria specifically dedicated to these securitizations.

2.3.2.5 Introduction of a dedicated framework for qualifying non-performing loan securitizations

Regulation EU 2021/557 created a new dedicated framework for non-performing loan securitizations. This framework consists of:

A risk weight of 100% for the senior tranche of a qualifying traditional NPL securitization (except in external rating-based approach, i.e., SEC-ERBA).
A floor of 100% for the risk weight of other positions in an NPL securitization (except in SEC-ERBA).
The prohibition of using the parameters of the foundation internal model approach (SEC-IRBA).
The possibility of using the look-through approach: the look-through approach is authorized and adapted to allow the deduction of the non-deductible purchase discount from the expected loss (EL) coming to reduce the average weight of the underlying portfolio. This weight may be retained by the originator retaining qualifying senior tranches, even if it is lower than 100%, with the application of a floor of 50%.

2.3.2.6 Clarifications regarding the prohibition of providing implicit support

Article 250 of the CRR as amended provides for restrictions on implicit support provided to securitization structures by their originating institutions and sponsors. Institutions not meeting the stated requirements are thus imposed capital requirements for all relevant securitized exposures as if no securitization had taken place.

The provisions of the new securitization framework regarding implicit support evolve little compared to the previous version of the CRR: it is forbidden to provide direct or indirect support to the securitization with a view to reducing potential losses for investors. To this end, the operation must have been concluded under normal competitive conditions. It should be noted, however, the introduction of an obligation to disclose information in case of non-compliance with said provisions.

For the purpose of controlling the absence of implicit support, the ACPR relies on the Guidelines on implicit support for securitization operations published by the EBA on November 24, 2016, defining what constitutes transactions conducted under normal competitive conditions ("arm's length") as well as the conditions under which a transaction is considered as providing no support, and providing further clarification on the notification and documentation requirements set out in Article 250 of the CRR. To complete this framework, the ACPR College adopted on December 21, 2017, an instruction specifying the scope and content of the notification obligation provided for in Article 248 of the CRR. This instruction was published on the ACPR website with reference 2017-I-23.

2.3.2.7 Required due diligence, notably regarding compliance with the retention threshold

The regulation recalls that investors' ability to exercise appropriate due diligence depends on their access to information on these instruments (Recital 12 of the STS Regulation). The regulation thus develops, based on existing provisions, a global system allowing potential and actual investors to access all relevant information on the entire life of the operations, by limiting the notification obligations of originators, sponsors, and SSPEs and facilitating continuous and free access by investors to reliable information on securitizations. Securitization repositories will thus collect reports on this matter, mainly concerning the underlying exposures to securitizations (Chapter 3 of the STS Regulation). These securitization repositories are approved and controlled by ESMA (Article 10 of the same regulation).

The legislator deemed it essential to subject institutional investors to proportionate requirements in terms of appropriate due diligence to ensure that they correctly assess risks (Article 5 of the STS Regulation).

Thus, the investor must notably verify (i) that the originator or initial lender grants all credits giving rise to the underlying exposures to the securitization based on rigorous procedures and criteria and (ii) that the originator or initial lender retains a significant economic interest in the securitization.

The investor must also assess (i) the risk characteristics of the individual securitization position and the underlying exposures and (ii) the structural characteristics of the securitization likely to significantly influence the performance of the securitization position.

In particular, the investor must exercise appropriate due diligence regarding STS securitizations. It may rely, but in a non-mechanical and non-exclusive manner, on the STS notification made by the originator to ESMA.

The investor must finally establish procedures adapted to the securitization risk profile to continuously control the performance of the securitization position and the underlying exposures and to ensure that the checks carried out during the investment remain relevant.

The investor regularly conducts stress tests on cash flows, the value of collateral securing the underlying exposures, and where applicable, on the solvency and liquidity of the sponsor (in the case of an ABCP program supported by the sponsor). The investor's management body must be kept informed of significant risks arising from the securitization and must ensure that these risks are managed adequately.

The investor's supervisor must be able to verify that the investor has a complete and in-depth understanding of the securitization position and its underlying exposures, and that it has implemented written policies and procedures to manage the risks of the securitization position and to keep a record of the checks and due diligence obligations carried out.

For France, the supervisor in charge of controlling these investor obligations is the ECB when it concerns SIs and the ACPR when it concerns LIs (Article 29-2 and 29-3).

Pursuant to Article 6 of the Horizontal Securitization Regulation, originators/sponsors/initial lenders established in the EU must permanently retain a significant net economic interest of at least 5% in the securitizations they put in place. The interest is measured at initiation. The Horizontal Securitization Regulation provides that in the absence of agreement between originators, sponsors, and initial lenders, it is the originator who retains the 5%. Under the new direct approach, originators/sponsors/initial lenders may be sanctioned in case of non-compliance with the level and modalities of the required retention. Pursuant to Article 7(1)(e)(iii) of the Horizontal Securitization Regulation, they make available to investors and competent authorities information on the modalities of this retention.

Commission Delegated Regulation 2023/2175 of July 7, 2023 complements the regulatory framework by specifying in more detail the risk retention requirement applicable to originators, sponsors, initial lenders, and management bodies.

This rule adds to the indirect approach which consists of (Article 5(1)(c) of the Horizontal Securitization Regulation) asking investors to verify under penalty of sanction that originators/sponsors/initial lenders respect the required retention.

This point was confirmed by Recital 26 of Regulation 2021/557.

This approach remains applicable for cases where the originator, sponsor, or initial lender is not established in the EU.

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2.3.2.8 Calculation rules
The Regulation amending the CRR clarifies that an Originating Institution may, in the presence of a significant risk transfer, calculate its risk-weighted exposure amounts based on its positions in the securitization. If there is no risk transfer, it is required to include the underlying exposures as if they had not been securitized (Article 247 of the CRR).

Article 248 of the CRR allows for the calculation of the risk exposure value of a securitization position. In this context, an Originating Institution may deduct from the exposure value of a securitization position that receives a risk weight of 1250% or that is deducted from own funds (Article 248) the amount of specific credit risk adjustments on the underlying exposures in accordance with Article 110. Article 249 sets out the consideration of credit risk mitigation when a securitization position benefits from full credit protection.

The maximum risk weight for senior securitization positions is defined by Article 267 of the CRR. This is equal to the exposure-weighted average risk weight that would apply to the underlying exposures if these had not been securitized.

Similarly, the maximum capital requirements (Article 268 of the CRR) are equal to the capital requirements that would be calculated for the underlying exposures if these had not been securitized.

When an Institution presents a material non-compliance, due to negligence or omission, with the requirements set out in Chapter 2 of the Securitisation Transverse Regulation, competent authorities impose an additional risk weight proportional to the risk, which cannot be less than 250% of the capped risk weight of 1,250% that applies to the relevant securitization positions in accordance with the modalities provided for in Art 247§1 or Article 337§3 of the CRR.

The additional risk weight increases progressively with each subsequent breach of the provisions on due diligence and risk management (Art 270bis of the amended CRR). Its calculation method is defined in Commission Implementing Regulation (EU) No 602/2014 of 4 June 2014, and depends on the duration of the infringement:
Total RW = Min[12.5 ; Original RW * (1 + (2.5 + 2.5 * InfringementDuration in years) * (1-Article405ExemptionPct66))] Where RW = risk-weighted assets

2.3.2.9 Hierarchy of methods and common parameters
Regulation 2017/2401 amending the CRR provides that:
a. the SEC-IRBA approach (Articles 259-260) must be used if the conditions (Article 258) allow it; b. if the SEC-IRBA approach cannot be used, the SEC-SA approach (Articles 261-262) will be retained; and
c. if the SEC-SA approach cannot be used, then the SEC-ERBA approach (Articles 263-264) will be retained.

The Regulation nevertheless provides (Article 254(2)) that for rated positions, the SEC-ERBA approach should be used preferentially instead of the SEC-SA approach:

When the application of the SEC-SA approach would result in a risk weight greater than 25% for both STS and non-STS positions or when the application of the SEC-ERBA approach would result in a risk weight greater than 75% for non-STS positions;
For securitization transactions backed by auto loan and lease contracts and equipment.

Furthermore, Institutions may choose to systematically apply the SEC-ERBA approach instead of the SEC-SA approach. This choice then applies to their entire portfolio and they notify the supervisor. Institutions notify their decision to the competent authority in accordance with Article 254 of the CRR.

The supervisor may, on a case-by-case basis, prohibit the use of the SEC-SA approach when it considers that the resulting risk-weighted exposure amount from the application of this approach is not proportionate to the risks presented for the Institution or for financial stability.

Article 255 defines the modalities for determining Kirb and Ksa when the Institution uses respectively a SEC-IRBA model or the SEC-SA approach, which corresponds to the pre-securitization capital requirement.

66 Note that the term « Article405ExemptionPct » now refers to the provisions of Chapter 2 Article 6(5) of the Securitisation Transverse Regulation 2017/2402.

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2.3.2.10 Transitional provision in the context of the application of the output floor
The entry into force of the CRR3 Regulation introduces a transitional measure allowing a temporary reduction of capital requirements for IRB Institutions within the framework of the output floor (halving the p factor of capital non-neutrality in the SEC-SA approach for the calculation of the output floor), until 31 December 2032.

Furthermore, the Regulation also introduces an EBA mandate by 31 December 2026 regarding the production of a report on the prudential treatment of securitization. The report must in particular address the impact of the introduction of the output floor on securitization (for IRB Institutions), and in particular the consequences in terms of capital charge reduction for originating Institutions in the context of SRT transactions as well as the economic viability of new transactions. The EBA must also analyze the appropriateness of the calibration of the p factor of capital non-neutrality, in the SEC-SA and SEC-IRBA approaches. The EBA report will therefore address the impact of the securitization framework for IRB Institutions, directly under the SEC-IRBA approach and indirectly via the output floor under the SEC-SA approach, but also for SA Institutions.

2.3.2.11 Technical standards on securitization
A number of technical standards are provided. These are essentially guidelines from the EBA or ESMA or technical standards from these same authorities67. Some apply to all securitizations while others apply only to securitizations recognized as meeting the STS criteria.

Delegated Regulation (EU) No 625/2014 of 13 March 2014 supplementing the CRR with regulatory technical standards specifies the requirements for investors, sponsors, initial lenders, and Initial Institutions regarding exposure to transferred credit risk, concerning:

the requirements of Articles 405 and 406 of the CRR (in its former version) applying to Institutions exposed to the risk of securitization positions;
the due diligence requirements of Article 406 of the CRR (in its former version) for Institutions exposed to the risk of securitization positions;
the requirements of Articles 408 and 409 of the CRR (in its former version) applying to Initial Institutions, sponsors, or initial lenders of securitizations.

The retention modalities mentioned in Article 405 of the CRR (in its former version) and provided for in this Regulation will be replaced by the RTS on retention.

The RTS on retention aims to provide more clarity on the requirements related to risk retention to thus reduce moral hazard and align interests. The RTS adopted by the EBA in 2018, which the Commission never adopted, was revised in 2022 to take into account the adjustments of the CMRP Regulation (« Capital Markets Recovery Package Regulation ») published on 6 April 2021. The revised RTS adopted by the EBA was published on 1 April 2022 and submitted to the Commission for adoption.

Pending its adoption by the Commission, the relevant provisions specifying the risk retention requirements imposed on credit institutions and investment firms concerned within the meaning of the CRR remain applicable. For reasons of legal certainty, the credit institutions or investment firms concerned should, for existing securitization positions at the date of application of Regulation 2017/2402, remain subject to Article 405 of the CRR, Chapters I, II and III as well as Article 22 of Delegated Regulation (EU) No 625/2014.

The EBA guidelines on significant transfer of credit risk relating to Articles 244 and 245 of the CRR establish a grid of risk factors likely to substantially reduce the risk transfer permitted by a securitization transaction. These risk factors must be examined by the originator claiming a significant transfer of credit risk and by the supervisor in case of doubt about the reality of the risk transfer of a transaction.

67 The ESMA guidelines and technical standards currently in force are available at the following link:
https://www.esma.europa.eu/convergence/guidelines-and-technical-standards

Modalités de calcul et de publication des ratios prudentiels dans le cadre de la CRD4IV et exigence de MREL – 20254 Secrétariat général de l’Autorité de contrôle prudentiel et de Résolution 62 The EBA guidelines on the STS criteria for ABCP securitizations (EBA/GL/2018/08) and non-ABCP (EBA/GL/2018/09) relate to Articles 19§2 and 23§3 of Regulation EU 2017/2402, which mandate the EBA to produce guidelines allowing for a harmonized application of the simplicity, transparency, and standardization (STS) criteria relating to ABCP securitizations (Articles 24 to 26) and non-ABCP securitizations (Articles 20 to 22).

The objective of these guidelines is to provide a unique and consistent interpretation of the criteria at the transaction and program level for ABCP and non-ABCP securitizations and to ensure a common understanding of these securitizations by originators, original lenders, sponsors, SSPEs, investors, competent authorities, and third parties verifying the STS criteria (Article 28). The guidelines apply on a cross-sectoral basis across the Union with the aim of facilitating the adoption of STS criteria. This is a prerequisite for the application of a more risk-sensitive prudential treatment for exposures on securitizations compliant with these criteria, under the new European securitization framework.

Delegated Regulation 2019/1851 of 28 May 2019 sets the conditions for a securitization to be recognized as homogeneous. Homogeneous exposures must be underwritten according to similar underwriting standards and securitized according to similar servicing procedures. In addition, they must fall under the same asset category. To facilitate the assessment of homogeneity, the RTS specifies a non-exhaustive list of the most common asset categories, reflecting market practices. Finally, for the majority of these asset categories, the underlying exposures must be homogeneous with regard to at least one of the homogeneity factors, such as the type of debtor, the ranking of security rights, the jurisdiction, or the type of real estate. The RTS applies to both ABCP and non-ABCP securitizations.

The EBA RTS on the calculation of Kirb with the purchased receivables approach was published by the EBA in April 2019 and was published in the Official Journal of the European Union in June 202468.

Guidelines on implicit support for securitization transactions: the ACPR declared itself compliant within the framework of the « comply or explain » process, on the date of 10/01/2017.

The RTS on third-party certifiers (Delegated Regulation 2019/885 of 5 February 2019) specifies the information to be provided to competent authorities in application of the authorization for a third party to evaluate STS compliance.

Guidelines on the determination of the weighted average maturity of the tranche, in accordance with Article 257, paragraph 1, point a), of the CRR were published by the EBA on 4 May 2020. The ACPR declared itself compliant within the framework of the « comply or explain » process by an opinion of 21 July 2020 and extends its application to financing companies by this Notice.

The RTS and ESMA disclosure ITS adopted in September 202069. They aim to define reporting requirements for a number of securitization characteristics such as details of underlying exposures, the structure of the securitization instrument, the performance of the transaction.

The RTS and ITS on STS notification, adopted in September 2020 and which specify how to submit information on STS securitizations to the ESMA. For synthetic STS securitizations as authorized by Regulation 2021/557 of 6 April 2021, the ESMA makes transitional templates available to ensure notification to the ESMA.

The RTS and ITS on securitization registries, adopted in September 2020, specify the operational standards of securitization registries and the format of registration requests as securitization registries.

The RTS on performance-related triggers in the context of STS securitization transactions on the balance sheet was published by the EBA in September 2022 and is submitted to the European Commission for adoption.

The RTS on the homogeneity criterion of underlying exposures in the context of STS securitization transactions was published by the EBA in February 2023 and is submitted to the European Commission for adoption.

68 The status of the various EBA technical standards is available at the following link: https://eba.europa.eu/regulation-and-policy/securitisation-and-covered-bonds 69 https://www.esma.europa.eu/policy-activities/securitisation

Modalités de calcul et de publication des ratios prudentiels dans le cadre de la CRD4IV et exigence de MREL – 20254 Secrétariat général de l’Autorité de contrôle prudentiel et de Résolution 63 The RTS on the determination of the risk exposure value of the synthetic excess spread was published by the EBA in April 2023 and is submitted to the European Commission for adoption.

In May 2023, the joint committee of the ESAs JRC (including the EBA, ESMA, and EIOPA) published an RTS on ESG transparency requirements for STS securitizations.

In May 2021, the JRC committee published its first report on the implementation and functioning of the regulatory securitization framework, a regulatory report with triennial frequency, provided for by Article 44 of the Securitisation Transverse Regulation. The second occurrence of this report was published in March 2025 and brings in particular clarifications regarding the operational modalities of risk retention.

Main EBA Q&As on securitization
Q&A 53 concerns the applicability of the definition of re-securitization to securitization positions subject to credit protection tranching under Article 249 of the amended CRR Regulation.
Q&A 2472 addresses the qualification of exposures that have been subject to retention.
Q&A 2878 clarifies that interest retention within the meaning of Article 405 of the CRR is not observed if the Originating Institution of the securitization has issued financial instruments transferring the net positive economic interest to its shareholder, but not the net negative economic interests (i.e., if the originator is exposed to losses but not to profits resulting from the retained portion of the securitization). Q&A 3806 clarifies the scope of application of the term securitization and the obligation of risk retention under Article 6 of Regulation 2017/2402. Q&A 4025 concerns the synthetic securitization of undrawn revolving credit facilities. Q&A 4207 concerns the treatment of an SRT that has failed for a traditional securitization. Q&A 4274 clarifies the correspondences between ratings and credit quality steps since the entry into force of Regulation 2017/2401 amending the CRR on securitization and pending the adoption of the RTS described in Article 270 of the CRR (cf. Annex C2). Q&A 4324 clarifies that for ABCP programs, the risk weights provided for securitization positions apply only to securitization positions within that program. However, to be considered STS, ABCP programs must be composed solely of securitizations (themselves STS). Q&A 4465 recalls that, in the context of securitization positions in the form of derivatives intended to cover market risk, derivatives are presumed to be assigned the risk weight of the reference position, calculated in accordance with the SEC-SA, SEC-ERBA, or SEC-IRBA approaches. Q&A_4500 clarifies the necessary reconciliation between external and internal ratings in accordance with Articles 263 and 264. Q&A_4987 recalls that a vertical note does not constitute a securitization position in the absence of subordination.

2.3.4 Counterparty Risk
Capital requirements for counterparty risk and their calculation methods are defined in Articles 271 and following of the CRR.

Modalités de calcul et de publication des ratios prudentiels dans le cadre de la CRD4IV et exigence de MREL – 20254 Secrétariat général de l’Autorité de contrôle prudentiel et de Résolution 64 New standard approaches for counterparty credit risk entered into application on 28 June 2021. The SA-CCR methods (Section 3, Articles 274 to 280f) and simplified SA-CCR (Article 281) were introduced while the initial margin method (Article 282) was recast. The mark-to-market and standard methods (former Sections 3 and 5 respectively) were removed. The internal model-based approach is defined in Articles 283 to 294.

Delegated Regulation EU 2021/931 specifies within the framework of SA-CCR the provisions allowing the identification of the main categories of risks to which derivative transactions are subject, the formula for calculating the regulatory delta coefficient for certain options assigned to the interest rate risk category as well as the method for determining the direction of a transaction (long or short).

The CRR defines a capital requirement for exposures on a central counterparty in Articles 300 to 311.
The Regulation takes into account three modes of exposure (exposure of clearing members vis-à-vis central counterparties (« CCP »), exposure of clearing members vis-à-vis their clients, exposure of clients of clearing members vis-à-vis CCPs), towards two types of CCPs (eligible CCPs, non-eligible CCPs) and two types of exposures (transaction exposure / default fund contribution).

Institutions using the internal model approach (IMM) for the calculation of their exposure on derivatives will apply, until 31 December 2029, an alpha factor of 1 (instead of 1.4) within the framework of the use of the standard approach for counterparty credit risk (SA-CCR) for the purpose of calculating the output floor (Article 465(4) CRR3).

Derivative transactions concluded between segregated subsidiaries of a banking group under the Law on the Separation and Regulation of Banking Activities (Law No. 2013-672, known as SRAB) and other subsidiaries of the same group may benefit from the exemption from the clearing obligation provided for by the EMIR Regulation70, if they meet the following two criteria:

The two counterparties are fully included in the same consolidation perimeter,
The two counterparties are subject to appropriate and centralized risk assessment, measurement, and control procedures.

Conversely, intragroup transactions involving segregated subsidiaries cannot be exempted from the collateralization obligation provided for by EMIR, as this exemption is conditioned, in addition to the two criteria mentioned above, to the absence of an actual or planned obstacle to the rapid transfer of own funds or the rapid repayment of liabilities between the counterparties (Article 11 of EMIR), which cannot be ensured given the characteristics of the SRAB law limiting the financial assistance that the Group can provide to the segregated subsidiary.

2.3.4.1 Technical standards on counterparty risk
Delegated Regulation EU 2021/931 specifies within the framework of SA-CCR the provisions allowing the identification of the main categories of risks to which derivative transactions are subject, the formula for calculating the regulatory delta coefficient for certain options assigned to the interest rate risk category as well as the method for determining the direction of a transaction (long or short).

Technical standards on central counterparties (CCPs) Implementing Regulation (EU) No 484/2014 of 12 May 2014 defining technical implementing standards regarding the hypothetical capital of a central counterparty details the modalities (frequency and format) of submission by CCPs to their clearing members and competent supervisory authorities. It also specifies the conditions under which supervisors may require a higher frequency of submission. Thus, two stress situations have been identified, the first corresponding to the use of the CCP contribution, while the second corresponds to the recourse to contributions from the default fund of non-defaulting members.

The Regulation also provides for the transition period necessary for CCPs to adapt their information systems.

70 Regulation (EU) No 648/2012

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Q&A 1889 clarifies that the initial margins posted as collateral by a clearing member, to which volatility adjustments are deducted under the FCCM, are taken into account in full (i.e., including excess initial margins) for the calculation of the quantity IMi used to assess the hypothetical capital of the CCP.
The Delegated Regulation (EU) No 152/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council by regulatory technical standards concerning capital requirements applicable to central counterparties, specifies that the capital requirements of a CCP are equal to the following sum:

gross operating expenses for the period necessary for the liquidation or restructuring of the CCP;
capital necessary to cover all operational or legal risks;
capital necessary to cover credit, counterparty, and market risks not covered by specific financial resources;
risks of the activity.
With regard to risks specific to each CCP, capital requirements must be calculated based on the CCP's own estimates; however, a minimum threshold is imposed to ensure prudent capital requirements. If the level of capital held by the CCP proves to be less than 110% of regulatory requirements, the CCP must immediately contact the competent authority and present the measures taken to again exceed the 110% coverage of prudential requirements.

Main Questions and Answers (Q&A) from the EBA regarding counterparty risk Three Q&As (134, 387, and 990) concern Article 273 and the methods for calculating exposure value. Q&A 990 specifically clarifies that the exposure value for credit derivatives purchased to hedge against banking book exposure or counterparty risk exposure can be zero only if these derivatives are eligible hedges in accordance with Chapter 4 of Title II of Part 3 of the CRR. Furthermore, Q&A 819 concerns the calculation of actual expected exposure in the case of margin agreements (Article 285). Q&As 1424 and 2004 deal with the supervisor's recognition of novation contracts and intra-group clearing agreements (Article 296). Q&A 1904 clarifies that the weighting provided for in Article 306(1)(a) of the CRR applies to all transactions of an Institution towards a QCCP, whether for its own account or for the account of its clients. Q&A 1903 clarifies, for its part, that in application of Article 306(1)(a), the value of the exposure on transactions of an Institution towards a QCCP is calculated in accordance with the counterparty credit risk framework (CRR, 3rd Part, Title II, Chapter 6, Sections 1 to 8). Q&A 6839 clarifies the treatment of counterparty risk for centrally cleared operations in the case of a multi-level client structure.

2.3.5 Market Risks
Note: Elements relating to the deferral of FRTB are mentioned in part 1.3.2 of the Notice.
Market risks cover:

exchange rate risk and commodity risk which are assessed on the entire banking and trading portfolios of the subject Institution;
position risk which is assessed only on the trading portfolio: general and specific risk on debt instruments, on shares and similar instruments.

2.3.5.1 Definition of the Trading Portfolio
The trading portfolio, which serves as the reference for the calculation of market risks, is subject to a prudential definition (point 86 of Article 4(1) of the CRR), independent of accounting definitions.

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In accordance with the definition of the trading portfolio and the management rules applicable to it (cf. Chapter 3 of Title I of Part 3 of the CRR, Articles 102 to 106), the items included in the trading portfolio must be free of restrictions on their negotiability or be coverable. They are managed according to precise standards, notably in terms of holding period or limits applicable to them.
Article 94 of the CRR provides for a derogation from the capital requirement for market risk for small trading portfolios.

2.3.5.2 Determination of the Net Position
For the calculation of capital requirements for market risks, securitization positions held in the trading portfolio are treated as any debt instrument for interest rate risk (see in particular Articles 326, 337, 338 of the CRR).
In line with the treatment provided for in the banking portfolio for credit derivatives covering a basket of exposures (cf. Articles 240 and 241 of the CRR), the treatment provided for in Article 347 of the CRR applies to credit derivatives covering a basket of exposures held in the trading portfolio, for specific risk:

first-to-default credit derivative: when an Institution obtains credit protection for a basket of exposures in the form of a first-to-default credit derivative, it can offset the specific risk of the underlying asset to which the lowest percentage of specific risk would apply. This situation is only applicable if the first default triggers payment and ends the contract;
n-th default credit derivative: when the n-th default triggers payment, the buyer of protection cannot offset the specific risk (according to the modalities defined for first-to-default credit derivatives) unless it benefits from protection for any default from 1 to n-1, or if n-1 defaults have already been observed.
For the calculation of capital requirements for general risk, the net position on an index is determined in accordance with Article 344 of the CRR. A stock index futures contract (this notion also includes delta equivalents of options on stock index futures contracts) can either be broken down into its underlying positions or treated as a single share. In the second case, if the futures contract refers to a relevant properly diversified index and is traded on a stock exchange, it can be considered to have zero specific risk. The Implementing Regulation (EU) No 945/2014 of 4 September 2014 lists all relevant properly diversified indices. An update of the list of indices was published on 27 September 2023 by the Commission (Implementing Regulation 2023/2056). When positions on stock index futures contracts are treated as underlying positions in the shares constituting the index, they can be offset with opposite sign positions in the underlying shares themselves. Institutions applying this treatment notify the competent authority.

2.3.5.3 Positions related to credit derivatives
The definition of the base for calculating capital requirements for market risks associated with the positions of subject Institutions on credit derivatives is as follows:

for the subject Institution seller of protection (for which the position is long in risk), Article 332 (1) of the CRR authorizes the Institution to define the base either as the notional amount of the credit derivative, or as the algebraic sum of the notional amount of the credit derivative and the market value of the credit derivative;
for the subject Institution buyer of protection (for which the position is short in risk), the base is defined either as the notional amount of the credit derivative, or as the difference between the notional and the market value of the credit derivative. In accordance with Article 332 (2) of the CRR, the position of the buyer of protection is indeed determined by symmetry with that of the seller.

2.3.5.4 Capital requirements on debt instruments
2.3.4.4.1 Specific Risk
For a net position subject to interest rate risk, the specific risk capital requirement resulting from the base can be capped at the maximum possible loss related to a default, in accordance with Article 335 of the CRR.

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2.3.4.4.2 General Risk
For all debt securities subject to general interest rate risk, capital requirements are calculated according to one of the two methods presented in Articles 339 and 340 of the CRR. Institutions have the possibility of using the maturity method, in accordance with Article 339 of the CRR, or the modified duration method, in accordance with Article 340 of the CRR, provided that they do so consistently. Institutions using the method presented in Article 340 of the CRR must adapt the calculation of modified duration in the case of instruments subject to prepayment risk, in accordance with the EBA Guidelines on corrections of modified duration. To do this, said Guidelines provide two calculation formulas: one based on the separate valuation of the instrument's optionality, the other based on a total revaluation of the instrument. The method based on separate valuation consists of splitting a bond with prepayment risk between the bond itself on the one hand and the option inducing the prepayment risk on the other hand. The modified duration is replaced by the corrected modified duration (CMD) as follows:
CMD = MD * Φ * Ω
With Ω = 1 + Δ + 1/2 * ΓdB + Ψ
Where:
MD is the modified duration;

Φ = theoretical price of the bond without prepayment option (B)/theoretical price of the bond with embedded prepayment option;
Δ, Γ = delta, gamma of the embedded option;
Ψ = additional factor reflecting transaction costs as well as behavioral factors related to an increase in the actuarial rate of 100 basis points, which can only increase the CMD.
The method based on total revaluation consists of directly calculating the change in value of the instrument (constituted of the bond and the option) due to a shock of the actuarial rate of 100 basis points: it is an adapted duration calculated by making a total reevaluation of the value of the instrument in the case of a movement of the actuarial rate. The modified duration is replaced by the corrected modified duration (CMD) as follows:
CMD = (P−Δr − P+Δr) / (2 × P0 × Δr) + ψ
Where:
P0 is the market price of the instrument;
Δr is equal to 50 basis points;
P±Δr is the price of the instrument after an increase/decrease in the actuarial rate of Δr;
Ψ is a term reflecting transaction costs and behavioral effects associated with a movement of the actuarial rate of 100 basis points.

2.3.4.5 Foreign Exchange Risk
Institutions calculate their capital requirements for foreign exchange risk, in accordance with Articles 351 to 354 of the CRR.
The ACPR has declared itself compliant with the EBA guidelines (EBA/GL/2020/09) on the treatment of structural foreign exchange positions under Article 352, paragraph 2, of the CRR and has extended these guidelines to financing companies. The EBA guidelines EBA/GL/2020/09 have been applicable since January 1, 2022.

2.3.4.5.1. Scope of application of the exclusion of structural foreign exchange positions
The guidelines require Institutions to specify the desired scope for the exemption request. An Institution is notably required to specify: which of the three capital ratios referred to in Article 92 of the CRR it intends to cover; the currencies for which the exemption request is made, which must be considered relevant for the Institution's activity. The Institution must ensure that the foreign exchange position it intends to exclude is a net long position, as only a long position is capable of protecting capital ratios in the event of appreciation of the foreign currency. It is specified that the structural positions covered by the exemption request necessarily belong to the banking portfolio (positions in the trading portfolio are therefore not concerned).

2.3.4.5.2. Examination of eligibility: Structural nature of positions and hedging intention
The structural nature of positions is a necessary but not sufficient condition for them to benefit from the exemption referred to in Article 352, paragraph 2. The Institution must also demonstrate that these positions were taken with the aim of covering the relevant ratio.
Investments in subsidiaries are by default presumed to be positions of a structural nature72. Other positions may nevertheless be considered to be of a structural nature if the Institution provides adequate justification. For this examination, the competent authority may take into account the stability of positions over time, their link with the cross-border nature of the Institution's activities, as well as how the latter intends to manage these positions over time. Regarding the hedging intention, the guidelines specify that the Institution must document a risk management procedure covering the positions covered by the exemption request. Among the constituent elements of the procedure are notably the objective of covering the capital ratio, its evaluation modalities by the Institution, the acceptable level of tolerance in terms of sensitivity of ratios to foreign exchange risk and in terms of losses related to the holding of these positions. The risk management procedure must be linked to the Institution's risk appetite framework and validated by the Institution's board of directors.

2.3.4.5.3. Maximum net open position
The guidelines establish that the size of the structural position excluded from the scope of foreign exchange risk cannot exceed a certain amount, defined as the maximum net open position. This amount corresponds to the size of the net open position that allows the capital ratio to be completely insensitive to variations in the exchange rate. The guidelines specify the modalities for calculating the maximum net open position depending on the capital ratio that the Institution wishes to cover. The Institution also has the possibility to simplify this calculation if it is able to demonstrate that this does not lead to overestimating its size.

2.3.4.5.4. Documentation and notifications: monitoring of the exemption
The guidelines specify that the Institution is required, for each currency for which an exclusion is granted, (i) to calculate monthly a series of quantitative indicators, including the maximum net open position and the sensitivity of capital ratios to foreign exchange risk, and (ii) to report these indicators to its competent authority on a quarterly basis. The quarterly reporting requirement also concerns qualitative elements (notably justification of any change in the amount of the structural net open position and the two sensitivities or any envisaged evolution of the exemption request).

2.3.4.6 Commodity Risk
Institutions calculate their capital requirements for commodity risk, in accordance with Part III, Title 4, Chapter 4 of the CRR.

When the exemption request concerns more than five currencies, the institution must justify the relevance of the currencies beyond the first five.
72 On an individual basis, a position corresponding to investments in subsidiaries included in the same consolidation scope as the Institution requesting the exemption is considered structural. On a consolidated basis, a position resulting from an investment in a subsidiary included in the consolidation and whose currency in which the position is denominated corresponds to the reporting currency used by the subsidiary holding the item to which this position corresponds, is considered structural.

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2.3.4.7 Authorization to use internal models
Under Article 363 of the CRR, the competent authority authorizes subject Institutions to use their internal models to calculate capital requirements for market risks for several categories of risks (general and specific risks related to shares and debt securities, foreign exchange risk, and commodity risk), after verifying that they comply with the requirements of Sections 2, 3, and 4 of Chapter 5 of Title IV of Part 3 of the CRR. In accordance with Article 363 (2) of the CRR, an "Institution continues to calculate its capital requirements in accordance with Chapters 2, 3, and 4 of Title IV of Part 3 of the CRR, as the case may be, for the categories of risk for which it has not received the authorization to use its internal models referred to in paragraph 1. The authorization to use internal models granted by competent authorities is required for each category of risks and is granted only if the internal model covers a significant share of positions of a certain category of risk." Two special cases must be distinguished regarding the treatment of specific risk:

regarding default and migration risks for traded debt securities: Institutions are not required to take these risks into account in their internal models used for specific risk when they take them into account in the IRC (Article 371 (2) of the CRR);
in accordance with Article 371 (1) of the CRR, regarding securitization positions or n-th default credit derivatives for which a capital requirement for specific risk is calculated using the standard method (according to the methods exposed in Articles 332 (1) e) and 337 of the CRR), they may be excluded from the scope of calculation of the SCR for specific risk related to debt securities using internal model methods, with the exception of positions subject to the internal model approach for correlation trading described in Article 377 (Comprehensive Risk Measure or "CRM").
An Institution using an internal model to calculate its capital requirements for specific risk related to traded debt securities also has an internal model for additional default and migration risks (Incremental Risk Charge or "IRC"), in accordance with Article 372 of the CRR. The IRC model must furthermore respect the conditions provided for in Section 4 of Title IV of Part 3 of the CRR. Regarding the authorization to use a CRM model, this depends, in accordance with Article 377 (1) of the CRR, on the one hand on the authorization of Institutions to use their internal model for specific risk related to debt securities and, on the other hand, on the respect of quantitative and qualitative criteria set out in Section 5 of Title IV of Part 3 of the CRR. The competent authority may authorize an Institution to use VaR and stressed VaR but not to use the CRM, which would imply the calculation of capital requirements for specific risk for the correlation portfolio using the standard method.

2.3.4.7.1 Treatment of securitization positions and calculation of specific risk
If authorized by the competent authority, internal models may be used for the calculation of capital requirements for specific risk on debt securities of the trading portfolio (Article 363(1) d) of the CRR).
Consequently, as soon as the competent authority has authorized the use of internal models on this scope, securitization positions or n-th default credit derivatives, whether included or not in the Correlation Trading Portfolio ("CTP"), are included in the calculation of this capital requirement.
Two cases are distinguished, depending on whether the positions belong to the CTP or not: see Article 364(2), 364(3) and 371 of the CRR.

2.3.4.7.2 Calculation of the CRM "floor"
In accordance with Article 364 (3) (c) of the CRR, a floor (or "floor") on the amount of capital requirements calculated with a CRM model is applied, representing 8% of the capital requirements that would be calculated in accordance with Article 338 (4), the latter representing the SCR for specific risk applicable to the CTP and calculated using the standard method.

2.3.4.7.3 EBA Guidelines on Value at Risk in crisis situations and on capital requirements for additional default and migration risks (IRC)

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The Guidelines on stressed Value at Risk ("stressed VaR") and the Incremental Risk Charge ("IRC") concern Institutions using internal models for the calculation of capital requirements for market risks.

The Guideline on stressed VaR defines best practices for the identification and annual review of the stressed period, the calculation methodology, and the operational use ("use test") of stressed VaR. The main provisions are as follows:

Choice of the stress period: Institutions determine the 12-month period of significant financial stress in a manner appropriate to their trading portfolio, relying optionally on quantitative methods or judgment-based methods;
Review of the stress period: The stress period must be reviewed at least annually, but may be reviewed more frequently if necessary. Any modification to the selected stress period must be communicated to the competent authority before its implementation. Furthermore, the representativeness of the stress period must be continuously reviewed by Institutions;
Modeling of stressed VaR: The methodology for stressed VaR must be aligned as much as possible with the VaR methodology, except where specific requirements apply. Since stressed VaR relies on the calibration of parameters based on a historical period, proxies may be used for new risk factors for which there are no historical data.

The Guideline on IRC specifies the scope of the charge (i.e., instruments included in the IRC), requirements regarding default probabilities and transition matrices used, the simulation of migrations and defaults over a one-year capital horizon, best practices for assessing profits and losses ("P&L") in the event of migration or default (impact on market prices and on the determination of P&L), the determination of liquidity horizons, the validation of IRC models, and operational use. The main provisions are as follows:

Modeling of individual positions: Institutions must, in particular, define a hierarchy of internal or external rating sources and take into account specific conditions defined in the Guideline for the determination of default probabilities (PD) and loss given default (LGD) used in their IRC model;
Modeling of interdependence: Institutions must take into account the best practices specified in the Guideline regarding the modeling of correlation between default and migration, as well as the consideration of portfolio concentration;
Specification of a migration matrix: Institutions must, in particular, model the probability of transition from one rating to another based on observed historical data over a period of at least 5 years;
Constant risk level assumption over a one-year capital horizon: Institutions must model the IRC by resetting their positions at the end of each liquidity horizon to return to the same risk level as that considered at the beginning of the liquidity horizon, over the one-year capital horizon. Institutions may, however, opt for a second approach consisting of calculating the IRC by assuming that positions remain constant over the one-year capital horizon. The chosen assumption must be applied to all positions subject to the IRC;
Modeling the effects of rating changes on price changes: Institutions must implement best practices regarding the modeling of the effects of rating changes on price changes;
Determination of liquidity horizons: Institutions must define a liquidity horizon at the product level rather than at the issuer level, take into account key criteria specified in the Guideline to determine an adequate liquidity horizon, and regularly review liquidity horizons;
Calculation frequency: The IRC must be calculated at least once a week.

2.3.4.8 Stress Testing
Institutions conduct stress tests, in accordance with Article 368(1)(g) of the CRR.

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2.3.4.9 Technical Standards on Market Risk
Delegated Regulation (EU) No 530/2014 of 12 March 2014 supplementing CRD4 with regulatory technical standards to clarify what constitutes a significant exposure and the thresholds for internal approaches to specific risk related to the trading portfolio defines materiality criteria justifying the use of internal models (Article 77 of CRD4) for trading book positions subject to the calculation of Specific Position Risk (SPR) for the specific risk of debt securities. If an Institution meets certain criteria, competent authorities must encourage it to use internal models (specific VaR and SVaR, IRC).

The Regulation defines:

a significant exposure in absolute value to specific risk set at EUR 1,000,000,000 of the sum of net long and short positions;
a "high number of significant positions in debt securities from different issuers," defined as holding more than 100 positions greater than EUR 2,500,000.

Delegated Regulation (EU) No 528/2014 of 12 March 2014 supplementing the CRR with regard to regulatory technical standards for non-delta risk related to options in the standard method for market risk specifies the calculation of non-delta risk for options and warrants, under Articles 329(3), 352(6), and 358(4), based on the Basel framework specifying 3 methods:

a simplified approach for Institutions buying shares only;
the delta-plus method based on the calculation of sensitivities;
the scenario approach.

The methods defined in the delegated Regulation are, however, adapted to meet the level 1 text which requires a separate calculation of delta risk and non-delta risks. Furthermore, the delegated Regulation departs from the Basel framework by defining a punitive "fall-back" approach for complex options, in the simplified and delta-plus approaches, to encourage banks to instead use the scenario approach or internal models for measuring risks of these more sophisticated products.

Under the simplified approach, options other than simple calls and puts (American or European) are considered complex options. In the delta-plus approach, complex options are defined as any option discontinuous at the delta and gamma level (e.g., barrier options). This approach also applies to options for which gamma or vega cannot be determined. The SPR for non-delta risks of complex options will be determined by taking, for purchased options, the market value of the option minus the weighted delta-equivalent amount; for sold options: the market value of the underlying (or the maximum payment amount if contractually set) minus the weighted delta-equivalent amount.

Implementing Regulation (EU) 2015/2197 of 27 November 2015 amended by Implementing Regulation (EU) 2021/249 of 17 February 2021 lists closely correlated currency pairs. In accordance with Article 354(3) of the CRR, these relevant closely correlated currency positions can be weighted at 4% (instead of 8%) when calculating SPR for exchange rate risk in the standard approach. The list of currency pairs is regularly reviewed by the EBA.

Implementing Regulation (EU) No 945/2014 of 4 September 2014 lists, in accordance with Article 344(1) of the CRR, relevant duly diversified indices. In the context of calculating SPR for the specific risk of equity positions, a stock index futures contract can either be broken down into its underlying positions or treated as a single share. In the latter case, if the futures contract refers to a relevant duly diversified index and is traded on a stock exchange, it can be considered to have zero specific risk.

The Implementing Regulation clarifies the methodology for determining a duly diversified index:

the index must be composed of at least 20 shares;
no share may represent more than 25% of the index;
the 10% largest shares must not represent more than 60% of the index;
the index must be composed of shares from at least one national market (no regional index);
the index must be composed of shares from at least 4 different industries.

An update of the list was published on 29 January 2020 by the Commission through Implementing Regulation 2023/2056. In total, 101 indices appear as duly diversified (including the CAC 40 and the SBF 120). Their list is reviewed annually by the EBA.

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Delegated Regulation (EU) No 525/2014 of 12 March 2014 supplementing the CRR with regard to regulatory technical standards defining the term "market" defines, in accordance with Article 341 of the CRR, the netting level of long and short positions in shares in the context of calculating capital requirements for general share risk. A market is defined as a national market, except the euro zone which is considered a single market.

The EBA Guidelines on modified duration adjustments, published on 4 January 2017, are detailed in section 2.3.4.4 'Capital requirements for market risk on debt instruments.'

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2.3.4.10 Main EBA Questions and Answers ("Q&A") on Market Risks
Q&A 157 clarifies that Articles 341 to 344 (prudential treatment of specific equity risk in market risk) apply only to shares in the trading book, and not to those in the banking book.

Two Q&As (1171 and 1795) concern capital requirements for exchange rate risk and five Q&As (163, 422, 589, 940, and 1813) concern capital requirements for commodity risk. Q&A 163 specifically explains the treatment of commodity indices in accordance with Article 357 of the CRR: indices must be broken down into positions on the same commodity.

Q&A 2692 clarifies the determination of capital requirements for position risk in UCITS using approaches other than transparency or those aiming to reflect the position risk of these UCITS (i.e., for UCITS other than those referred to in CRR Article 350): this is 32% (or 40% in the presence of exchange rate risk) of the positions concerned, in application of CRR Article 348.

Q&A 2797 clarifies the treatment of negative accrued interest for the calculation of the exchange rate position.

Q&As 2571 and 3314 recall that perfectly hedged options do not generate market risk but counterparty risk. Conversely, Q&A 6217 clarifies that as soon as the hedge is not perfect, market risk is not zero and institutions must request the authorization provided for in Article 329(1) of the CRR in the case of options under the standard approach for which delta is not available. Q&A 3120 deals with the impossibility of netting "depositary receipts" with the shares they represent.

Q&A 2917 reiterates the netting rules for positions in UCIs applicable for the calculation of capital requirements for market risk.

Q&A 2138 clarifies that an Institution treats as exposures to undertakings (CRR 107(2)(b)) exposures for which the Institution is a client of an eligible CCP acting itself as a member of a non-qualified CCP.

Q&A 3137 indicates that in the context of calculating the net open position in a currency, contracts for difference (CFDs) must be broken down into a combination of long and short positions.

Q&A 4021 recalls that in the context of calculating consolidated capital requirements, a parent institution must obtain authorization from the competent authority to use internal models (IMA) at the consolidated level in order to use capital requirements calculated by its subsidiaries using IMA.

Q&A 4142 recalls that the application of the closely correlated currencies framework is independent of the institution's reporting currency.

Q&A 4378 asks about the possibility of using the internal model approach for market risk to treat positions in UCIs where positions are unknown or replication of the followed index is impossible. The answer indicates that the use of market risk internal models is permitted for these positions. Nevertheless, these positions can only be integrated into internal models if all other conditions of Articles 367 and 370 CRR are met.

Q&A 4381 asks about the calculation methods for SPR under the standard market risk approach for positions in derivatives with UCITs underlyings. The answer indicates that derivatives (and option products) with UCITs underlyings must be treated as positions in their underlying (i.e., the UCITS).

Q&A 4167 recalls that gold positions are subject to the same treatment as currency positions. Thus, the net short/long position in gold must be converted into the institution's reporting currency. In the case of gold derivatives, the impact of exchange rates affecting the value of the derivative must be taken into account.

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Q&A 4329 indicates that residual maturity represents the furthest period until which the contract can be active for the institution.

Q&A 6746 clarifies that in the context of the ASA for non-securitization credit positions, the basis risk between bonds and CDS must be taken into account for delta risk but not for curvature risk.

2.3.6 Operational Risk
2.3.6.1 Clarifications on the Definition of Operational Risk
Operational risk is defined by Article 4(52) of the CRR as "the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including, but not limited to, legal risk, model risk, or risk related to information and communication technologies (ICT), excluding, however, strategic and reputational risk."

Legal risk is included in operational risk and defined as "the risk of losses, including expenses, fines, penalties, or punitive damages that an institution may incur due to events giving rise to judicial proceedings," including the elements listed in Article 4(52bis) of the CRR. On the other hand, costs related to compliance with the legal framework (for example, implementation costs related to MiFID II adaptations) do not constitute legal risks.

Environmental risks, as defined in Article 4 of the CRR, and to which an Institution is exposed, may constitute causes of operational risks. Some events resulting from an environmental risk can indeed directly affect the performance of specific business lines or even the overall activity of the credit institution (natural disaster, legal risks...). Operational loss events – identified as such – linked to an environmental risk can thus be covered by capital.

Model risk, as defined in Article 4(52ter) of the CRR and in Article 10(aa) of the Order of 3 November 2014, is attached to operational risk.

IT risk, as defined in Article 4(52quater) of the CRR and in the EBA Guidelines on ICT and security risk management (EBA/GL/2019/04) 7374, is a major sub-category of operational risk. The Order of 25 February 2021 amending the Order of 3 November 2014 on internal control adapted the French legislative framework to these guidelines. It created Title VI bis and Articles 270-1 to 270-5 which specify requirements on IT risk management. This update is accompanied by the ACPR Notice on IT risk management for companies in the banking, payment services, and investment services sector published on 7 July 2021, allowing clarification of the implementation modalities of the new regulatory provisions. In parallel, the guidelines on ICT risk assessment in the context of the SREP (EBA/GL/2017/05), which aim to ensure convergence of prudential practices during ICT risk assessment, underpin the ACPR's document-based control methodology to evaluate in particular the governance, strategy, exposure to ICT risks, and risk control mechanisms of the Institutions it supervises. The Internal Control Annual Report framework has also been modified to include specific indications aimed at collecting information to control compliance with these EBA references by the concerned Institutions. Risk related to information and communication technologies (ICT) and security: risk of loss resulting from a breach of confidentiality, failure of system and data integrity, inadequacy or unavailability of systems and data, or inability to modify information technologies within a reasonable time and at reasonable costs, when the environment or "business" requirements change (agility). This includes security risks resulting from insufficient internal processes or failure of these processes, or external events, such as cyberattacks or insufficient physical security. These guidelines replace the EBA guidelines on security measures for operational and security risks related to payment services (EBA/GL/2017/17) upon their entry into application.

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The EBA published guidelines on outsourcing (EBA/GL/2019/02), to which the ACPR declared itself compliant, which define outsourcing75. These guidelines replace the previous EBA recommendations on outsourcing to cloud service providers (EBA/REC/2017/03), as well as the former CEBS guidelines on outsourcing dating from 2006. These guidelines have been applicable since September 30, 2019. These guidelines, applicable to credit institutions and investment firms (and also to payment institutions and electronic money institutions), are extended to Finance Companies through an ACPR compliance notice. The decree of February 25, 2021, which amended the decree of November 3, 2014, relating to internal control, in line with these guidelines, made it possible to update Articles 232 and 238, notably to create the obligation to manage a register of outsourcing arrangements in force.

2.3.6.2 Calculation of the capital requirement for operational risk
CRR3 introduces a new standard method for calculating capital requirements for operational risk, which replaces the three pre-existing methods. The main changes compared to the previous standard method concern:

The beta factor is no longer determined according to the type of activity but according to the amount of the business indicator;
A cap is introduced on the interest margin component, calculated based on the amount of interest-bearing assets;
Regarding commission income and expenses, they are no longer taken into account on a net basis but on the basis of the highest amount between commission income and commission expenses.

The capital requirement for operational risk corresponds to the business indicator component (BIC), in accordance with Article 312 of CRR. Pursuant to Article 313 of CRR, this business indicator component (BIC) is calculated by applying a progressive scale to the business indicator (BI), that is to say by applying marginal coefficients to the business indicator (BI): 12% below €1 billion; 15% between €1 billion and €30 billion; 18% beyond €30 billion:

In accordance with Article 314 of CRR, the business indicator (BI) is calculated as the average over the last three years of three components (ILDC, SC, and FC):

The "interests, leases, and dividends" component (interest, leases, and dividend component - ILDC), which aims to approximate intermediation activities. It is calculated by adding 1) the minimum between i) the interest component (IC)76 and ii) the asset component (AC)77 multiplied by 0.0225 on the one hand; and 2) the dividend component (DC)78 on the other hand. Note that a parent institution in the Union may, until December 31, 2027, request its consolidated supervisory authority for authorization to calculate a distinct ILDC component for one of its specific subsidiary institutions under the conditions provided for in Articles 314(3) and 314(4) of CRR. The formula is as follows:
The "services" component (services component - SC), which aims to approximate banking services activities. It is calculated by adding 1) the maximum between i) other income (OI)79 and ii) other operating expenses (OE)80; and 2) the maximum between i) the fee and commission income component (FI)81 and ii) the fee and commission expense component (FE)82. The calculation formula is as follows:
A "financial" component (financial component - FC), which is calculated by adding the trading book component (TC - trading book) and the banking book component (BC – banking book). These two components correspond to the annual average of the absolute values of the net result of the portfolio. The calculation formula is summarized as follows:

In total, the calculation of the business indicator component (BIC), which corresponds to the capital requirement for operational risk, can be summarized as follows:

75 "Agreement, in whatever form, concluded between an institution, a payment institution, or an electronic money institution and a service provider, under which this service provider takes charge of a process or executes a service or an activity that would otherwise be executed by the institution, the payment institution, or the electronic money institution itself." The definition of "outsourced activities" provided in Article 10 q) of the decree of November 3, 2014 on internal control is aligned with this definition.

The "services" component (services component - SC), which aims to approximate banking services activities. It is calculated by adding 1) the maximum between i) other income (OI)79 and ii) other operating expenses (OE)80; and 2) the maximum between i) the fee and commission income component (FI)81 and ii) the fee and commission expense component (FE)82. The calculation formula is as follows:
A "financial" component (financial component - FC), which is calculated by adding the trading book component (TC - trading book) and the banking book component (BC – banking book). These two components correspond to the annual average of the absolute values of the net result of the portfolio. The calculation formula is summarized as follows:

In total, the calculation of the business indicator component (BIC), which corresponds to the capital requirement for operational risk, can be summarized as follows:

76 The interest component corresponds to the institution's interest income from all financial assets and other interest income, including interest from finance lease contracts and simple lease contracts and profits on assets given under lease, minus the institution's interest expenses from all its financial liabilities and other interest expenses, including interest expenses resulting from finance lease contracts and simple lease contracts, losses, amortizations, and impairments on simple lease assets, calculated as the annual average of the absolute values of the differences observed over the last three financial years. 77 The asset component corresponds to the sum of the total gross outstanding loans, advances, interest-bearing securities, including government bonds, and assets given under lease of the institution, calculated as the annual average of the last three financial years based on amounts established at the end of each financial year. 78 The dividend component corresponds to the institution's dividend income from holdings in shares and non-consolidated funds in the institution's financial statements, including dividend income from subsidiaries, affiliated companies, and joint ventures not consolidated, calculated as the annual average of the last three financial years. 79 Income of the institution arising from ordinary banking operations that are not included in other elements of the business indicator but are of a similar nature. 80 Expenses and losses of the institution on ordinary banking operations, not included in other elements of the business indicator but of a similar nature, and on operational risk events. 81 Income received by the institution for the provision of advice and services, including income received by the institution as an external provider of financial services. 82 Remuneration paid by the institution for advice and services, including outsourcing fees paid by the institution in exchange for financial services, but excluding outsourcing fees paid in exchange for non-financial services.

Article 314(7) precisely and limitatively defines the list of elements excluded from the business indicator83, unlike previous provisions which gave greater latitude for the possible exclusion of any "non-recurring" element or that did not correspond to the ordinary activity of the institution.

Article 314(8) explicitly clarifies the case of institutions that have been exercising their activities for less than three years and provides for:

The use, in agreement with the competent authority, of prospective estimates; and
The resumption of historical data as soon as this data is available.

The calculation methods for each component are specified within the delegated regulation relating to the components of the business indicator (art. 314(6)(a) CRR) and to the elements excluded from the business indicator (art. 314(6)(b)). This delegated regulation was subject to consultation by the European Banking Authority in 2024, while the latest version awaiting adoption by the European Commission was published by the EBA on June 16, 2025.

The correspondence between the elements of the business indicator and FINREP statements is specified within the implementing act under Article 314(7) of CRR. This act was subject to consultation by the European Banking Authority in 2024, while its final version awaiting adoption by the European Commission was published by the European Banking Authority in 2025.

Furthermore, the business indicator must be adjusted in the case of merger-acquisition operations, and may be adjusted during disposal operations with the authorization of the competent authority, in accordance with Article 315 of CRR. The modalities of these adjustments are specified within the delegated regulation relating to adjustments of the business indicator, which was subject to consultation by the European Banking Authority in 2024, and whose final version awaiting adoption by the European Commission was published by the EBA in 2025.

In the case of merger-acquisition operations, the adjustments to the calculation of the business indicator are specified within the delegated regulation under Article 321(2) of CRR, which was subject to consultation by the European Banking Authority in 2024.

2.3.6.3 Data collection and governance

83 Institutions do not use any of the following elements in the calculation of their business indicator: a) income and expenses of insurance or reinsurance undertakings; b) premiums paid and payments received under insurance or reinsurance policies; c) administrative expenses, including personnel costs, outsourcing costs for non-financial services, and other administrative expenses; d) recovery of administrative expenses, including recovery of payments on behalf of clients; e) costs related to premises and equipment, unless they result from operational risk events; f) amortization of tangible and intangible assets, with the exception of amortization of simple lease assets, which must be included in costs related to finance lease and simple lease contracts; g) provisions and reversals of provisions, unless these provisions relate to operational risk events; h) expenses related to share capital repayable on demand; i) impairments and reversals of impairments; j) variations in recognized goodwill; k) corporate income tax.

Institutions whose business indicator is equal to or greater than €750 million calculate their annual loss for operational risk, in accordance with Article 316 of CRR. By way of derogation, a competent authority may exempt an institution from the obligation to calculate annual losses for operational risk if its business indicator does not exceed €1 billion, provided that it has demonstrated that the calculation of annual losses would represent an "excessive burden" for it, as specified within the delegated regulation under Article 316(3) of CRR, which was subject to consultation by the European Banking Authority in 2024.

Institutions that must calculate their annual loss for operational risk put in place devices, processes, and mechanisms to establish and permanently maintain a set of data on losses compiling, for each recorded operational risk event, the gross loss amounts, recoveries outside insurance, insurance recoveries, reference dates, and grouped losses, including those resulting from misconduct cases.

The institution's loss data set must cover all operational risk events arising from all entities forming part of the consolidation perimeter. In the case of merger-acquisition operations, loss data adjustments are specified within the delegated regulation under Article 321(2) of CRR, which was subject to consultation by the European Banking Authority in 2024.

To calculate annual losses for reporting purposes, institutions take into account operational risk events for which the net loss, calculated in accordance with Article 318 of CRR, is greater than or equal to €20,000. For publication purposes, this threshold is set at €100,000. Furthermore, an institution may request authorization from the competent authority to exclude from its annual loss calculation exceptional operational risk events that no longer have significance regarding their risk profile, subject to the conditions provided for in Article 320 of CRR, and under the modalities provided for within the delegated regulation under Article 320 of CRR.

The institution must also be able to link its internal historical loss data to the event types and flags provided for within the delegated regulation relating to taxonomy and under Article 317(9) of CRR. This delegated regulation was subject to consultation by the European Banking Authority in 2024.

Finally, institutions must put in place an operational risk management framework, in accordance with Article 323 of CRR, which implies, among other things, systems and procedures for assessing and managing operational risk, the independence of risk management from operational units, the establishment of reporting to management, or the establishment of regular controls and reviews via internal or external audits.

2.3.6.4 Main European Banking Authority (EBA) questions and answers ("Q&A") relating to operational risk

Regarding C17.00, the EBA provided the following clarifications:

Q&A 2016_2874: operational loss elements related to credit risk elements but not covered by a capital requirement for credit risk must be reported in this statement (this includes the repayment of undue interest);
Q&A 2016_2867: adjustments on previously reported losses (positive or negative) must be communicated via this statement;
Q&A 2020-5261: only losses recorded in the income statement must be reported in C.17.01, but those not yet recorded can still be taken into account in the RWA calculation in the AMA if they correspond to the notion of "latent loss" within the meaning of Article 22.1(d) of Delegated Regulation (EU) 2018/959;
Q&A 2022-6426: reimbursements of fees or interest received or deducted in error must only be taken into account in the reporting if the expense is recognized in a financial year subsequent to the recognition of the income from these fees or interest.

Furthermore, losses declared in the "OPR details" statement include amounts incremented over the 6-month period (semi-annual reporting) or 12 months (annual reporting) and not the cumulative amount since the origin, if amounts have been declared in previous periods (Q&A 1694).

2.3.7 Settlement-delivery risk

In accordance with Article 92(4)(a), capital requirements for settlement risk include capital requirements ("CR") arising from all activities of the Institution. Banks calculate their CR for settlement risk in accordance with Articles 378 to 380 of CRR, for which the EBA has provided clarifications via Q&As:

Q&A 2014_851 concerning Article 378 of CRR: derivative transactions must be included in the calculation required by Article 378;
Q&A 2018_3669 concerning Article 379 of CRR: when the counterparty is an institution, unsettled trading positions must, for the purpose of risk-weighted allocation, be reported in line 270 of sheet 007 of C 07.00, unless they are deducted from capital in accordance with Articles 379(3) and 36(1)(k) of CRR.

2.3.8 Credit Valuation Adjustment (CVA) risk

The capital requirement for Credit Valuation Adjustment (CVA) risk arises from all activities of the Institution and aims to cover the risk related to the current market value of the credit risk represented by the counterparty of over-the-counter derivative transactions, with the exception of credit derivatives used to hedge credit risk. The regulatory framework relating to CVA is completely revised in CRR3. From January 1, 2025, the three methods (internal models, standard approach (default approach), and conservative alternative approach accessible only to banks with immaterial derivative portfolios) will be replaced by three new approaches:

A standard approach, which must be subject to prior authorization from the supervisor (Article 383 CRR).
The SA-CVA approach is an adaptation of the FRTB-SA approach for market risks with the main differences being: (i) SA-CVA has a reduced number of risk classes84 (six versus seven for FRTB-SA); SA-CVA does not include "convexity" risks (only "delta" and "vega") and does not include default risk (covered by the "Default Risk Charge" in FRTB). For a bank to use SA-CVA, it must be able (1) to model and calculate, on a monthly basis, its sensitivities to risk factors and (2) have a dedicated CVA "desk" for managing and hedging CVA risk.
A so-called "basic" approach (Article 384 CRR) divided into two sub-approaches: a so-called "reduced" approach and a so-called "complete" approach. The main difference between these two methods lies in the taking into account of certain hedges for counterparty risk in the complete approach (the basic approach being by nature more intended for banks that do not hedge CVA risk).
A simplified approach that can be used subject to not exceeding materiality thresholds in terms of derivative notionals (Article 385 CRR). Banks whose derivative portfolio size does not exceed 5% of total assets and €100 million may choose to apply the so-called "simplified" approach, which consists of taking into account for CVA requirements the amount of capital requirements calculated for counterparty credit risk. However, the competent authority may oppose the application of this simplified method if CVA risk is deemed material for the bank. A bank that chooses to apply the simplified approach applies it for its entire portfolio.

CRR3 therefore thoroughly revises Title 6 of Part III of CRR (Articles 381 to 386) regarding calculation methodologies for capital requirements. However, CVA exemptions present in CRR2 (Article 382) are maintained. In particular, transactions concluded with an eligible central counterparty, intragroup transactions (including with non-financial counterparties), transactions concluded with a non-financial counterparty within the meaning of the EMIR regulation, and transactions concluded with a Member State counterparty of the European Union, remain excluded from the scope of CVA. CRR3 introduces, however, a reporting requirement for exposures exempt from CVA charges (Article 382(4b)).

84 Interest Rate Risk, FX risk, Credit Spread Risk, Equity Risk and Commodity Risk

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2.4 Main questions and answers (Q&A) related to prudential reporting (reporting) concerning the solvency ratio
Q&A 209
Reporting of contributions to the CCP failure fund in CR SA (C 07.00) and CA2 (C 02.00) states: column 020 of the CR SA state "of which: exposures arising from contributions to the failure fund" must not be filled in; the calculation of risk-weighted exposure amounts must be reported directly in the CA2 state, in line 460 "Exposure amount for contributions to the failure fund of a CCP". Q&A_143 In the CR GB 1 (C 09.01) state, exposures to supranational organizations must not be assigned to the country of residence of the institution, but to the geographic zone "Other countries", regardless of the exposure classes to which exposures to international bodies are assigned. The geographic zone "Other countries" must also be used to report exposures to the ECB. This principle also applies to the COREP CR GB 2 (C 09.02) state and to FINREP states F 20.01 to F 20.07. The BIS produces a list allowing the identification of supranational organizations: Part G of the "Guidelines for reporting the BIS international banking statistics"; this list not being exhaustive, the BIS refers to the list produced by Eurostat (appendix 11). Q&A 1448 Regarding line 130, columns 010-030 of the C 16.00 tab dedicated to operational risk, the reference indicator mentioned in the COREP reporting instructions is the sum of the items listed in Article 316(1) of the CRR and this regardless of the approach used by the Institution for the calculation of its capital requirements (basic, standard or advanced). Q&A 4276 regarding the nature of "public administrations" counterparties to be reported in the Corep C33.00 (GOV) state. Alignment with Finrep states requires retaining in the Corep C33.00 table only exposures on "public administrations" respecting the Finrep definition, which excludes counterparties that may nevertheless attract a weighting equal to that of a central government in credit risk elsewhere.

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3. Large Exposures
3.1 General principles
The CRR, in its fourth part, requires Institutions to monitor and control their largest exposures, the "large exposures".
An exposure to a client or a group of connected clients is considered a large exposure if its value reaches or exceeds 10% of the Institution's Tier 1 capital85 (Article 392 of the CRR). The value of an exposure to an individual client is obtained by adding the exposures to that client from the banking book and the trading book. Exposures to groups of connected clients are calculated by adding the exposures to the individual clients composing each group. Pursuant to Article 395 (1) of the CRR, among its exposures considered as large exposures, an Institution may not present an exposure to a client or a group of connected clients whose value, after taking into account the effects of credit risk mitigation, would exceed 25%86 of its Tier 1 capital (the maximum between 25% of Tier 1 capital and EUR 150 M, up to 100% of Tier 1 capital, when the counterparty is an Institution). This limit is 15% of Tier 1 capital for exposures of a global systemically important institution (G-SII) to another G-SII or to a non-EU G-SII. Pursuant to Article 395 (2) of the CRR, the EBA has developed Guidelines to set aggregate or individual limits for exposures to the shadow banking system carrying out banking activities outside a regulated framework. This framework comes in addition to the general large exposure framework. Institutions thus have the possibility to define their own internal exposure limits, provided they have sufficient information on their counterparties (the information and procedures for this approach being set by the Guidelines). However, in the event of an Institution's inability to have this information, aggregate exposures are limited to 25% of Tier 1 capital (i.e., the usual large exposure limit under Article 395.1 of the CRR). The implementation details are specified by an ACPR position of December 20, 2016. The limits of Article 395 (1) of the CRR may be exceeded for exposures from the trading book pursuant to Article 395 (5) of the CRR provided that these exceedances are reported immediately to the competent authority and are accompanied by the calculation of additional capital requirements (see section 3.3).
3.1.1 Calculation of the exposure value
In the context of large exposures, all exposures are taken into account, whether they fall under the banking book or the trading book. Generally, the amount of an exposure is calculated according to the methods applicable for credit risk, without application of risk weighting or risk degree (Articles 389 and 390 of the CRR).
Exposures to derivative products from Annex II of the CRR and to credit derivatives are calculated according to Part Three, Title II, Chapter 6, Sections 3, 4 and 5 relating to counterparty risk. When trading book credit derivatives cover positions on the banking book, the banking book credit risk mitigation rules apply. When trading book credit derivatives do not cover any position on the banking book, the amount of the related exposures is calculated in accordance with Article 299 of the CRR. Pursuant to Article 390 (5) introduced by CRR2, Institutions must add to the total exposures to a client, the exposures coming from derivative contracts listed in Annex II of the CRR and credit derivatives, when these contracts are not directly concluded with this client, but the underlying debt security or equity instrument was issued by this client. The EBA published on February 19, 2021 a draft regulatory technical standard specifying how to determine the value of these so-called "indirect" exposures to derivative contracts and credit derivatives (EBA/RTS/2021/03), for which the delegated regulation was published in the OJEU on March 10, 2022 (COMMISSION DELEGATED REGULATION 2022/1011). The Delegated Regulation (EU) No 1187/2014 of October 2, 2014 provided for by Article 390 (8) of the CRR introduces new rules for the calculation of the total exposure to a client or a group of connected clients in the case of transactions involving underlying assets. By principle, the transparency approach is applied. Nevertheless, derogations are possible: Institutions may dispense with applying the transparency approach to exposures whose value is smaller than 0.25% of eligible capital and assign the exposure to "separate client". Furthermore, when the transparency approach is not possible for certain structures or underlyings for which the exposure exceeds 0.25% of eligible capital, the Institution must assign the corresponding exposure to the "unknown client" category, this constituting a counterparty subject to the general limitations applicable under large exposures. For collective investment undertakings and European funds, there is no need to declare the exposure to the fund (on the structure) nor additional risk as long as transparency is applied and the exposures to the underlyings are assigned with the declarations concerning the counterparties concerned. In securitization, the technical standard, in line with the most unfavorable scenario possible, considers that all tranches of the securitization are treated equally. In all cases, the exposure corresponding to the investment in a tranche is calculated from the proportion of the tranche held by the investor; it is then considered that the investor holds this same proportion of each of the underlyings of the securitization product within the limit of its exposure in the tranche. The EBA report accompanying the publication by the EBA of the standard adopted by the Commission in the form of Delegated Regulation
(EU) No 1187/2014 included examples illustrating the large exposure treatment of different scenarios relating to securitizations.
3.1.2 Definition of groups of connected clients
A group of connected clients is characterized by (i) the holding of a power of control (of a natural or legal person over another), or (ii) an economic connection link (cf. Article 4.1.39 of the CRR); an EBA guideline, published in November 2017 and applicable since January 1, 2019, specifies the grouping procedures for these clients. The 2017 guidelines specify the grouping procedures for these two cases. Finally, the guidelines clarify that the notion of "groups of connected clients" is not only applicable to the Large Exposures part, in particular, but also applicable for credit risk (retail clientele) – see part 2.3 "credit risk" – and for the SME support factor. The ACPR published a compliance opinion on these guidelines on June 5, 2018 concerning credit institutions and certain investment firms. Furthermore, the ACPR extends by this Notice to finance companies the implementation as of January 1, 2019 of these EBA guidelines. On December 20, 2022, the EBA published its final draft RTS specifying the circumstances in which the conditions for forming client groups under Article 4 (4) CRR, following the public consultation concluded on September 8, 2022. A delegated regulation published in the Official Journal of the European Union on June 18, 2024 now enshrines these clarifications in regulation, it being understood that sections 4, 6 & 7 of the aforementioned guidelines should soon be repealed, as anticipated in the draft RTS, their substance now being taken up and consolidated directly in the delegated regulation. For the detection of groups of connected clients by economic connection, the EBA guidelines of November 2017 specify that Institutions must intensify their search when the sum of exposures linked to a client exceeds 5% of Tier 1 capital. Furthermore, in the case of groups of connected clients by economic connection, if the connected client is easily replaceable, grouping is not necessary, provided that the Institution justifies it.
3.2 Reporting of large exposures
Pursuant to Article 394 CRR and the Consolidated Reporting Regulation, Institutions must report all large exposures they present to a single counterparty in the prudential reporting states C26 to C31. The required information notably requires the identification of each entity using a code specific to it, primarily using the LEI (Legal entity identifier) code which allows the attribution of a unique and universal identifier to each counterparty. Consequently, the principle of counterparty identification under the CRR Large Exposures regime is now based on:

the LEI code when it exists;
or failing that the SIREN number when it is a French entity, including for natural persons carrying out a commercial activity;

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or the valid national identification number in the country of the entity concerned (equivalent to SIREN) for foreign companies.
Institutions also report to their competent authorities the information required by Article 394 (2) of the CRR concerning their ten largest exposures to Institutions, on a consolidated basis, as well as their ten largest exposures to entities of the shadow banking system carrying out banking activities outside the regulated framework (CRR3 introduces a new definition), on a consolidated basis, including large exposures exempted from the application of Article 395 (1) of the CRR. The CRR3 regulation also introduces new reporting requirements regarding aggregate exposures to entities of the shadow banking system, as well as two EBA mandates: one, with a deadline of January 10, 2027, aimed at updating the guidelines relating to limits for exposures to entities of the shadow banking system carrying out banking activities outside a regulated framework; the other, with a deadline of December 31, 2027, for the production of a report aimed at clarifying the relevance of introducing aggregate or individual binding limits for exposures to entities of the shadow banking system. By December 31, 2028 at the latest, the Commission presents, if necessary, on the basis of said report, to the European Parliament and to the Council a legislative proposal concerning limits to exposures to entities of the shadow banking system. The final RTS defining the identification criteria for entities of the shadow banking system provided for in Article 394 (4) of the CRR was published by the EBA on May 23, 2022 and the delegated act published in the Official Journal of the European Union on September 6, 2023.
3.3 Calculation of additional capital requirements for large exposures in the trading book
The holding limits provided for may be exceeded for exposures falling under the trading book provided that they are not already exceeded for exposures falling under the banking book. The exposure to a client or group of connected clients in the context of the trading book may reach up to 500% of Tier 1 capital when a maximum of ten days has elapsed since the occurrence of the exceedance; beyond 10 days, this limit is raised to 600% of Tier 1 capital (Article 395 of the CRR). These exceedances on the trading book, although authorized, must be accompanied by additional capital requirements provided for in Article 397 of the CRR.
3.4 Taking into account credit risk mitigation techniques
The calculation of the exceedance of the 25% limit is measured after taking into account credit risk mitigation techniques. Pursuant to Article 399 (1) of the CRR (as amended by CRR2), when an Institution has used a risk mitigation technique for the calculation of its capital requirements for credit risk, it must use it for the calculation of the exceedance of the large exposure limit, provided that the conditions of Article 399 (1) are met. Pursuant to Articles 401 (1) and 403 of the CRR, when an Institution reduces its exposure to a client using an eligible credit risk mitigation technique under Article 399(1), it treats the deducted part of this exposure as an exposure taken on the provider of protection and not on the client as provided for in Article 403.
Article 403 of the CRR amended by CRR2 explains how to apply the substitution approach. The EBA Q&A of January 21, 2022 clarified that the application of substitution was mandatory as soon as the initial exposure to the client had been reduced, including in certain specific cases, notably the case of credit protection financed when the institution uses the general method based on financial collateral (Q&A 2020_5496).
In particular, Article 403(3) of the CRR (as amended by CRR2) introduces a specific treatment for the application of the substitution approach in the case of collateral resulting from tripartite repo operations. The EBA guidelines of February 16, 2021 (EBA/GL/2021/01) applicable since June 28, 2021 specify the conditions for the application of this specific treatment. The ACPR declared itself compliant with these guidelines via the Notice for the implementation of these guidelines. This Notice also aims to extend the scope of application of these guidelines to finance companies.

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3.5 Exemptions
3.5.1 Exemptions provided for by the CRR
Pursuant to Art 400 (1) of the CRR, certain exposures are exempted from the application of Article 395 (1), which means that they are not subject to compliance with large exposure limits. The following are notably exempted from compliance with large exposure limits certain "weighted" exposures at 0% (pursuant to Part Three, Title II, Chapter 2):

Assets constituting claims on central governments, central banks or public sector entities which, if unsecured, would receive a risk weighting of 0% under the standard approach for credit risk;
Assets constituting claims on international organizations or multilateral development banks which, if unsecured, would receive a risk weighting of 0%;
Assets constituting claims expressly guaranteed by central governments, central banks, international organizations, multilateral development banks or public sector entities, provided that an unsecured claim on the entity providing the guarantee would receive a risk weighting of 0%;
Assets constituting claims on regional or local administrations of Member States, provided that these claims would receive a risk weighting of 0% pursuant to Part Three, Title II, Chapter 2, and other exposures to, or guaranteed by, these regional or local administrations.
3.5.2 Exemptions resulting from national options or supervisor discretions
Article 400 (2) of the CRR also provides for the possibility left to the discretion of competent authorities to exempt certain exposures entirely or partially from the application of Art. 395 of the CRR. These exemptions can also be implemented by Member States under Article 493(3) of the CRR during a transitional period (until December 31, 2028). The decree of December 23, 2013 taken under Article 493(3) of the CRR, which specifies the entities partially or totally exempted from the application of Art. 395, exempts intragroup exposures by 100%, provided that these companies are included in consolidated supervision as defined in Article 493(3)(c) of the CRR. Exposures to, or guaranteed by, regional or local administrations of Member States of the European Union or States party to the Agreement on the European Economic Area, are exempted by 80% provided that these claims would receive a risk weighting of 20% under the standard approach for credit risk.
CRR2 introduces two new exemptions left to the discretion of competent authorities (points k) and l) of Article 400 (2) of the CRR). Competent authorities may exempt entirely or partially, under certain conditions, exposures in the form of collateral or guarantee for residential mortgage loans, provided by an eligible protection provider within the meaning of Article 201 of the CRR and exposures in the form of a guarantee for export credits benefiting from public support, provided by a public export credit agency. The ACPR College adopted on June 28, 2021 Decision No 2021-C-23 allowing exposures referred to in Article 400 (2) points k) and l) to be exempted from the application of the large exposure limit subject to compliance with the conditions of Article 400 (3) of the CRR. Without this being an exhaustive list, the ACPR considers that the Crédit logement protection provider meets the conditions of Article 400(2)(k) of the CRR. Regarding the exemption of Article 400 (2) point (l), it is incumbent on Institutions to ensure that the conditions regarding the guarantor set out in point (l) are met to be able to use the exemption, notably i) the guarantee benefits from public support, ii) it is granted by a public export credit agency respecting the credit quality condition set out in the same article. Institutions may exercise these exemptions subject to compliance with the conditions specified in Article 400 (3) of the CRR. Institutions assess whether the conditions specified in Article 400 (3) of the CRR are met and the ACPR can verify this assessment at any time. Regarding the guarantees of export credits issued by the public export credit agency Bpifrance Assurance Export (to whom was transferred on 01/01/2017 the activity of managing public export guarantees in the name of and under the control of the State pursuant to Art L 432-2 of the Insurance Code previously conducted by

Modalities for the calculation and publication of prudential ratios under CRD4 and MREL requirements – 2025 General Secretariat of the Prudential Control and Resolution Authority 84 85 Tier 1 capital is defined in Article 25 of the CRR.
86 For French systemic banks, the HCSF published a decision specifying the implementation modalities of a new "large exposures" measure (decision D-HCSF-2018-2 of the High Council for Financial Stability). It consists of limiting exposures to the most indebted large companies to a maximum of 5% of their Tier 1 capital. Furthermore, a note on the Modalities for the application of this measure was published by the HCSF. In addition, two measures extending the 2018 decision were adopted, successively in 2020 and then in 2021.

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Coface): insofar as these guarantees are issued by Bpifrance AE on behalf and for the account of the French State and are eligible as a credit risk mitigation technique subject to appropriate documentation by the Institutions, the guarantor to be considered for the inclusion of this guarantee in the calculation of capital requirements for credit risk and for large exposures is the French State, and these guarantees are exempt from large exposure limits under Article 400(1) of the CRR.

Article 500bis of the CRR on the temporary treatment of public debt issued in the currency of another Member State, introduced by Regulation (EU) 2020/873, provides for an extension of the transitional provisions already in force (under Article 493(4) introduced by Regulation (EU) 2017/2395 of the European Parliament and of the Council of 12 December 2017) concerning the derogation from large exposure limits applicable to these exposures, in degressive steps until 31 December 2025. This derogation is extended by two years by the CRR3 Regulation which amends Article 500bis of the CRR, with new degressive steps until 31 December 2027.

3.6 Supervisory equivalence and regulatory requirements for large exposures

The Commission Implementing Decision (EU) 2021/1753 of 1 October 2021 draws up a list of third countries whose banking regulation is considered equivalent to the CRR, notably for the purposes of large exposure requirements as provided for in Article 391(2) of the CRR (as amended by CRR2) but also for credit risk requirements (see chapter Credit Risk / recognition of third countries).

3.7 Main EBA Questions and Answers (Q&A) on large exposures

Institutions submitting reports on an individual basis do not have to transmit the C30.00 and C31.00 reports (Q&A 133).

In the case of a connected group of clients, the counterparty identification code (column 010) to be entered in the submission reports corresponds to the identification code of the parent company. When a connected group of clients has no parent company, the identification code to be used is that of the individual entity considered the most significant within the connected group of clients. A connected group of clients is an "institution" or an "unregulated financial entity" depending on the classification of the parent company; in the absence thereof, classification is based on the most significant entity (Q&A 492).

The search and analysis of connected clients must be conducted even in cases where exposures benefit from the intragroup exemption under national rules adopted pursuant to Article 493(3) of the CR, and only intragroup entities exempt from supervision on an individual basis can be totally or partially exempt (Q&A 3665).

The treatment of items deducted from own funds as large exposures is described in Q&A 787.

Q&A 2923 specifies the procedures for analyzing the control link for the formation of a connected group of clients, and Q&A 1443 clarifies how economic dependence is analyzed to form connected groups of clients.

Q&A 3621 deals with exemptions from Large Exposure limits for equity exposures guaranteed by guarantors that would receive a risk weight of 0% under the Standardized Approach (SA). The Q&A clarifies that an equity exposure guaranteed by a high-quality guarantor (e.g., the French State) can be exempt from Large Exposure limits, subject to meeting the CRM (Credit Risk Mitigation) eligibility criteria.

Q&A 4501 deals with Large Exposure limits applicable to exposures on shadow banking entities, notably in the case of exposures on the underlying assets of a vehicle that itself falls within the definition of shadow banking entities.

Q&A 4805 deals with exclusion criteria for the calculation of the exposure value, notably the case of Nostro accounts.

Q&A 4915 concerns the amendments made by CRR2 to the exemption vacated in Article 400(1)(j) of the CRR.

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Q&A 5746 and Q&A 6903 provide explanations on the determination of exposure to a single client or a connected group of clients in the case of an operation with underlying assets.

Q&A 7336 provides initial operational clarifications regarding the procedures for institutions to report their aggregated exposures on shadow banking entities.

Leverage Ratio

4.1 General Principles

Part VII of the CRR (Articles 429 and 430) sets out the rules for calculating the leverage ratio. The leverage ratio measures the ratio between Tier 1 capital and the total exposure measure, which includes on-balance sheet assets, including derivatives and securities lending/borrowing transactions, as well as off-balance sheet items. The leverage ratio is included in the CRD4 as a Pillar 2 and Pillar 3 measure.

Until CRR 2, the leverage ratio was subject only to a regulatory reporting and information publication obligation; since 28 June 2021, it has been a binding minimum requirement (Pillar 1). As of 1 January 2023, a leverage ratio buffer requirement for G-SIIs, set at 50% of the ESI capital buffer requirement expressed in RWA, will apply to G-SII institutions. The leverage ratio serves to provide a simple and credible indicator as a complement to the solvency ratio. The introduction of the leverage ratio has two objectives:

to limit the accumulation of leverage in the banking sector in order to avoid destabilizing deleveraging processes that can harm the financial system as a whole and the economy;
to strengthen risk-based capital requirements by a simple, non-risk-based safety net measure.

The minimum leverage ratio requirement to be met at all times is 3%.

The leverage ratio is expressed as follows:
Tier 1 Capital
On-balance sheet and off-balance sheet exposures ≥ 3%

The entry into application of the additional leverage buffer (50% of the ESI buffer) for global systemic importance entities was postponed by the CRR QuickFix Regulation to 1 January 2023, in line with the Basel deferral decided in the context of the Covid-19 crisis.

4.2 Total Exposure Measure (Denominator of the Leverage Ratio)

The total exposure measure corresponds to the sum of on-balance sheet and off-balance sheet exposures. Exposures are calculated from accounting data. Unless otherwise provided, physical or financial collateral, guarantees, or acquired credit risk mitigants are not used to reduce the total exposure measure.

Specific rules apply to:

Derivatives: the calculation is based on the Standardized Approach for Counterparty Credit Risk, with some adjustments compared to solvency requirements (Article 429 quater), and an additional exposure must be taken into account for sold credit derivatives (Article 429 quinquies);
Repo-type transactions: collateral deliveries are not recognized for the purpose of reducing exposure, but netting of cash exposures is authorized, under more restrictive conditions than in solvency. An add-on must also be taken into account (Article 429 sexies);
Off-balance sheet commitments (Article 429 septies): nominal values are subject to the conversion factors provided for in solvency rules, with a floor of 10%;
Standardized pending settlement purchases and sales (Article 429 octies).

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Furthermore, Article 429 ter points (2) and (3) of the CRR provides for the possibility to net assets and liabilities within the framework of providing a centralized cash management facility, subject to compliance with the conditions set out in that article. Pursuant to point (d) of Article 429 ter (3) of the CRR, and as specified by Section II, Chapter 7, point 4 of the ECB Guide, Institutions must inform the ACPR of their intention to apply the preferential treatment for centralized cash management when the frequency of transferring balances to a single account is not daily (see Q&A 6585 for schemes in which balances centralized at the end of the day are credited back to the original individual accounts the following day). This notification must include a detailed description of the cash concentration product, including information on the frequency of transfers from the original accounts to the distinct single account, and a self-assessment of compliance with the conditions set out in Article 429 ter (2) and (3) of the CRR.

4.2.1 Main Exemptions

Article 429 bis of the CRR mentions various exemptions in the calculation of exposures, notably concerning exposures on central banks, regulated savings transferred to a public entity, and public investments. This article also authorizes other exemptions on clearing houses or on the guaranteed portion of export credits.

4.2.1.1 Central Bank Exposures

In order to prevent the leverage ratio requirement from hindering the proper transmission of monetary policy in the event of an exceptional period, the CRR provides in Article 429 bis for the possibility to exclude from the leverage ratio, for a period of one year, certain exposures on the central bank. This derogation requires the public declaration of exceptional circumstances justifying the exclusion of these exposures to facilitate the effectiveness of monetary policy by the competent authority, after consultation with the concerned central bank, and requires the application of a netting mechanism.

The netting mechanism associated with this exemption results in an increase in the leverage ratio requirement aimed at compensating for the impact of the exclusion of central bank exposures present in the balance sheet before the start of the period of exceptional circumstances. The start of the period of exceptional circumstances can be set retroactively. The calculation methods for this adjusted leverage ratio are defined in paragraph 7 of Article 429 bis of the CRR as amended by Regulation (EU) 2020/873 ("Quick Fix Regulation").

4.2.1.2 Regulated Savings Transferred to a Public Sector Entity

The exemption concerning exposures on a public sector entity, treated in accordance with Article 116-4 of the CRR, resulting from deposits that the Institution is legally required to transfer to this entity for the financing of investments of general interest (Article 429 bis-1-j) is now applicable without prior authorization from the supervisor.

4.2.1.3 Public Institutions

The exemption is provided to take into account the particular business model of public development credit institutions, with an exclusion from the leverage ratio calculation of exposures resulting from assets that constitute claims on central, regional, or local administrations or on public sector entities linked to public investments and incentive loans (Art. 429 bis-1-d). The notion of public development credit institution can be extended pursuant to Article 429 bis-2 of the CRR with ACPR authorization and subject to satisfying the criteria set out in the same paragraph to independent and autonomous units, organizationally, structurally, and financially, of a credit institution. This possibility must not affect the effectiveness of the supervision of the concerned institution. The ACPR recommends that Institutions wishing to benefit from this treatment document their application by following the criteria and list of documents to be provided described in Section II, Chapter 7, point 3 of the ECB Guide.

CRR III introduced a relaxation (Article 429bis (dbis)) to allow an institution that is not a public development credit institution but acting in the context of implementing a public policy as a simple refinancing intermediary, the possibility to exclude exposures on its shareholders in the form of bonds provided that these are guaranteed by real estate holdings otherwise taken into account by the shareholders in their own leverage ratio.

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4.3 Main EBA Questions and Answers (Q&A) on the Leverage Ratio

Q&As 2318, 2234, 1861, and 576 address the treatment of repurchase agreements in the leverage ratio.

Q&A 3028 reviews the rules for netting of derivative and non-derivative instruments, and Q&A 2491 on the netting rules applicable to "Credit default swaps" (CDS).

Q&A 3628 specifies the valuation methods for exposures on derivative contracts.

Q&A 5627 clarifies that the exemption provided for export credit exposures applies to both on-balance sheet and off-balance sheet exposures, provided that the conditions are met.

Q&A 5811 specifies the scope of the exemption for exposures arising from the transfer of incentive loans to other credit institutions.

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Minimum Requirement for own funds and Eligible Liabilities (MREL)

This part takes into account Directive (EU) 2024/1174 of 11 April 2024 known as "Daisy chains II" which provided for the regime of resolution entities and similar entities, and an option to set the MREL requirement on a sub-consolidated basis for certain intermediate entities within indirect holding chains. Most of its provisions apply from 14 November 2024.

5.1 General Principles

The regulatory framework for the minimum requirement for own funds and eligible liabilities (hereinafter "the MREL requirement") is defined by the BRRD Directive, the SRMR Regulation, the CRR Regulation, and the French transposition of the BRRD within the Monetary and Financial Code.

Furthermore, the Single Resolution Board (SRB) publishes an "MREL Policy" 88 which presents the approach it intends to adopt when applying these provisions to institutions under its direct competence: Significant Institutions (SI) and cross-border Less Significant Institutions (LSI). 89

The MREL requirement, stemming from European regulation, must be distinguished from the TLAC (Total Loss-Absorbing Capacity) requirement, stemming from international standards provided for by the Financial Stability Board (FSB). The latter applies in parallel to the MREL requirement but only targets globally systemic banking groups (G-SIBs). The CRR Regulation transcribes the international TLAC standard into European law, in Articles 92 bis and 92 ter.

When they apply to an institution or a group, the MREL and TLAC requirements must ensure that it has, in the event of its failure, sufficient "internal" resources (from its shareholders and certain creditors) to which the resolution authority could impose resolution costs (loss absorption, recapitalization). These requirements must prepare and facilitate the implementation of a bail-in measure, possibly supplemented by tools for total or partial transfer of the bank, and avoid recourse to public funds (bail-out).

The strengthening and maintenance of MREL capacity facilitate the implementation of the preferred resolution strategy (developed in the resolution plan of each institution) and play a key role in improving the resolvability of institutions. Where applicable, write-down and conversion (WDC) powers will be exercised in cascade on MREL-eligible instruments, in the order provided by the BRRD Directive, which takes into account the hierarchy of creditors in a liquidation scenario.

Within a resolution group subject to the MREL requirement, two types of MREL are distinguished:

An external MREL requirement, applied to the resolution entity (or in some cases, a set of resolution entities) 90, calculated at the consolidated level of the resolution group, for which instruments issued to investors outside the resolution group are recognized;
An internal MREL requirement ("iMREL"), which certain entities in the group that are not resolution entities (non-resolution entities) must comply with, which is calculated in principle on an

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individual basis, and which must be satisfied with instruments issued directly or indirectly (via an intermediate entity) to the resolution entity. This requirement must guarantee the group's capacity to absorb potential losses of the concerned entity ("losses flowing up") and to support its recapitalization ("capital flowing down").

5.2 Applicable Provisions and Competent Authorities

Entities established in Metropolitan France and Overseas Departments 91

Entities | Resolution Authority | Applicable MREL Provisions --- | --- | --- Single Mechanism Entities referred to in Article 2 of the SRMR Regulation | SI and cross-border LSI 92 | SRB Non cross-border LSI | ACPR 93 Outside SRMR Entities referred to in Article L. 613-34 of the CMF, other than those referred to in Article 2 of the SRMR Regulation | ACPR (exclusive competence) | Articles L. 613-44, L. 613-44-1, R. 613-46 et seq. of the CMF (French transposition of Articles 45 to 45 quaterdecies of the BRRD)

Entities established in New Caledonia, French Polynesia, Wallis and Futuna Islands, and Saint-Pierre-and-Miquelon

The French transposition of the BRRD and the competence of the ACPR as resolution authority are extended to New Caledonia, French Polynesia, Wallis and Futuna Islands, and Saint-Pierre-and-Miquelon, under the conditions provided by Book VII of the CMF. The concerned institutions do not fall under the SRMR.

Monégasque Entities

The French transposition of the BRRD and the competence of the ACPR as resolution authority apply to Monégasque institutions under the conditions provided by the agreement in the form of an exchange of letters between the Government of the French Republic and the Government of the Principality of Monaco on banking regulation applicable in the Principality of Monaco and the Monetary Agreement concluded on 29 November 2011 between the European Union and the Principality of Monaco. The concerned institutions do not fall under the SRMR.

5.3 Subject Entities

The entities likely to be subject to the MREL requirement are the following:

Credit institutions;
Central bodies mentioned in Article L. 511-30 of the CMF;
Investment firms that are authorized to provide an investment service mentioned in points 3, 6-1, or 6-2 of Article L. 321-1 of the CMF, or authorized for the safekeeping of financial instruments;
Holding entities referred to in points 4° to 6° of I of Article L. 613-34 of the CMF;

87 The Directive provides for the transposition before 14 November 2024 of the amendments to the BRRD. The French transposition of "Daisy Chains II" is ensured by Article 2 of Law "DDADUE" No. 2025-391 of 30 April 2025. The amendments falling within the legislative domain are now in force; certain modalities falling within the regulatory domain will be the subject of a decree in the Council of State (planned for the second half of 2025). The amendments to the SRMR Regulation regarding the sub-consolidation of internal MREL requirements enter into force on 13 May 2024; the other amendments to the SRMR Regulation enter into force on 14 November 2024. 88 See the latest version published on the SRB website: https://www.srb.europa.eu/en/content/mrel 89 See the list of institutions subject to the direct competence of the SRB ("SRB remit"): https://www.srb.europa.eu/en/content/banks-under-srbs-remit 90 Resolution entity: legal person in respect of which the resolution plan provides for the application of resolution measures in the event of failure. Within a group, it may be the parent company (general case); the other entities in the group are then designated as non-resolution entities.

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91 Guadeloupe, Martinique, Guyana, Réunion, Mayotte, Saint-Martin.
92 See the list of institutions subject to the direct competence of the SRB ("SRB remit"): https://www.srb.europa.eu/en/content/banks-under-srbs-remit 93 The SRB retains indirect competence regarding non cross-border LSIs. Where applicable, the ACPR complies with the instructions of the SRB. In certain cases provided for in Article 7 of the SRMR Regulation, the SRB may exercise direct competence over these entities.

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The "financial institutions" (as defined by the CRR regulation) subsidiaries of the aforementioned entities, to which consolidated supervision of their parent company applies within the framework of the SSM.
Financing companies may be subject to MREL (1) either as a subsidiary of a banking group qualified as a "financial institution" (see above), (2) or, by decision of the ACPR supervisory college, by application of the specific regime mentioned in II of Article L. 613-34 of the CMF.

When the aforementioned entities are approved as clearing houses in accordance with the provisions of Article L. 440-1 of the CMF, they are exclusively subject to the resolution regime of the CCPRRR regulation and are therefore not subject to MREL.

The resolution authority (SRB or ACPR depending on the case, see point 5.2) determines the treatment applied to the aforementioned entities regarding the MREL requirement. Depending on its decision, each entity falls into one of the categories listed below.

▪ Liquidation entities and similar, which are in principle not subject to any MREL decision

These entities correspond to:

On the one hand, entities for which the individual or group preventive resolution plan provides for liquidation in the event of failure;
On the other hand, subsidiaries of resolution groups, which are not resolution entities, and for which the group preventive resolution plan does not provide for the exercise of write-down and conversion powers.

The simplified regime introduced by the "Daisy Chains II" directive 94 provides that these entities are not subject to an MREL decision.

As an exception, the resolution authority may subject one of these entities to an MREL requirement. In this case, specific calibration and eligibility rules apply: Article 45 quater (2 bis) of the BRRD, Article 12 quinquies (2 bis) of the MRU regulation.

Instruments issued by these entities are subject to specific provisions regarding the deduction of MREL capacity from the intermediate entity in an indirect holding chain ("daisy chain").

In accordance with its current MREL Policy, the SRB does not make an MREL decision regarding subsidiaries belonging to a group under its direct competence, subject to group resolution in the event of failure, but which:

Do not provide critical functions, and
Do not exceed the threshold of 2% of group TREA, nor 2% of group LRE, nor that of 5 billion in assets, and
Are not intermediate entities for which the MREL Policy provides for the setting of MREL.

▪ Resolution entities subject to an external MREL target on a consolidated basis

These entities are those identified by the resolution authority as requiring resolution measures in the event of failure of the banking group to which they belong.

94 Directive (EU) 2024/1174 of the European Parliament and of the Council of 11 April 2024. The modifications introduced by "Daisy Chains II" in the MRU regulation entered into force in two stages, on 13 May 2024 and then on 14 November 2024. The French transposition of the directive is ensured by Article 2 of the "DDADUE" law n° 2025-391 of 30 April 2025. Certain application details falling within the regulatory domain are the subject of Decree n° 2025-974 of 2 October 2025. Directive (EU) 2024/1174 of the European Parliament and of the Council of 11 April 2024 amending Directive 2014/59/EU and Regulation (EU) No 806/2014 as regards certain aspects of the minimum requirement for own funds and eligible liabilities.

The calibration of their MREL target is determined on a consolidated basis, at the level of the resolution group, by applying Articles 12 quinquies (3) of the MRU regulation and 45 quater (3) of the BRRD. Eligible liabilities to meet this requirement are provided for by the eligibility rules of Articles 12 quater of the MRU regulation and 45 ter of the BRRD.

The following hypotheses are distinguished:

Banking group subject to resolution following a classic Single Point of Entry (SPE) scheme: a single resolution entity is subject to external MREL; it corresponds to the single resolution group;
Mutualist banking group (central body and affiliates) subject to resolution following a "coordinated bail-in" SPE scheme: the resolution authority designates, considering the characteristics of the group's solidarity mechanism and the preferred resolution strategy, a set of group entities that are subject to external MREL, in order to guarantee that the resolution group as a whole meets the MREL requirement at the consolidated level;
Banking group subject to resolution following a Multiple Point of Entry (MPE) scheme: several resolution entities are designated, each corresponding to a distinct resolution group within the banking group; a specific calibration of external MREL targets reflects the particularities of these groups.

▪ Non-resolution subsidiaries subject to an internal MREL target on an individual or sub-consolidated basis (Article 12 octies of the MRU regulation, Article 45 septies of the BRRD directive)

Under these provisions:

Within a resolution group, credit institutions and investment firms 95 that are neither resolution entities nor liquidation entities and similar, nor beneficiaries of an MREL exemption, must respect an internal MREL target set by the resolution authority.
After consulting the supervisory authority, the resolution authority may also subject the types of entities mentioned above other than credit institutions and investment firms to internal MREL.

This requirement is in principle set on an individual basis. By derogation, it is set on a sub-consolidated basis (corresponding to a sub-group) in three cases:

When the entity in question is (a) the parent company in the Union of a group and (b) the subsidiary of third-country entities of this group;
In the context of an internal MREL exemption granted to a subsidiary of the entity in question, the latter being in this case the parent company referred to in Article 12 nonies (2), point b) of the MRU regulation or Article 45 septies (4), point b) of the BRRD, subject to internal MREL on a sub-consolidated basis at the level of a Member State;
When the resolution authority applies the derogatory power of setting internal MREL on a sub-consolidated basis, introduced by the "Daisy Chains II" directive for certain intermediate entities in an indirect holding chain.

95 Those Categories of IIs referred to, depending on the case, in Article 2 of the MRU regulation which indirectly refers to the definition of Article 2(1)(3) of the BRRD (banking group subject to the MRU) or to Article L. 613-34 of the CMF (outside MRU).

The conditions for applying this latter derogation are fixed in Articles 12 octies (1), 4th paragraph and following of the MRU regulation, and 45 septies (1), 4th paragraph and following of the BRRD. For groups that do not have a HoldCo structure 96, the derogation (a) can only concern an intermediate entity for which the supervisory authority has set a P2R requirement, and exclusively on a sub-consolidated basis, and (b) must not lead to overestimating the recapitalization needs of the sub-group concerned, particularly when there is a predominance of liquidation entities within it.

In the case of a mutualist resolution group, any affiliates, central body, or resolution entities that have not been subject to the external MREL fixation on a consolidated basis provided for this type of group, must satisfy the internal MREL requirement on an individual basis.

The calibration of internal MREL requirements is fixed in Articles 12 quinquies (6) of the MRU regulation and 45 quater (7) BRRD.

Eligible liabilities for internal MREL (and where applicable internal MREL on a sub-consolidated basis) are referred to in Articles 12 octies (2), (2 bis) and (2 ter) of the MRU regulation, and 45 septies (2), (2 bis) and (2 ter).

▪ Entities benefiting from an MREL exemption decision

MREL exemption decisions are provided for in the following cases:

Internal MREL exemption of a subsidiary under the conditions provided by Article 12 nonies of the MRU regulation or Article 45 septies (3) and (4) of the BRRD.

This exemption is restricted to non-cross-border situations: the exempted subsidiary must be established in the same Member State as the resolution entity (subject to external MREL on a consolidated basis), or in the same Member State as its parent company subject to internal MREL on a sub-consolidated basis at the level of that Member State.

The conditions for granting this exemption are fewer within the MRU (exemption provided by the MRU regulation) than in the rest of the EU (exemption provided by the BRRD).

Substitution of a guarantee for the internal MREL requirement of a subsidiary under the conditions provided by Article 12 octies (3) of the MRU regulation and Article 45 septies (5) of the BRRD.

This power allows the resolution authority to authorize a subsidiary to meet its internal MREL requirement, partially or totally, with a guarantee granted by the resolution entity and covered by at least 50% by a financial guarantee within the meaning of the "Collateral" directive. Like the aforementioned exemption, it is not applicable in cross-border situations.

Specific internal MREL exemption for mutualist groups, under the conditions provided by Article 12 decies of the MRU regulation and Article 45 octies of the BRRD.

This exemption may concern the central body of a mutualist group or a credit institution permanently affiliated to it. It does not cover cross-border situations.

Right of exemption from MREL (internal or external) for mortgage credit institutions referred to in Articles 12 ter of the MRU regulation and 45 bis of the BRRD.

In France, this exemption concerns (1) housing financing companies, (2) land credit companies, and (3) credit institutions whose exclusive object is to refinance promissory notes governed by Articles L. 313-42 to L. 313-49-1 and representative of loans granted for the financing of real estate operations by issuing, under the conditions provided in Article 13 of Law n° 85-695 of 11 July 1985.

96 For the purposes of these provisions, a HoldCo resolution group has a European group head that is a financial holding company and is the resolution entity; it holds the intermediate entity, which is its only direct subsidiary, established in the same Member State.

The exemption applies to these establishments as long as the following conditions are met: (1) the applicable preventive resolution plan provides for judicial liquidation or the application of resolution transfer tools in the event of failure; (2) these measures ensure that the creditors of the establishment, including, where applicable, holders of secured bonds, bear losses in a manner consistent with the objectives of resolution.

The application of this exemption to an establishment implies not including it in the consolidation scope for the purpose of the external MREL requirement applied at the level of the resolution group ("deconsolidation" of the exempted establishment).

5.4 Calibration of the overall MREL requirement

Under the conditions provided by Articles 12 quinquies of the MRU regulation and 45 quater of the BRRD, and where applicable the SRB's MREL Policy for groups under its direct competence, the resolution authority determines the overall external or internal MREL targets for each subject entity.

The standard calibration of overall external and internal MREL targets comprises the following components, which, depending on the level of MREL target setting (individual or consolidated), are expressed in individual or consolidated terms.

Loss-Absorption Amount	Recapitalisation Amount
MREL Target expressed in TREA:	P1 and P2R expressed in TREA + P1 and P2R expressed in TREA (with adjustments by the authority) + Market Confidence Charge (MCC)* (optional)
The CBR cushions add to the MREL requirement in TREA 97

The resolution authority may apply the market confidence charge with the aim of "ensuring, following a resolution, a sufficient level of market confidence in the entity for an appropriate period not exceeding one year". When it applies, it corresponds in principle to the anticipated CBR after resolution, without the specific countercyclical buffer for the establishment, with possible upward or downward adjustments.

Loss-Absorption Amount	Recapitalisation Amount
MREL Target expressed in TEM:	Leverage Ratio of 3% expressed in TEM + Leverage Ratio of 3% expressed in TEM (with adjustments by the authority)

Entities subject to an overall MREL target must simultaneously respect:

Their MREL target expressed in TREA + the CBR
Their MREL target expressed in TEM

5.5 Subordination requirements

In addition to their overall external MREL target, certain resolution entities must also satisfy a subordination requirement. This differs from the overall target mainly in that it can only be satisfied by regulatory capital (CET1, AT1, T2) and debt instruments whose rank is subordinated (junior) relative to all exclusions listed in Article 72 bis (2) of the CRR regulation.

The application of these requirements allows the resolution authority to have, in the event of failure, sufficient internal resources (1) capable of being subject to bail-in (2) which are moreover not pari passu with 97 Establishments do not use the Category 1 common equity they hold to meet the overall capital cushion (CBR) requirement to satisfy the risk-based components of MREL and TLAC requirements, in accordance with Article 128 of the CRD directive transposed into Article L. 511-41-1-A of the CMF.

liabilities that it could not subject to bail-in. Indeed, such a pari passu situation can, in certain hypotheses, generate a risk of breach of the no creditor worse off (NCWO) principle.

Thus, senior unsecured debt instruments cannot count towards meeting subordination requirements. Subject to meeting other eligibility criteria, they can, however, count towards meeting overall external MREL targets.

▪ "8% TLOF" subordination requirement for so-called "Pillar 1" banks

This requirement expressed as a percentage of the balance sheet (Total Liabilities and Own Funds – TLOF), applies where applicable adjusted upwards or downwards, under the conditions provided by Articles 12 quater (4), (6) to (9) of the MRU regulation and 45 ter (4), (6) to (9) of the BRRD.

It concerns resolution entities:

Of groups identified as globally systemic (G-SIBs)
Of non-G-SIB resolution groups whose total asset value exceeds 100 billion euros (Top Tier Banks)
Of other resolution groups, when the national resolution authority of the resolution entity has considered that it represented systemic risk (Other Pillar 1 Banks)

▪ Subordination requirement expressed in TREA and TEM for so-called "Pillar 1" banks

For resolution entities of Top Tier and Other Pillar 1 banks referred to above, this requirement is, pursuant to Articles 12 quinquies (4) and (5) of the MRU regulation, 45 quater (5) and (6) of the BRRD, of at least:

13.5% TREA + CBR
5% TEM

For all so-called "Pillar 1" banks (G-SIB, Top Tier, Other Pillar 1), the resolution authority adjusts the subordinated targets set in TREA (to which the CBR is added) and in TEM so that the resolution entity respects the 8% TLOF requirement, where applicable adjusted upwards or downwards.

Independently of the resolution authority's decisions on MREL, resolution entities of G-SIB groups respect the TLAC requirement provided for in Article 92 bis of CRR, which is:

18% TREA + CBR
6.75% TEM

This TLAC requirement is met using regulatory capital and eligible TLAC and subordinated liabilities. As an exception, a share corresponding to the TLAC allowance (3.5% TREA when Article 72 ter (3) of CRR applies) can be satisfied using non-subordinated eligible TLAC liabilities.

In addition, significant EU subsidiaries of non-EU G-SIB groups, within the meaning of Article 4(1), points 134 and 135 of CRR, respect the TLAC requirement provided for in Article 92 ter of CRR.

▪ Ad hoc subordination requirement for banks other than so-called "Pillar 1" banks

The resolution authority may set a subordination requirement for the resolution entity of a group that is not "Pillar 1", when it considers that its balance sheet structure generates a risk of breach of the no creditor worse off principle in the event of resolution implementation, under the conditions provided by Articles 12 quater (5) of the MRU regulation and 45 ter (5) of the BRRD.

5.6 Eligibility rules

To meet their MREL requirements, the concerned establishments count instruments that satisfy all MREL eligibility conditions:

For external MREL, these conditions are provided for in Articles 12 quater of the MRU regulation and 45 ter of the BRRD;
For internal MREL, these conditions are provided for in Articles 12 octies of the MRU regulation and 45 septies of the BRRD.

For the definition of these eligibility conditions, the BRRD and the MRU regulation refer partially to the TLAC eligibility conditions defined in CRR (Articles 72 bis and following). This reference is completed by specific adjustments for MREL (for example in the case of structured bonds).

Under the conditions mentioned above, the following are eligible for MREL:

Regulatory capital (CET1, AT1, T2). For MREL purposes, the amortized portion of Tier 2 with at least one year of residual maturity is counted.
Unsecured debt instruments with at least one year of residual maturity, which respect all eligibility conditions (for external or internal MREL as applicable) and do not form part of the exclusions listed in Article 72 bis (2) CRR – notably retail deposits, derivatives, and instruments mandatorily excluded from bail-in.

In the case of external MREL, the subordination condition provided for in (d) of Article 72 ter (2) does not apply to the overall MREL requirement. It applies, however, to any potential subordinated external MREL requirement, when it applies in parallel with the overall requirement. In the case of internal MREL, this subordination condition applies in all cases.

5.7 "Daisy chains" regime applicable to intermediate entities

Regulation 2022/2036 of 19 October 2022 ("Daisy Chains I"), supplemented by Directive 2024/1174 of 11 April 2024 ("Daisy Chains II") 98, provided the regime applicable to intermediate entities within chains of indirect holding of own funds and instruments issued under internal MREL ("daisy chains").

This type of hypothesis corresponds to the case where instruments eligible for MREL (regulatory capital and eligible liabilities) are issued by subsidiaries to the resolution entity of the resolution group, which holds them indirectly via a subsidiary (the intermediate entity). To ensure correct loss absorption and capital descent in the event of failure within the group, this particular situation must be reflected in the internal MREL requirement of this intermediate entity:

Regulation 2022/2036 provided a regime for deducting the MREL capacity of the intermediate entity subject to internal MREL on an individual basis. This regime applies from 1 January 2024.
Directive 2024/1174 provided a derogatory power to apply internal MREL on a sub-consolidated basis, reserved for certain intermediate entities (see above "Non-resolution subsidiaries subject to an internal MREL target"). This power applies from 13 May 2024 within the framework of the MRU regulation, and the national transposition of the corresponding provisions in the BRRD is planned before 14 November 2024.

98 The modifications introduced by "Daisy Chains II" in the MRU regulation entered into force in two stages, on 13 May 2024 and then on 14 November 2024. The French transposition of the directive is ensured by Article 2 of the "DDADUE" law n° 2025-391 of 30 April 2025. Certain application details falling within the regulatory domain are the subject of Decree n° 2025-974 of 2 October 2025.

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Pursuant to Article 72 sexies (5) of the CRR, an intermediate entity subject to internal MREL must, in principle, deduct from its MREL capacity holdings of instruments issued by subsidiaries belonging to the same resolution group, which are:

prudential own funds,
eligible liabilities for internal MREL,
where applicable, eligible liabilities for "internal" TLAC provided for in Article 92 ter of the CRR.

Two exceptions to the aforementioned principle may apply:

When the sub-consolidation of the internal MREL requirement of the intermediate entity applies, deductions do not apply to own funds and eligible liabilities issued by subsidiaries included in the sub-consolidation scope in accordance with Part One, Title II, Chapter 2 of the CRR.
Regarding instruments issued by subsidiaries qualified as resolution entities and similar entities, for which the resolution authority has not determined the MREL requirement (see above "Resolution entities and similar entities"):
- Holdings of eligible liabilities for internal MREL that they issue, should these entities issue them, must not be deducted;
- Holdings of prudential own funds that they issue must not be deducted, unless they exceed 7% of the total internal MREL capacity of the intermediate entity, on an annual average basis as of December 31.

The modalities of the deduction regime are specified by reporting requirements regarding daisy chains (see the texts mentioned below regarding submission modalities).

Pursuant to Article 113(1) of the CRR as amended by Regulation 2022/2036, the risk weights provided for in this article do not apply to exposures subject to the deduction regime presented above.

5.8 Consequences of MREL Insufficiency

Articles 12 undecies and 45 duodecies provide for the consequences of an insufficiency in the MREL capacity of an establishment. These may include in particular:

The application of powers to reduce or remove resolvability obstacles,
The application of restrictions on permitted distributions ("M-MDA" – see below),
Supervisory measures referred to in Article 104 of the CRD Directive,
Early intervention measures,
Administrative sanctions provided for by the Monetary and Financial Code.

In the event of non-compliance with prudential cushion requirements (CBR) due to insufficient MREL capacity (as opposed to non-compliance resulting from insufficient prudential own funds), the establishment concerned must apply distribution restrictions known as "M-MDA" (MREL Maximum Distributable Amount), provided for by Articles 10 bis of the MRU Regulation and 16 bis of the BRRD.

99 See Articles 12 quinquies (2 bis) of the MRU Regulation and 45 quater (2 bis) of the BRRD.
100 In the general case, these resolution entities and similar entities do not issue eligible liabilities for internal MREL.

Notice 2025 on the Calculation and Publication of Prudential Ratios under CRD4 and MREL Requirements General Secretariat of the Prudential Control and Resolution Authority 98

The M-MDA mechanism is similar to the distribution restrictions provided for by the prudential MMD ("Maximum Distributable Amount"). However, M-MDA differs from MMD in that it provides for the possibility of a 9-month grace period before the application of restrictions similar to prudential MDA – which are automatic – during which the application of these restrictions is at the discretion of the resolution authority. After this 9-month period, a list of conditions also leaves a margin of flexibility to avoid imposing M-MDA automatically in the event of a systemic crisis or contagion effects resulting from the imposition of M-MDA.

It should be noted that M-MDA can only apply if the establishment meets its own fund requirements; otherwise, the automatic prudential MMD applies in priority.

5.9 Submission Modalities

Reporting and publications regarding MREL and TLAC are provided for by Article 45 decies of the BRRD, Articles 430 and 434 bis of the CRR, and specified in Commission Implementing Regulation (EU) No 2021/763 of 23 April 2021, amended by Regulation 2024/1618 of 6 June 2024. The various data must be submitted in XBRL format, submitted via the OneGate portal.

For entities under its direct competence, the SSM may request MREL data other than those provided for by Regulation No 2021/763, as part of an Additional Liability Report. For the 2025 reporting cycle, these additional data are requested for:

Multiple point-of-entry (MPE) resolution groups
Resolution groups within which a mortgage credit institution is subject to the exemption provided for in Article 45 bis of the BRRD, which leads to its deconsolidation for external MREL purposes

The SSM's additional reporting requirements are published on its website.

The EBA published an update to the ITS on 20 December 2023, now adopted by the Commission (Implementing Regulation 2024/1618 of 6 June 2024). Implementing Regulation No 2021/763 is amended, to reflect in particular:

The entry into force of the deduction regime applicable to intermediate entities within chains of indirect holdings of own funds and instruments issued under internal MREL (the "daisy chains" regime set by Regulation 2022/2036, supplemented by Directive 2024/1174);
The consequences on MREL/TLAC capacity of authorizations (prior permissions) granted in accordance with Article 78 bis of the CRR.

These updates have been integrated into EBA reporting framework 3.5 and are applicable to MREL/TLAC submissions and publications as of the reference date of 31 December 2024.

MREL and TLAC models provided for by Implementing Regulation (EU) No 2021/763 (consolidated version)

No.	Model Code	Model Name/Group of Models	Abbreviation
AMOUNTS: KEY INDICATORS FOR MREL AND TLAC
1	M 01.00	Key indicators for MREL and TLAC (groups / resolution entities)	KM2
COMPOSITION AND MATURITY
2	M 02.00	MREL and TLAC: capacity and composition (groups / resolution entities)	TLAC 1
3	M 03.00	Internal MREL and internal TLAC	ILAC
4	M 04.00	Financial structure of eligible liabilities	LIAB-MREL
CREDITOR RANKING
5	M 05.00	Creditor ranking (entity that is not a resolution entity)	TLAC 2
6	M 06.00	Creditor ranking (resolution entities)	TLAC 3
CONTRACT-SPECIFIC INFORMATION
7	M 07.00	Instruments governed by the law of a third country	MTCI

In addition to MREL/TLAC reporting formats, Regulation No 2021/763 defines the format for publications relating to TLAC and MREL. As a reminder, TLAC publications became mandatory on 27 June 2019^101 and MREL publications have applied since 1 January 2024.^102

Information to be published on MREL/TLAC requirements under Implementing Regulation (EU) No 2021/763 (consolidated version)

Model Code	Model Name
EU KM2	Key indicators – MREL and, where applicable, requirement for own funds and eligible liabilities applicable to EISs
EU TLAC1	Composition – MREL and, where applicable, requirement for own funds and eligible liabilities applicable to EISs
EU iLAC	Internal loss-absorbing capacity: internal MREL and, where applicable, requirement for own funds and eligible liabilities applicable to non-EU EISs
EU TLAC2	Rank in the creditor hierarchy – entity that is not a resolution entity
EU TLAC3	Rank in the creditor hierarchy – resolution entity

Resolution entities and similar entities for which the resolution authority has not set an MREL target are exempt from these submissions (Article 45 decies (4) of the BRRD).

5.10 Applicable Technical Standards and EBA Questions and Answers (Q&A)

During workshops organized as part of the transposition of the 2019 amendments to the BRRD (so-called BRRD2), the European Commission collected questions from Member States on the text and published two notices in the Official Journal of the European Union (2020/C/321/01 of 29 September 2020 and 2020/C 417/02 of 2 December 2020) compiling its responses to the questions asked and clarifying many aspects of the BRRD, including MREL requirements, their calibration, and internal MREL exemptions.

The EBA has published several Q&As relating to MREL, including:

Q&A 2019_4861 on the transitional period before the application of the final MREL target;
Q&A 2019_4901 on the taking into account of restoration options in the calibration of the MREL requirement;
Q&A 2019_4983 on the subordination requirement for non "Pillar 1" banks;
Q&A 2019_5009 on the completeness of conditions to be met to authorize the iMREL exemption and the difference between the exemption in the context of the MRU and that provided for by the BRRD;
Q&A 2020_5146 on the waiver of set-off in contractual clauses of eligible liabilities;
Q&A 2020_5581 on the characteristics of the guarantee provided for the granting of an iMREL exemption;
Q&A 2020_5582 on the interactions between two types of iMREL exemptions for a subsidiary;

101 Article 3, point 3), second subparagraph, of Regulation (EU) 2019/876.
102 Article 3, point 1), third subparagraph, of Directive (EU) 2019/879.

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Q&A 2020_5644 on the amount that must be guaranteed when it is established as part of an iMREL exemption request;
Q&A 2021_6203 on the inclusion of a reference to the prior permission regime in contractual clauses of eligible liabilities;
Q&A 2022_6588 on MREL decisions regarding entities subject to the simplified obligations regime;
Q&A 2024_7141 on the deduction of holdings of senior eligible instruments when the issuing establishment (G-SIB) accounts for part of them for the purpose of meeting its TLAC requirement (senior allowance).

Directive (EU) 2023/2864 of 13 December 2023 on the European Single Access Point (ESAP) added Article 128 bis to the BRRD, which provides for the conditions for publishing various data via the single access point. Data on MREL capacity and target referred to in Article 45 decies (3) of the BRRD are part of this.

The delegated regulations and implementing regulations listed below complement the provisions of the BRRD and the MRU Regulation (where applicable, consult their consolidated version after amendments):

After the adoption of BRRD2, the following delegated regulations were adopted by the European Commission:

Delegated Regulation (EU) 2021/1118 of 26 March 2021, concerning the estimation of Pillar 2 and CBR requirements at the resolution group level, for the purposes of calculating the RCA component of the MREL target, in cases where the resolution group differs from the prudential group;
Delegated Regulation (EU) 2021/1340 of 22 April 2021 relating to contractual clauses recognizing suspension powers in resolution;
Delegated Regulation (EU) 2021/1527 of 31 May 2021 relating to the contractual recognition of write-down and conversion powers;
Delegated Regulation (EU) 2023/827 of 11 October 2022, which amends Commission Delegated Regulation (EU) 241/2014, regarding the prior permission regime for reduction, the notions of indirect financing and repayment incentives regarding eligibility, rules relating to exposure to eligible instruments via indices, and the temporary derogation from the obligation to carry out deductions on own funds and eligible liabilities;
Delegated Regulation (EU) 2024/895 of 13 December 2023 amending Delegated Regulation (EU) 2015/63 as regards the calculation of eligible liabilities and the transitional regime.

After the adoption of BRRD2, the following implementing regulations were adopted by the European Commission:

Implementing Regulation (EU) 2024/1618 of 6 June 2024 amending Implementing Regulation (EU) 2021/763 relating to the models, instructions and uniform methods for MREL reporting;
Implementing Regulation (EU) 2021/622 of 15 April 2021 relating to the models, instructions and uniform methods for MREL reporting;
Implementing Regulation (EU) 2021/763 of 23 April 2021 relating to declarations for supervisory purposes and publications on MREL: MREL-TLAC submissions and Pillar 3 publications;
Delegated Regulation (EU) 241/2014 of 7 January 2014: Articles 32 bis and following relating to the prior permission regime for early repayment of eligible MREL and TLAC liabilities ("prior permission");
Implementing Regulation (EU) 2021/1751 of 1 October 2021 relating to uniform formats and models to be used for notifications of the finding of impracticability of including contractual recognition of write-down and conversion powers;
Delegated Regulation (EU) 2021/1527 of 31 May 2021: "impracticability" procedure (exemption from the obligation of contractual recognition of bail-in provided for in Article 55 of the BRRD);
Implementing Regulation (EU) 2021/1751 of 1 October 2021: format of "impracticability" notifications;

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Delegated Regulation (EU) 2016/1075 of 23 March 2016: provisions of Chapter 5 relating to the contractual recognition clause of bail-in;
Delegated Regulation (EU) 2021/1118 of 26 March 2021: concerning the estimation of Pillar 2 and CBR requirements at the resolution group level, for the purposes of calculating the RCA component of the MREL target, in cases where the resolution group differs from the prudential group;
Implementing Regulation (EU) 2021/622 of 15 April 2021: data to be transmitted to the EBA by resolution authorities on their MREL requirement decisions.

Resolution planning reporting (composition of liabilities, critical functions, interdependencies, access to market infrastructures) is to be distinguished from MREL-TLAC submissions. This reporting must comply with the new ITS format currently being adopted by the Commission, as of the reference date of 31 December 2025. The ITS will repeal and replace the current Implementing Regulation 2018/1624 of 23 October 2018.

Implementing Regulation (EU) 2022/365 of 3 March 2022 amending Implementing Regulation (EU) 2018/1624 relating to procedures, standard forms and models to be used for the provision of information for the purposes of drawing up resolution plans.

Liquidity and Funding Requirements

The CRR provides for two liquidity ratios, the LCR or Liquidity Coverage Ratio requirement, and the NSFR, or Net Stable Funding Ratio requirement, as well as additional liquidity monitoring elements (called "Additional Liquidity Monitoring Metrics" or ALMM).

Liquidity requirements are defined in Part VI of the CRR and by Commission Delegated Regulation No 2015/61 (hereinafter the "LCR Regulation") amended by Delegated Regulation No 2018/1620 which entered into application on 30 April 2020 and by Delegated Regulation No 2022/786 which entered into application on 8 July 2022 concomitantly with Directive 2019/2162 on covered bonds.

Financing companies are subject to the national provisions provided for by the Order of 5 May 2009 amended and to reporting obligations defined by instructions 2015-I-08 and 2015-I-09 of the ACPR and submit the Surfi COEF_LIQ and INFO_LIQ statements.

When an establishment no longer meets or expects not to meet these requirements, it must notify the ACPR immediately, present without unjustified delay a plan for compliance, and submit prudential declarations related to liquidity daily, unless it has obtained authorization from the ACPR for submission at a lower frequency, in application of Article 414 of the CRR. See also the ECB Guide section II, Chapter 6 point 3 on this subject.

6.1 LCR

The Liquidity Coverage Ratio requirement is assessed via the ratio between the "liquid asset buffer" of a credit institution and its "net cash outflows" over a stress period of 30 calendar days (LCR). "Net cash outflows" are calculated by subtracting the credit institution's cash inflows from its cash outflows and integrating a mechanism limiting in certain cases the taking into account of net cash inflows (mechanism of capping cash inflows relative to cash outflows). The liquidity coverage ratio is expressed as a percentage and set at a minimum level of 100%, which means that the credit institution holds sufficient liquid assets to meet its net cash outflows during a stress period of 30 days. In such a stress situation, a credit institution should be able to quickly convert its liquid assets into cash without resorting to central bank liquidity or public funds, this conversion potentially leading to a possible decline of its liquidity coverage ratio below the 100% threshold. In order for the buffers to play their role and allow to mitigate procyclicality by absorbing

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a part of the shocks during stress periods, it is essential that institutions are willing to use them during stress to avoid any worsening of the shock103.

6.1.1 LCR: Liquid Assets (“High Quality Liquid Assets” – HQLA)

6.1.1.1 Operational criteria

Pursuant to Article 8 of the LCR Regulation, institutions apply policies and limits ensuring that the liquid assets comprising their liquidity buffer remain sufficiently diversified at all times, taking into account any relevant diversification factor. The LCR Regulation further specifies that diversification is assessed by asset class, but also within an asset class and globally according to any other relevant diversification criterion (type of issuer, geographic location of the issuer…). For the implementation of this article, see also Section II, Chapter 6, points 5 and 6 of the ECB Guide. No legal or practical obstacle should prevent the liquidation of liquid assets within the LCR horizon, either by sale or by a simple repo transaction on an approved repo market (LCR Regulation art. 8 (2)).

Credit institutions ensure that the currencies in which their liquid assets are denominated are aligned with the currency breakdown of their net cash outflows, in accordance with Article 8 (6) of the LCR Regulation. For the implementation of this article, see also Section II, Chapter 6, point 4 of the ECB Guide.

The amended LCR Regulation (Article 2.3) also allows assets held by a subsidiary established in a third country to be recognized as liquid assets, even if the minimum issuance volume condition is not met, provided all other conditions are met and they are considered liquid assets by the national legislation of the third country determining liquidity coverage requirements. These assets can only be taken into account up to the net amount of cash outflows incurred in stress situations in the currency in which they are denominated and corresponding to the same subsidiary company.

6.1.1.2 Treatment of mandatory reserves at the central bank

The amount corresponding to the portion of minimum reserves that can be withdrawn during stress is determined by consensus between the competent authority and the relevant central bank. To this end, within the Eurosystem, only the portion of daily reserves exceeding the average amount of the daily reserve requirement to be maintained is considered as withdrawable during stress and can thus be declared as liquid assets (see the communication published by the ECB on September 30, 2015 for more information). Furthermore, time deposits with the central bank are considered liquid assets provided they are recognized as eligible collateral for Eurosystem operations, including marginal lending facilities.

The amended LCR Regulation extends the conditional recognition of certain reserves held in central banks of third countries. The new Article 10(1)(d)(ii) now allows reserves held with a central bank of a third country not benefiting from a 1st tier ECAI rating (credit quality step 1) to be recognized as Level 1 assets. Recall that in this case, the amount of assets that can be recognized must not exceed the amount of net cash outflows incurred in stress situations in the same currency. The new Article 10.1.b.iii specifies, for central banks of third countries benefiting from a 1st tier ECAI rating, the relevant competent authority in the case of subsidiaries or branches.

6.1.1.3 Inclusion of UCITS shares in liquid assets

The inclusion of UCITS shares in the liquid asset buffer is permitted by Article 15 of the LCR Regulation up to a cap of EUR 500 M per Institution on an individual basis (see also Q&A 292 of the EBA mentioned below).

This treatment applies to UCITS meeting the requirements of Article 132 (3) of the CRR (UCITS eligible for look-through or detailed mandate approaches detailed in Article 132 ter - detail infra 2.3.1.2.8), and which invest exclusively in liquid assets and in instruments hedging interest rate, exchange rate, or credit risk 103 The EBA reported in its second follow-up report on the LCR published in March 2021 how Credit Institutions reacted regarding the use of liquidity buffers.

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on the asset portfolio of the undertaking. Furthermore, given the operational constraints on the management of these UCITS, it is permitted that a relatively small portion of the UCITS funds can be placed in demand deposits for cash management needs, without affecting the eligibility of these UCITS, provided these deposits do not enter the UCITS management strategy. These deposits will then be excluded when assessing the market value of UCITS shares (cf. Q&A 132 infra).

According to Article 132 (3) of the CRR, these UCITS (UCITS or certain AIFs) must:

be managed by an entity subject to supervision in a Member State, or failing that under a comparable regime in a third country;
have a prospectus specifying the categories of assets in which these UCITS can invest and the corresponding limits;
provide information to the institution regarding its exposures, ensuring sufficient data granularity to calculate the exposure amount weighted according to the approach adopted by the institution.

Article 15 (2) of the LCR Regulation specifies the valuation methods for these UCITS shares:

the underlying assets are subject to a haircut based on their degree of liquidity, set by Article 15 (2). The applicable haircut rates are based on those of the underlying assets and increased by 5% (unless otherwise specified);
If it is able to allocate the portfolio among the different types of assets listed in Articles 10 to 13, the institution adopts a look-through approach;
otherwise, it will be assumed that the UCITS invests primarily in liquid assets listed in Articles 10 to 13 in descending order of haircuts applied to these assets up to the limits set in the UCITS regulations.

The assessment of the market value of UCITS shares (and therefore in practice of the underlying liquid assets) must be carried out by the Institution itself (Article 15 (4) of the LCR Regulation) using a robust methodology, and to the satisfaction of the supervisor. This assessment must be updated at least monthly to be consistent with the frequency of reporting requirements, and ideally on a daily basis.

Failing this, the Institution may rely on an external assessment, (i) either by the depositary, provided that all assets of the UCITS are held by this depositary, (ii) or by the manager (who must satisfy the conditions set out in point a) of Article 132 (3) of the CRR). The accuracy of these assessments must be certified in all cases by an external audit, to be carried out from April 30, 2020 on an annual basis (frequency clarification in the amended LCR Regulation).

Institutions inform the competent authority of the reasons justifying the impossibility of developing their own market value assessment methods and haircuts applied to UCITS shares and eligible as liquid assets under Article 15 of the LCR Regulation. The use of third parties listed in points a) and b) of Article 15 (4) is conditional upon the assessment of the competent authority.

6.1.1.4 Deposits and other forms of liquid financing of Mutual Institutions

Demand deposits maintained with the central body by affiliated Institutions may, under conditions, be declared as liquid assets in accordance with Article 16 (1) of the LCR Regulation. Their categorization into Level 1, 2A, and 2B assets is determined by transparency and depends on legal, contractual, or statutory provisions obliging the central body to invest the amount of these deposits in assets of one or more of these liquid asset categories. The corresponding haircuts are applicable.

In the absence of a specific investment obligation applicable to the central body, these deposits must be mandatorily declared as Level 2B liquid assets by the affiliated Institution, and subject to a minimum haircut of 25% on the entire deposit amount, pursuant to Article 16 (1) (b).

Legal, contractual, or statutory refinancing facilities granted by the central body to affiliated Institutions may be declared as Level 2B assets by the latter, provided that the affiliated Institution has access to these facilities within a 30-day horizon and that they are not collateralized by liquid assets, nor recognized as cash inflows under Article 34, in accordance with Article 16 (2) of the LCR Regulation. A minimum haircut of 25% must be applied to the amount of the commitment granted by the central body.

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6.1.1.5 Eligibility of securities issued by public sector entities

In application of the provisions of Articles 10 (1) (c)(v) and 11 (1) (a) of the LCR Regulation, assets issued or guaranteed by French public sector entities listed in Annexes B1 and B2 to Annex B1 of this Notice, as well as assets issued by French public sector entities not included in this Annex B1 of this Notice, are eligible, respectively, as Level 1 and 2A liquid assets, provided they meet the operational criteria provided for in Articles 7 and 8 of the LCR Regulation, as well as, where applicable, the criteria of Article 10 for Level 1 assets, and the criteria of Article 11 for Level 2A assets.

6.1.1.6 Eligibility of securities issued by financial sector actors

In principle, securities issued by the categories of financial sector actors listed in Article 7(4) of the LCR Regulation are not eligible as liquid assets, except in the following cases:

The asset is issued by a credit institution that is a public sector entity (see previous section);
The issued asset is a covered bond meeting the conditions set by the LCR Regulation;
The credit institution belongs to one of the two categories of Article 10.1.e) of the LCR Regulation which covers certain public institutions and development banks. In this regard, securities issued by the following entities are deemed to comply with the provisions of Article 10.1.e of the LCR Regulation: BPI-France Financement, the Société de Financement Local (SFIL).

The ACPR College adopted on June 21, 2024 Decision No. 2024-C-18 allowing communes, departments, regions, and public establishments for inter-municipal cooperation (EPCI) with their own tax status to be assimilated to the French central administration. Local authorities with special status are also assimilable to the central administration, as indicated in the section “Exposures on regional or local administrations”. Consequently, AFL issuances can be considered as High Quality Level 1 Liquid Assets (“HQLA 1”) pursuant to Article 10(1)(e)(ii) of the delegated LCR Regulation, provided that the share of loans granted by AFL to assimilable RGLAs is permanently at least equal to or greater than 90% of the total loan portfolio.

This list is not exhaustive and may be modified whenever the conditions set by the LCR Regulation are no longer met. Furthermore, securities issued by these entities must meet the general and operational criteria as specified in Articles 7 and 8 of the LCR Regulation to be recognized as liquid assets under the LCR.

Under a grandfather clause, assets issued by credit institutions benefiting from a guarantee by the central administration of a Member State are also eligible under the conditions set by Article 35 of the LCR Regulation and when the guarantee was granted or committed before June 30, 2014. In the event that these institutions no longer possess a credit institution authorization and do not fall into the list of ineligible entities under paragraph 2 of Article 416 of the CRR, their issuances would retain their eligibility as Level 1 liquid assets under Article 416§1 of the CRR, pursuant to Article 10 paragraph 1 point c) of the LCR Regulation, provided that these issuances continue to benefit from a guarantee by the central administration of a Member State and that these assets continue in particular to meet the conditions set in Articles 7 and 8 of the same Regulation. Issuances prior and subsequent to the loss of credit institution authorization of these institutions would not be rendered ineligible under paragraph 2 of Article 416 of the CRR solely due to the loss of authorization.

6.1.1.7 Eligibility of encumbered assets of the cover pools of covered bonds

The Covered Bonds Directive (or “CBD”) 2019/2162, published on 27/11/2019, aims to harmonize the treatment of covered bonds in the EU. This Directive contains certain liquidity requirements that require alignment with existing requirements in the LCR Regulation. The CBD imposes in particular on credit institutions issuing covered bonds to permanently maintain a liquidity buffer covering net cash outflows associated with these issuances over a 180-day horizon. This liquidity buffer must consist of assets meeting all eligibility conditions as liquid assets under the LCR Regulation except the condition requiring liquid assets to be unencumbered, as the assets of the cover pool are by definition segregated (Article 12 of the CBD) and therefore “encumbered”. Consequently, at a 30-day horizon, the liquidity buffer requirements of the “CBD” might appear redundant with the LCR Regulation requirements, while the encumbered nature of the cover pool assets makes them in principle ineligible as liquid assets under the LCR. The LCR Regulation was amended accordingly and now provides for relaxations intended to address interactions with the CBD for issuers subject to both the CBD and the LCR Regulation. Institutions thus have the possibility (Article 7 of the LCR Regulation) to treat liquid assets included in the cover pool liquidity buffer as unencumbered up to the amount of net cash outflows resulting from the linked covered bond program, in order to ensure that the LCR is not artificially inflated. Also, assets provided as overcollateralization practiced by covered bond issuers can be considered unencumbered for LCR purposes subject to compliance with the conditions of Article 7.2.ter of the LCR Regulation.

Derivative monetization requirements have also been determined for cover pool assets under Article 8.4 of the LCR Regulation.

6.1.1.8 Inability to hold interest-bearing assets for religious reasons

Pursuant to ACPR Decision 2025-C-33 of October 16, 2025 (which replaces ACPR Decision 2022-C-21 but maintains the same treatment in this matter), subject institutions that, according to their status, are unable for religious reasons to hold interest-bearing assets, may include corporate debt securities as Level 2B liquid assets in accordance with the conditions of Article 12(1)b of the LCR Regulation, and the ACPR may authorize, upon prior request, an exemption from points ii) and iii) of this paragraph when the conditions set out in Article 12, paragraph 3 are met. Where applicable, the ACPR will periodically review the list of assets benefiting from this exemption.

6.1.1.9 List of important stock indices

ACPR Decision 2025-C33 of October 16, 2025 (which replaces ACPR Decision 2022-C-21 but maintains the same treatment in this matter) specifies that pursuant to Article 12(1)(c)(i) of the LCR Regulation, the following indices are considered important stock indices for the purpose of identifying shares that may be qualified as Level 2B assets:
(i) Indices listed in Annex I of Implementing Regulation (EU) 1646/2016; (ii) Any other important stock index within a Member State or third country, identified as an important stock index by the competent authority of that Member State or third country; (iii) Any important stock index, which is not included in points (ii) and (iii), composed of major companies in the country in question. If they make use of this possibility, Institutions inform the ACPR and must be able to provide, upon request, any element demonstrating that the shares concerned are sufficiently liquid, particularly with regard to the criteria referred to in Article 7 of the LCR Regulation.

6.1.1.10 Liquidity buffer adjustment mechanism (unwind mechanism)

The liquidity buffer adjustment mechanism is provided to anticipate the effect on the stock of liquid assets of the unwinding within 30 days of secured financing transactions, secured lending transactions, or secured securities lending transactions involving liquid assets on at least one leg of the transaction. It is about demonstrating that the composition of the liquid asset stock respects the composition provided for by the LCR Regulation taking into account this unwinding (LCR Regulation art 17 and Annex I).

This “unwind” mechanism thus aims to prevent Institutions from using short-term financing transactions that could serve to circumvent the caps on Level 1 covered bonds as well as Level 2A and 2B assets. For more detail regarding this mechanism, see the EBA report dated November 19, 2020 and the second follow-up report on the LCR by the EBA (March 2021).

103 The EBA reported in its second follow-up report on the LCR published in March 2021 how Credit Institutions reacted regarding the use of liquidity buffers.

104 The liquidity buffer composed of assets considered as liquid and held in the cover pool, in accordance with Article 16 of Directive (EU) 2019/2162

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6.1.2 Cash Inflows and Outflows

6.1.2.1 Retail Customer Deposits

Article 24 of the LCR Regulation specifies the conditions to be met to apply a cash outflow rate of 5% to stable retail customer deposits. Points (2) and (3) of Article 25 of the LCR Regulation apply regarding the determination of retail customer deposits that present a higher risk of cash outflow, which may generate cash outflow rates of 10 to 20%. For the implementation of this article, see also Section II, Chapter 6, point 8 of the ECB Guide.

6.1.2.2 Operational Deposits

Deposits corresponding to clearing, custodian, cash management, or other similar services provided as part of an established operational relationship may be considered operational deposits and thus benefit from a cash outflow rate of 25%.

Article 27(6) states that operational deposits identified in accordance with point (c) of that article received from non-financial clients must meet the following conditions to characterize an established operational relationship:

The relationship has a duration of at least 24 months, or the deposit is used for at least two active services;
The remuneration of the account is set at least 5 basis points below the rate prevailing for comparable wholesale deposits, without necessarily being negative;
These deposits are maintained on accounts specifically designated for this purpose and remunerated in such a way as to give the client no economic incentive to maintain excess deposits;
Transactions of significant importance are frequently credited and debited to the account in question;

Finally, the EBA, in the first follow-up report on the LCR published in June 2019, provides additional guidance regarding the proper implementation of Article 27 of the LCR Regulation (section 2.1):

Non-exhaustive list of examples of transactions that can be considered operational deposits, within the meaning of paragraph (1.a) of Article 27 (i.e., clearing, custodian, cash management, or other similar services provided as part of an established operational relationship):
- Among others, cash pooling accounts, funds corresponding to the payment of salaries and social charges, and funds received as part of project financing to the extent that all related flows are centralized on this deposit account are cited;
- Deposits received for the purpose of centralized liquidity management are excluded from the scope of operational deposits, the EBA considering that the criteria set out in paragraph (6) points a) and b) could not be met;
Identification of best practices for quantifying the portion of excess operational deposits ("excess operational deposits"), corresponding to the part of the deposit not necessary for the execution of the service justifying the deposit of funds by the depositor, and which therefore cannot benefit from the preferential cash outflow rate of 25%.

The EBA also presents in the second follow-up report on the LCR published in March 2021 elements of analysis regarding the treatment of fiduciary deposits (deposits managed for third-party accounts), while the case of escrow accounts of payment institutions with Institutions is treated in EBA Q&A 3129.

6.1.2.3 Deposits of the Municipal Credit Banks with the Public Treasury

Demand deposits of the Municipal Credit Banks held with the Public Treasury for the purpose of reinvesting cash surpluses can be included in cash inflows at 100%, in application of EBA Q&A No. 1576, provided that no contractual obstacle prevents their withdrawal within 30 days.

6.1.2.4 Notification of cash outflows resulting from a downgrade of the credit institution's own external credit assessment

Institutions calculate and communicate to the competent authority the cash outflows resulting from a downgrade of the Institution's own external credit assessment in accordance with the provisions of Article 30(2) of the LCR Regulation. The ECB Guide defines the procedures implemented by the supervisor to assess the materiality of these cash outflows (Chapter 6 point 11).

6.1.2.5 Application of favorable weights to intragroup transactions

In application of the provisions provided for in Articles 29 and 34 of the LCR Regulation, the cash outflows (respectively cash inflows) applicable to credit facilities and cash facilities contracted between two Institutions of the same group within the meaning of point b) of Article 29.1 (respectively 34.1) of the LCR Regulation, may benefit from a derogatory weighting level upon decision of the competent authority. For the implementation of these articles, see also Chapter 6, points 10 and 14 of the ECB Guide. Regulation (EU) No 2017/1230 of 31 May 2017 defines additional conditions to those of the LCR Regulation. It specifies in particular how a low liquidity risk profile should be evaluated, taking into account the requirements of Pillar 1 and Pillar 2. Several conditions relating to the nature, currency, amount and cost, and conditional maturity of internal agreements and commitments are specified. The regulation also specifies how the liquidity risk management of the liquidity provider must consider the liquidity risk profile of the beneficiary, taking into account in particular the frequency of calculation of the liquidity position, and integration into emergency funding plans.

6.1.2.6 Additional cash flows related to derivatives and securities financing transactions

Delegated Regulation (EU) 2017/2008 of 31 October 2016 specifies the criteria for assessing the significance of the cash need resulting from the impact of an adverse market scenario, as well as the method for calculating the associated cash flow, based on the net variation of collateral posted recorded over a period of 30 consecutive days during the 24 months preceding the LCR calculation date (Basel method).

Article 21 of the LCR Regulation allows for the offsetting of cash outflows and inflows on derivatives governed by a bilateral netting contract, as well as for certain foreign exchange derivatives without this condition. To be deducted, the collateral received must be reusable and eligible as liquid assets.

6.1.2.7 Other off-balance sheet products and services

Under Article 23 of the LCR Regulation, Institutions regularly assess the probability and potential volume of cash outflows not otherwise taken into account in the LCR calculation. This provision aims in particular to capture cash outflows related to products and services generating off-balance sheet obligations and potential financing, resulting or not from a contractual arrangement, directly proposed or financed by the Institutions or that potential buyers would consider associated with them, which should not otherwise be subject to a flat cash outflow rate set elsewhere in the LCR Regulation and for which the probability and possible volume of cash outflows estimated by the Institutions are significant at a 30-day horizon. For the purposes of this assessment, Institutions take particular account of any significant damage to their reputation that could result from the absence of financial support for such products and services. Based on this internal assessment, Institutions report at least once a year to the ACPR, in their annual internal control report, the amount of exposures related to each of the products and services for which the estimated probability and volume of outflow are significant. The ACPR, in its decision No. 2016-C-26 regarding the implementation of the provisions of paragraph 2 of Article 420 of the CRR Regulation, provides indications on the methodology for determining the additional cash outflow rates associated with these other products and services to be applied in the context of the calculation of liquidity coverage requirements: products and services covered, information expected from Institutions, and weights retained.

The EBA specified in its first follow-up report on the LCR, published in June 2019, examples of products that could fall within the scope of Article 23. Credit institutions and supervisors refer to it for the qualification of operations covered by this provision.

6.1.2.8 Derogation from the cap on cash inflows

Credit institutions limit the recognition of their cash inflows to 75% of total cash outflows. Article 33 of the LCR Regulation nevertheless introduces several derogations from this principle that may be granted by the competent authority under certain conditions:

Partial or total exemption from the cap requirement for intragroup operations or interdependent flows as defined in Article 26;

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Exemption from the cap requirement for credit institutions when their main activities are leasing and factoring;
Application of a cap requirement of 90% for credit institutions when their main activities are granting financing for the acquisition of motor vehicles or granting consumer credit within the meaning of Directive 2008/48/EC on consumer credit.

For the implementation of these articles, Institutions may also consider Chapter 6, points 12 and 13 of the ECB Guide and Q&A 3598.

Regarding specifically the partial or total exemption from the cap requirement for interdependent flows, the second follow-up report on the LCR, published by the EBA in March 2021, provides clarifications on the situations covered and how competent authorities grant prior authorization. In particular, offsetting between incoming and outgoing flows can only be done on the condition that the incoming flow is received before the outgoing flow. An exception exists in the case of incoming flows guaranteed by a State, which concerns centralized regulated savings products, the incoming flow then being able to be received within a maximum of 10 days after the outgoing flow.

Subject Institutions wishing to benefit from the provisions of Article 26 of the LCR Regulation to declare flows resulting from centralized regulated savings products on a net basis must obtain authorization from the competent authority. This authorization is valid only for Institutions that have opted for the so-called "decadal" centralization (four times a month) permitted by Article 5bis of Decree No. 2011-275 of 16 March 2011. The Institutions concerned can declare the flows resulting from centralized regulated savings products on a net basis (by reducing the outgoing flows on the total regulated savings balance by the incoming flows related to repayment by the Caisse des dépôts et consignations). Furthermore, in cash inflows and outflows, it is also necessary to take into account the amounts to be paid/received whose amount is known at the reporting date based on the collection/de-collection observed since the last centralization. For the implementation of this article, see also Chapter 6, point 9 of the ECB Guide.

6.2 NSFR

6.2.1 Introduction to NSFR

The NSFR ratio ("Net Stable Funding Ratio") requires Institutions to maintain a stable funding profile intended to reduce the probability that difficulties disrupting the regular funding sources of an Institution erode its liquidity position to the point of increasing the risk of failure and, potentially, generating tensions likely to have a systemic effect. The NSFR limits excessive reliance on short-term wholesale funding, encourages better assessment of funding risk for all balance sheet and off-balance sheet items, and promotes funding stability. The horizon of the ratio is 1 year, with the inclusion of an intra-annual step at 6 months to limit threshold effects. It thus complements the LCR ratio, a short-term indicator based on 30-day stress assumptions, which are not repeated in the NSFR.

NSFR Ratio:
Available Stable Resources / Required Stable Funding Needs ≥ 100%

In the numerator, Available Stable Funding (ASF) corresponds to liability elements (i.e., equity, retail deposits distinguished by their stability, financing by financial/non-financial counterparties, etc.) weighted according to their level of stability and maturity (less than 6 months, 6 to 12 months, more than 12 months). The weights are higher the longer the residual maturity of commitments or equity is and the more stable the counterparty is considered.

In the denominator, Required Stable Funding (RSF) is the sum of all balance sheet assets and off-balance sheet commitments weighted according to the stable funding need they generate. The weights are inversely proportional to the liquidity of the asset – according to the HQLA classification used for the LCR – and the stability of the counterparty.

In case of non-compliance or forecast of non-compliance with the 100% NSFR ratio, as for the LCR, Institutions must immediately inform the ACPR and present a rapid compliance plan in application of Article 412 of the CRR.

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As with the LCR, there is no obligation to comply with the NSFR ratio in foreign currencies, but Institutions follow and declare the NSFR in the same currencies as the LCR, ensuring global adequacy of the distribution of their assets by currency, and restricting currency asymmetries under the conditions of Article 428 ter paragraph 5.

6.2.2 Main Applicable Weights

6.2.2.1 Summary Table of Applicable ASF and RSF by Type of Products and Balance Sheet and Off-Balance Sheet Items

The provisions relating to the NSFR are found in Part 6, Title 4 of the CRR, in Articles 428 and following.

ASF Operations Covered
100%

Equity elements before deductions (and limited to the residual part of 1 year and more for category 2 equity elements) and other capital instruments with a residual maturity of 1 year or more,
Any other borrowing and secured and unsecured commitment with a residual maturity of 1 year or more, including time deposits outside elements with options likely to reduce the duration to less than one year
Deferred tax liabilities and minority interests, when their residual maturity is 1 year or more.

95%

Demand and time deposits of retail customers, considered as stable retail deposits within the meaning of the LCR Delegated Act, with a notice period or residual maturity of less than 1 year

90%

Demand and time deposits of retail customers, meeting the definition of other retail deposits within the meaning of the LCR Delegated Act, with a notice period or residual maturity of less than 1 year

50%

Operational deposits within the meaning of the LCR,
Liabilities with a residual maturity of less than one year vis-à-vis:
a) the central administration of a Member State or a third country, b) regional or local administrations of a Member State or a third country, c) public sector entities of a Member State or a third country, d) multilateral development banks, e) non-financial enterprises, f) credit cooperatives authorized by a competent authority, personal investment companies, or deposit brokers;
Liabilities with a maturity between 6 months and 12 months vis-à-vis the ECB or the central bank of a Member State or a third country, and financial clients
Deferred tax liabilities and minority interests with an effective residual maturity between 6 and 12 months;
Other cases of liabilities with a residual maturity between 6 and 12 months not specified elsewhere

Other liability elements and liabilities without maturity
Interdependent liabilities with assets;
Commitments with a residual maturity of less than six months, from the ECB or the central bank of a Member State, central bank of a third country, or financial clients;
Amounts payable at the transaction date for the purchase of financial instruments, currencies, and commodities
Negative difference of the sum of netting sets with a positive fair value and those with a negative fair value (net passive derivatives position)

Regarding options held by the investor on liability elements, Institutions must assume that the option is exercised on the nearest possible exercise date. For options held by the Institution, the Institution must take into account reputation factors that could limit its ability to exercise the option. In particular, when markets anticipate that a liability element will be repaid early before its maturity date, Institutions must retain the effective maturity date.

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RSF Operations Covered
0%

Unencumbered HQLA Level 1 assets * excluding covered bonds;
Unencumbered UCIs eligible with a 0% haircut in LCR*
All central bank reserves (unless contrary decision and unless a higher RSF is applied by the central bank of a third country) and central bank claims of less than 6 months
Assets benefiting from the treatment of interdependent assets and liabilities;
Amounts receivable at the transaction date for the sale of financial instruments, currencies, and commodities;
Amounts receivable under repos/reverse repos with financial clients, collateralized by HQLA Level 1 (excluding covered bonds) if the Institution is entitled and able to reuse these assets, with a residual maturity of less than six months

Unencumbered UCIs or shares benefiting from a 5% haircut for the LCR calculation *;
Amounts receivable under repos/reverse repos with financial clients, with a residual maturity of less than six months, other than those subject to a 0% weight (see above);
Unused portion of confirmed credit and liquidity facilities, in accordance with the LCR Delegated Act;
Off-balance sheet commercial credit products with a residual maturity of less than six months.
Negative difference of the sum of netting sets of derivatives with a positive fair value and those with a negative fair value (net passive derivatives position)

7% - High-quality eligible covered bonds in HQLA in LCR *

7.5%

Off-balance sheet commercial credit products, with a residual maturity equal to or greater than six months but less than one year

10%

Amounts receivable resulting from operations with financial clients with a residual maturity of less than six months, other than those covered by weights of 0% and 5% (see above repo / reverse repo);
On-balance sheet commercial credit products with a residual maturity of less than six months;
Off-balance sheet commercial credit products with a residual maturity of one year or more.

12% - Unencumbered UCIs or shares subject to a 12% haircut in LCR *

15% - HQLA Level 2 eligible assets *

20% - Unencumbered UCIs or shares subject to a 20% haircut in LCR *

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25% - Eligible securitization tranches in Level 2B HQLA in LCR * 30%

Extremely high quality covered bonds in LCR unencumbered
Unencumbered shares or units of UCITS subject to a 30% haircut for LCR calculation *
35%
Unencumbered Level 2B securitizations
Unencumbered shares or units of UCITS that can benefit from a 35% haircut for LCR calculation *
40%
Unencumbered assets eligible as Level 2B assets in LCR, except Level 2B securitizations and high quality covered bonds *;
Operational deposits;
Amounts receivable with a residual maturity of less than one year, from:
a) the central administration of a Member State or a third country, b) regional or local administrations of a Member State or a third country, c) public sector entities of a Member State or a third country, d) multilateral development banks, non-financial corporations, retail clients and SMEs, e) credit cooperatives authorized by a competent authority, personal investment companies and deposit brokers
Amounts receivable with a residual maturity equal to or greater than 6 months but less than 12 months, resulting from operations with the ECB or a national central bank, the central bank of a third country, financial clients;
Commercial credit products included in the balance sheet with a residual maturity equal to or greater than six months but less than one year;
Encumbered assets with a residual maturity equal to or greater than six months but less than one year, unless a higher Required Stable Funding factor would be attributed to them if they were held as unencumbered assets, in which case the higher Required Stable Funding factor applicable to these assets if they were held as unencumbered assets applies;
Any other asset with a residual maturity of less than one year, unless otherwise provided
55%
Unencumbered shares or units of UCITS subject to a 55% haircut for LCR calculation *
65%
Unencumbered loans secured by residential real estate mortgages or unencumbered residential real estate loans with a residual maturity of one year or more, with a risk weight of at most 35% in solvency;
Unencumbered loans with a residual maturity of one year or more, excluding loans to financial clients, provided that these loans receive a risk weight of 35% in solvency

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85%

Cash, securities or other assets or off-balance sheet items provided as initial margin in derivative contracts or as contribution to the default fund of a central counterparty ;
Unencumbered loans that have a residual maturity of one year or more, excluding loans to financial clients, which have not been past due for more than 90 days and are weighted in solvency at more than 35%;
Commercial credit products included in the balance sheet with a residual maturity of one year or more;
Securities with a residual maturity of 1 year or more and unencumbered listed shares that are not eligible as Level 2B assets for LCR calculation;
Physically traded commodities;
Unencumbered assets with a residual maturity of one year or more that are part of a covered bond hedge basket.
100%
Unless otherwise provided, any asset encumbered for a residual maturity of one year or more
Loans to financial clients with a contractual residual maturity of one year or more,
Non-performing exposures,
Items deducted from own funds, fixed assets, unlisted shares, retained interests, insurance assets and defaulted securities:
Positive difference between the sum of netting sets with positive fair value and those with negative fair value (positive net derivative position)

independently of operational requirements and the composition criterion of the LCR liquidity buffer
see below for the full treatment of derivatives

When calculating the residual maturity of an asset, options are taken into account by assuming that the counterparty will use the possibility to extend the maturity of an asset (except in the case of deposits with significant penalties for early withdrawal) and that the institution could, to preserve its reputation risk, accept to extend an option in its favor.

6.2.2.2 Encumbered assets
Assets borrowed in the context of repurchase transactions are subject to an RSF rate when they are not recorded on the institution's balance sheet but the institution is the beneficiary.
Assets lent in repurchase transactions are considered encumbered. If they are encumbered for a residual duration of less than 6 months, their RSF treatment is the same as if they were not encumbered. However, if they are encumbered for a residual duration of 6 months or more, their RSF treatment is the highest between that applicable to encumbered assets and that applicable to unencumbered assets, even if the residual maturity of the encumbered assets is shorter than that of the underlying repurchase transaction. Assets pre-positioned in baskets to obtain refinancing under credit lines but which are not yet financed are not considered encumbered. In the event of partial use of these assets, the assets included in the basket are encumbered in order of increasing liquidity starting with assets not eligible in the liquidity buffer (art 428 septdecies paragraph 6). Assets related to the optional overcollateralization of a covered bond issuance are not considered encumbered. Under Decision ACPR 2025-C33 of October 16, 2025 (which replaces Decision ACPR 2022-C-21 but maintains the same treatment in this matter) Decision ACPR 2022-C-21 and for the application of Article 428 octodecies paragraph 2, amounts paid in the context of derivative transactions under EMIR are considered encumbered until the maturity of the transaction they secure.

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6.2.2.3 Treatment of commercial credit products and factoring
Commercial credit products, which are assimilated to factoring, are subject to the application of modulated RSF weights depending on maturity (5% when it is less than 6 months, 7.5% between 6 months and 1 year, 10% for a maturity greater than 1 year).

6.2.2.4 Treatment of derivatives
The determination of the Required Stable Funding for derivatives concluded by the Institution is done in 3 steps:
1- First, for each netting set (or for each derivative if it does not belong to a netting set) of positive value, the variation margin received from the counterparty in the form of Level 1 HQLA is deducted, and for each netting set of negative value, the variation margins provided are deducted:
Derivatives involving the exchange of the entire principal on the same date are treated on a net basis for all currencies even if they do not belong to the same netting set.
2- A second netting is then performed at the Institution level. The sum of all netting sets of positive value and all those of negative value is made and:
If the difference is positive (positive net derivative position), an RSF of 100% is applied; If the difference is negative (negative net derivative position), an ASF of 0% is applied; then an RSF of 5% is applied to the fair value of netting sets with negative value, before deduction of collateral provided in application of margin variations:
3- Finally, an RSF of 85% is calculated on the initial margin paid for derivatives and contributions paid to the default fund of a CCP (including in the form of cash), unless a more penalizing RSF weight applies.
The RSF of 5% described in step 2 corresponds to the Required Stable Funding to cover the future funding risk related to these derivative contracts. The treatment of derivatives will be the subject of an EBA report in 2024 to assess the need for an amendment of the CRR, as provided for in Article 510 of the CRR, in parallel with other evaluations requested of the EBA, notably regarding Required Stable Funding for securities financing transactions.

6.2.2.5 Treatment of interdependent flows
The CRR allows for the treatment of interdependent flows, and thus their netting for assets and liabilities meeting the conditions of Article 428 septies paragraph 1 of the CRR, with prior authorization from the ACPR. For the implementation of this article, see the ECB Guide, section II, Chapter 6 point 16.
Assets and liabilities falling under paragraph 2 of Article 428 septies, notably centralized regulated savings and covered bonds meeting the conditions set out in this article as interdependent assets/liabilities, do not require prior authorization from the ACPR.
Operations concerned by this preferential treatment of interdependent flows will therefore benefit from a 0% stable funding requirement, in accordance with the principle of netting ASF and RSF for so-called interdependent products. The EBA will monitor the application of this exemption and is mandated to submit a report on the implementation modalities of this regime, and the compliance with the necessary conditions for the eligibility of the assets considered.

6.2.2.6 Deposits of cooperative networks and preferential treatment of intragroup flows
The central body applies to deposits received from a member a symmetric ASF rate to that applied in RSF by the member institution of the cooperative network depositing, if the assets are considered liquid by the depositor (article 428 octies of the CRR).
Furthermore, with prior authorization from the ACPR, preferential RSF and ASF rates may be applied to other cases of intragroup assets and liabilities of groups and cooperative networks, including groups with a central body referred to in Article 10 of the CRR and including for Institutions established in different Member States (Article 428 nonies of the CRR). For the implementation of this article, see the ECB Guide, section II, Chapter 6 point 17.

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6.2.2.7 Other off-balance sheet items
The ACPR may determine the RSF factors to be applied to off-balance sheet items other than undrawn portions of credit and liquidity facilities and off-balance sheet commercial credit products.
Under Decision ACPR 2025-C33 of October 16, 2025 (which replaces Decision ACPR 2022-C-21 but maintains the same treatment in this matter), the ACPR requires that Institutions apply to off-balance sheet exposures not mentioned in Chapter 4 of Title 4 of Part Six of the CRR stable funding factors that correspond to the runoff rates that institutions apply to these same exposures in the context of Article 23 of the LCR Regulation and described in section 6.1.2.7, taking into account Decision ACPR n°2016-C-26.

6.2.2.8 Treatment of short-term securities financing operations with financial clients
The European CommissionThe co-legislators made permanent on June 28, 2025, the treatment hitherto temporarily applied to short-term securities financing operations (less than 6 months) with financial clients105. These modifications have applied since June 29, 2025. They aim to maintain liquidity on financial markets and to guarantee fairer competitive conditions for EU banks compared to their international competitors. The following stable funding requirements consequently continue to be applied:

0% for short-term operations with financial clients, collateralized by Level 1 HQLA
5% for short-term operations with financial clients, collateralized by assets other than Level 1 HQLA
10% for short-term loans to financial clients, uncollateralized.
These operations are weighted at 0% in Available Stable Funding.

6.2.3 The simplified NSFR
A simplified NSFR ratio (Article 428 sextricies of the CRR) may be used, with prior authorization from the supervisor, by Institutions meeting the definition of "small and non-complex institutions" (see § 1.2.1). This simplified ratio thus provides: only two maturity intervals (instead of three for the general NSFR), with a threshold at one year; a less granular decomposition of the main categories of assets and liabilities; weights at least as prudent as those of the NSFR. It is accompanied by adapted reporting forms (C 82.00 and C 83.00). In particular, the ECB indicated in its Guide in section II, chapter 6 point 18 that small and non-complex institutions belonging to a group whose supervision is ensured by the SSM may request to benefit from the application of the sNSFR. The general options exercised by the ACPR for the NSFR apply identically for the sNSFR (see Decision 2022-C-21Decision 2025-C-33).

6.4 Main EBA Q&A related to liquidity
Q&A related to LCR:
Liquid assets
Q&A 132 : It is permitted, given the operational constraints weighing on UCITS management, that a relatively small part of UCITS funds can be placed in the form of demand deposits for cash management needs, without this affecting the eligibility of these UCITS, provided that these deposits do not enter the UCITS management strategy. These deposits will then be excluded when evaluating the market value of UCITS shares described in section 6.1.1.3. Q&A 292 : The EUR 500M cap applying to UCITS shares or units, in accordance with Article 416.6 of the CRR and 15.1 of the LCR Regulation, is assessed on an individual basis for each entity constituting a group. Therefore, from a consolidated perspective, the amount of UCITS shares or units may exceed the EUR 500M threshold provided by regulation. Q&A 2695 : Inflows and outflows associated with the settlement of hedging operations of elements admitted to the LCR numerator (the "buffer") are integrated into the evaluation of assets eligible for the buffer, effect of collateral on hedging elements included. Q&A 2651 : Covered bonds whose underlying consists of aeronautical asset financing are not eligible as liquid assets. Q&A 3125 : Eligibility of sovereign bonds from third countries, notably in the absence of credit rating by an ECAI. Q&A 4285 : Eligibility for the LCR numerator of assets denominated in euros held in third countries. Q&A 2823 : Equivalence rules specific to liquidity. Q&A 3955 : Assets recorded at amortized cost can be included in the LCR liquidity buffer as long as they meet the general and operational requirements. Deposits Q&A 1576 : Demand deposits of Institutions held with other institutions ('nostro') can be taken back as cash inflows up to 100%.

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Q&A 2784 : Difference between operational deposits and deposits from correspondent banking activity.
Q&A 2112 : Cash inflows from term deposits with early withdrawal option: they are treated by the depositing bank as conditional and non-contractual cash inflows. Therefore they are not integrated into the LCR denominator.
Q&A 3357 : Deposits listed in Article 28(1) of the LCR Regulation (non-financial client deposits) exceeding the amount guaranteed by the deposit guarantee scheme are fully weighted at 40% for the calculation of outflows.
Q&A 2647 : Operational deposits: practical aspects related to their identification and nature of limitations making significant withdrawals under 30 days improbable.
Q&A 2840 : Electronic money and funds received on its behalf are not covered by the Deposit Guarantee Directive. Consequently, this debt must be treated as a debt on the corresponding client category (retail, non-financial, financial...) in the LCR, NSFR and ALMM and cannot benefit from the preferential weighting provided in LCR for deposits covered by the deposit guarantee. Q&A 4890 : Retail client deposit accounts managed exclusively by telephone (or by internet and by telephone) are assimilated to "internet-only" accounts for the purpose of Article 25 of the LCR Delegated Regulation. Q&A 4891 : Cash held in the Institution's ATMs (automated teller machines) present outside its branches (i.e. for example in supermarkets) do not meet the conditions of Article 8(3) of the LCR Delegated Regulation (they are not under the effective and operational control of the liquidity management of the EC) and cannot be considered as "coins and bank notes" liquid assets for the liquidity reserve. Q&A 3128 : Interest credited on a retail deposit account follows the same treatment as other elements constituting the deposit account balance. Q&A 5322 : Assessment of the 500 KEUR threshold provided for in Article 25(2)(a) of Delegated Act 2015/61 for the application of higher runoff rates in the case of joint accounts. Interdependent flows Q&A 2740 : Netting of inflows and outflows is only possible for derivative operations and interdependent flows for which authorization has been granted by the competent authority. Derivatives Q&A 3163 : Details of the modalities for taking into account collateral received and posted as cover for derivative contracts (Annex II of the CRR). Q&A 4705 : The 30-day cash flows of contracts listed in Annex II of the CRR must be taken into account on a net basis per counterparty subject to a netting agreement. Once considered, outflows or inflows are taken into account at 100%. In the context of determining the 30-day cash flow of a futures contract, it is necessary to consider on the one hand the difference between the market value of the underlying asset and its future value (after deduction of liquid assets exchanged as collateral), and on the other hand the additional cash outflows resulting from collateral calls generated by an adverse market scenario. Cash inflows Q&A 6386 : Definition of past due for the calculation of contractual cash inflows. Q&A 6163 : Reverse repo operations with a maturity exceeding 30 days are not included in cash inflows. Q&A 2024_7053 : if the institution can demonstrate that open maturity reverse repo operations are effectively unwound within the 30-day horizon, then they can be recorded in cash inflows. Q&A 3266 : Example of contingent flows not entering the base for cash inflows. Q&A 2992 : Case of unsecured lent assets. Ratio calculation

105 Financial markets: the Council approves the decision to maintain certain rules on bank liquidity - Consilium

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Q&A 5231: Excess collateral posted or received at the netting set level must not change the sign (positive or negative) of a netting set and must be treated as an asset or liability with the relevant counterparty on the appropriate maturity.

Q&A 1294: LCR calculation elements are to be reported in total for all currencies in the equivalent value of the reporting currency and for any currency that exceeds the 5% threshold of liabilities. The reporting currency is not subject to this separate reporting requirement.

Q&A 2660: Exemption from the cap on cash inflows. The total or partial exemption from the 75% cap for intragroup cash outflows applies regardless of the country to which the intra-group entity belongs and is granted on a case-by-case basis by the supervisory authority.

Q&A 2870: Level of application of the preferential treatment for the cap on cash inflows for specialized credit institutions.

Interest rate risk in the banking book (IRRBB) and credit spread risk in the banking book (CSRBB)

Pursuant to the decree of November 3, 2014, amended by the decree of August 31, 2017, and by the decree of December 22, 2020, regarding the internal control of companies in the banking, payment services, and investment services sectors subject to the supervision of the Prudential Control and Resolution Authority (paragraphs 134 to 139), Institutions are required to have a system for measuring non-trading interest rate risk (IRRBB) inherent in their activities.

To this end, without prejudice to the principle of proportionality, Institutions comply with the EBA Guidelines EBA/GL/2022/14 specifying the criteria for detecting, assessing, managing, and mitigating risks arising from potential interest rate variations (IRRBB) and the criteria for assessing and monitoring credit spread risk (CSRBB) from non-trading book activities. These guidelines, published on October 20, 2022, are applicable as of June 30, 2023, regarding interest rate risk (IRRBB) requirements and as of December 31, 2023, regarding credit spread risk (CSRBB) requirements. The ACPR extended by its Notice of April 20, 2023106 to financing companies the implementation of the EBA guidelines EBA/GL/2022/14.

The EBA published two regulatory technical standards: RTS EBA/RTS/2022/09 regarding the standard approach and the simplified standard approach for assessing interest rate risk (IRRBB), and RTS EBA/RTS/2022/10 regarding the Supervisory Outlier Test for interest rate risk (IRRBB), in its version published in the annex of Opinion EBA/Op/2023/03; these requirements must also be taken into consideration by banking sector institutions and financing companies in the context of their interest rate risk (IRRBB) assessment.

The provisions on the publication of information on interest rate risk (IRRBB) exposures of banking sector institutions and financing companies, specified in Implementing Regulation 2022/631 of April 13, 2022, are also applicable.

Institutions must ensure that their internal capital is proportional to the level of IRRBB risk, apprehending, when necessary, their sensitivity to basis risk, option risk, or basis risk.

106 20230420_notice_orientations_abe_2022_14.pdf (banque-france.fr)

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In the context of assessing its IRRBB risk, the Institution may take into account the indicative prudential expectations regarding the modeling and assessment of the IRRBB indicator, depending on the Institution's sophistication category (i.e., SREP category), as detailed in Annex II of the EBA Guidelines EBA/GL/2022/14.

IRRBB management must not rely exclusively on the results of the Supervisory Outlier Test. Institutions must develop and use their own internal capital allocation methodologies in accordance with their risk profile and risk management policy.

The provisions regarding the maximum modeling duration for deposits without a review date for their rate are specified in Article 7 of RTS EBA/RTS/2022/09 for institutions using the standard approach or the simplified standard approach for assessing interest rate risk (IRRBB) and in paragraphs 110 and 111 of the EBA Guidelines EBA/GL/2022/14, for institutions using internal measurement systems for assessing their sensitivity to interest rate risk (IRRBB).

RTS EBA/RTS/2022/10 regarding the Supervisory Outlier Test for interest rate risk (IRRBB) specifies, in addition to the framework for assessing a change in the economic value of equity, the calculation methods for a significant decline in net interest income due to an interest rate shock.

7.1 Main EBA Questions and Answers (Q&A) regarding Interest Rate Risk in the Banking Book

Q&A 4448 clarifies how to determine applicable interest rate scenarios in the context of parallel interest rate shocks of +/- 200 basis points.

Q&A 6807: In the context of internal IRRBB risk measurement and except for specifically exempted products mentioned in paragraph 111 of GL 2022/14, banks must apply a 5-year cap on the duration of non-maturity deposits. Consequently, compliance with the 5-year cap is expected, unless the institution can demonstrate that, given its specific business model, the application of the 5-year cap could bias its IRRBB metrics. In this case, the competent authority must assess in its supervisory judgment the consequences of applying the cap.

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Financial communication under Pillar 3
8.1 General principles

Part eight of the CRR sets out the prudential information disclosure requirements for institutions subject to these requirements on an individual or consolidated basis in application of Articles 6 to 16 of the CRR.

The implementation details of the concepts of non-significant, sensitive, and confidential information in the context of publication exemptions provided for in Articles 432(1) and 432(2) of the CRR have been clarified by the EBA Guidelines 2014/14 of December 23, 2014, for which the ACPR published a compliance Notice.107

In particular, these guidelines specify the assessment procedures for the need to publish information under Part eight of the CRR more frequently than annually.

CRR2 introduced a proportionate approach by distinguishing three categories of institutions: large institutions, small non-complex institutions (see section 1.2.1), and other Institutions, to which differentiated financial communication requirements apply regarding both the volume of information to be published and the frequency of publication (Articles 433 to 433 quater).

Since June 28, 2022, large institutions that have issued securities admitted to trading on a regulated market of a Member State must also publish information on ESG risks (Article 449 bis of the CRR and EU Regulation 2022/2453 on the publication of information on ESG risks). This information was published annually in the first year and semi-annually thereafter.

CRR3 introduces modifications to Article 449 bis to extend these requirements to all institutions while respecting principles of proportionality. A draft new ITS was submitted for public consultation in May 2025. [Text correction: was to be submitted for consultation by the end of 2024]. The EBA's analysis of respondents' comments is ongoing. It is expected that this ITS will be published at the end of 2025.

The EBA has begun publishing Q&A concerning the implementation of the Pillar 3 ESG ITS.

In May 2025, the EBA published a discussion paper on information obligations regarding ESG risks and exposure to non-bank financial intermediaries. The provisions envisaged therein are expected to apply from December 31, 2026.

Summary table of financial communication requirements depending on the institution category.

	Quarterly	Semi-annual	Annual
Large Institutions	- Key Indicators (KM1, Article 447)<br>- Risk-weighted exposures (OV1, Articles 438 d, d bis, and h)<br>- Variations in risk-weighted exposures (Article 438 h)<br>- Liquidity Coverage Ratio (Article 451 bis, paragraph 2)	- Own funds (Article 437 a)<br>- Risk-weighted exposures (Article 438 e)<br>- Counterparty credit risk exposures (Article 439 e to l)<br>- Countercyclical capital buffer (Article 440)<br>- Credit risk and dilution risk exposures (Article 442 c, e, f, and g)<br>- Use of the standard approach (Article 444 e)	- Market risk exposures (Article 445)<br>- Interest rate risks for positions not held in the trading book (Article 448, paragraph 1, a and b)<br>- Exposures to securitization positions (Article 449, j to l)<br>- Leverage ratio (Article 451, paragraph 1, a and b)<br>- Liquidity requirements (Article 451 bis, paragraph 3)<br>- Use of the IRB approach for credit risk (Article 452 g)<br>- Credit risk mitigation techniques (Article 453, f to j)<br>- Use of internal models for market risk (Article 455, paragraph 2 a, b, and c; d, e, and g)
For listed large institutions:<br>- ESG risk information (Article 449 bis) is published semi-annually from 30/06/2024<br>- Aggregated exposure to parallel banking system entities (Art 449 ter)
Large non-EISm, non-listed Institutions	Key Indicators (KM1, Article 447)	All information required in Part eight of CRR Article 433 terbis, paragraph 2
Large Institutions subject to Article 92 bis (EISm) or 92 ter (EISm non-EU)	TLAC Key Indicators (KM2, Article 447 h)<br>TLAC Tables (Article 437 bis)	EISm Indicators
Other listed Institutions	Key Indicators (KM1, Article 447)	All information required in Part eight of CRR
Other non-listed Institutions	- Risk management (Article 435, paragraph 1, a, e, and f; and paragraph 2, a, b, and c)<br>- Own funds (Article 437 a)<br>- Risk-weighted exposures (OV1, Article 438 c, d, and d bis)<br>- Credit risk and dilution risk exposures (Art 442 c and d)<br>- Key Indicators (KM1, Article 447)

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Remuneration policy (Article 450, paragraph 1, a to d and h to k)

Small and non-complex listed Institutions
Key Indicators (KM1, Article 447)

Risk management (Article 435, paragraph 1, a, e, and f)
Risk-weighted exposures (OV1, Article 438 c, d, and d bis)
Key Indicators (KM1, Article 447)
Credit risk and dilution risk exposures (Art 442 c and d)
Remuneration policy (Article 450, paragraph 1, a to d, h, i, and j)

Small and non-complex non-listed Institutions Key Indicators (KM1, Article 447)

8.2 Clarifications on information to be published

CRR2 implemented a number of key provisions, such as the net stable funding ratio, the leverage ratio, and large exposures, and introduced new publication requirements for institutions on all prudential subjects. The Commission adopted implementing technical standards on March 15, 2021, which optimize the Pillar 3 publication regulatory framework for Institutions by consolidating into a single comprehensive text most of the previous regulatory texts and thus the prudential information to be provided.

The Implementing Regulation (EU) No 2021/637 of March 15, 2021 ("Pillar 3 Regulation") applies for reference dates as of June 30, 2021.

This Pillar 3 Regulation repeals and replaces:

Regulation (EU) No 1423/2013 of December 20, 2013 on the modalities for publishing information required by Article 437(1) of the CRR on own funds;
Regulation (EU) 2015/1555 of May 28, 2015 on the modalities for publishing information required by Article 440 of the CRR on capital buffers;
Regulation (EU) 2016/200 of February 15, 2016 on the modalities for publishing information required by Article 451(1) on the leverage ratio, and Delegated Regulation (EU) 2017/2295 of September 4, 2017 on the modalities for publishing information required by Article 443 of the CRR on encumbered assets.
Commission Implementing Regulation No 1030/2014 of September 29, 2014 specifying harmonized formats and dates for the publication of values used to identify Global Systemically Important Institutions (insertion of a new Article 6bis in ITS 2021/637 - refer for the moment to Implementing Regulation 2021/1018).

Furthermore, the Pillar 3 Regulation incorporates the instructions and tables relating to Pillar 3 publication obligations of several guidelines that had been developed by the EBA to allow institutions subject to the requirements of Part eight of the CRR to comply with Basel requirements. In particular, the Pillar 3 Regulation completely replaces:

The EBA Guidelines 2016/11 of December 14, 2016 published to allow Systemically Important Institutions (GSII and OSII) to comply with Basel requirements. They also recalled all applicable texts specifying the modalities for publishing information under Part eight of the CRR and the information to be provided under Article 435(2) of the CRR regarding governance108:
The EBA Guidelines 2017/01 published on June 21, 2017, which define harmonized formats for the publication of the LCR, derived from the Basel standard published in 2014. These guidelines covered the information to be provided under Article 435(1) on risk management regarding the liquidity coverage ratio109;
The EBA Guidelines 2021/04 published on July 2, 2021, relating to the modalities for publishing information required by Article 450 on remuneration policy.

Regulation (EU) 2021/763 of April 23, 2021, amended by Regulation 2024/1618 of June 6, 2024, specifies the modalities for regulatory submission and publication under Pillar 3 of TLAC and MREL indicators. The publication requirements relating to MREL, the European standard for own funds and eligible liabilities during bail-ins, are applicable as of June 28, 2021.

The decree of December 19, 2014, amended by the decrees of September 6, 2017, and July 20, 2021, concerning the publication of information relating to encumbered assets, continues to apply to financing companies.

The Pillar 3 Implementing Regulation is amended or supplemented by three sets of implementing technical standards:

Regulation (EU) 2022/631 of April 13, 2022, relating to information requirements on interest rate risk in the banking book (IRRBB).
Regulation (EU) 2022/1159 of March 11, 2022, relating to the publication of information on investment policy by investment firms.
Regulation (EU) 2022/2453 of November 30, 2022, relating to information publication obligations on environmental, social, and governance risks, applicable as of June 28/December 20, 2022.

8.2.1 Transitional measures

The Parliament and the Council adopted Regulation (EU) 2020/873 entering into force on June 27, 2020 (QuickFix), whose objective is to contribute to mitigating the Covid-19 economic crisis by supporting credit supply to businesses and households. This regulation provides for publication measures under Part eight of the CRR (so-called Pillar 3) such as the publication of the impacts of the implementation of a temporary optional filter on sovereign debt securities at fair value by own funds (Article 468). During the periods of application of the transitional measures, Institutions that have decided to apply the temporary treatment must publish the amounts of own funds, Common Equity Tier 1 capital, and Tier 1 capital, the total capital ratio, the Common Equity Tier 1 capital ratio, the Tier 1 capital ratio, and the leverage ratio they would have had if they had not opted for these measures. This measure ended on December 31, 2022. CRR III provides for the reintroduction of this mechanism, however.

8.2.12 Financing Companies

Following the consolidated version of the decree of December 23, 2013, relating to the prudential regime of financing companies, these are subject to financial communication requirements as provided for in Part eight of the CRR, with the exception of requirements relating to liquidity and leverage. The proportionality criteria described above also apply.

8.3 Pillar 3 Data Hub Project

108 These guidelines are currently being repealed by the EBA.
109 These guidelines are currently being repealed by the EBA.

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The project for the centralized collection of Pillar 3 reporting was implemented by the EBA in 2025. The ITS specifying its technical modalities was published by the EBA in February 2025. The centralized collection should be effective in December 2025/2026 for all "large and others" institutions.

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List of Annexes
Annex A List of eligible protection providers for the assimilation of guaranteed credit to mortgage credit in application of Article 108(4) CRR3
Annex B1 List of French public sector entities assimilated to central governments in application of Article 116(4)
Annex B2 List of French public sector entities to which Articles 116(1) and 116(2) of the CRR apply
Annex C1 Standard Approach – correspondence between ECAI ratings and CRR credit quality steps
Annex C2 Securitization – correspondence between ratings and CRR credit quality steps
Annex D Main EBA Guidelines regarding the scope covered by the Notice
Annex E Technical standards and delegated acts related to CRD IV4
Annex F Main ECB decisions, recommendations, and regulations relating to the areas covered by the Notice
Annex G Useful sites and documents
Annex H Evolutions of the Notice occurring during the year

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Annex A
List of eligible protection providers for the assimilation of guaranteed credit to mortgage credit in application of Article 108(4) CRR3

The list of eligible protection providers for the assimilation of guaranteed credit to mortgage credit in application of Article 108(4) CRR3 is published below. The following protection providers are eligible:

Crédit Logement
Caisse d’assurances mutuelles du Crédit Agricole (CAMCA)
Compagnie européenne de garanties et cautions (CEGC)
Parnasse Garanties
Crédit Mutuel Habitat (CMH)
Crédit Mutuel Caution Habitat (CMCH)
Axa France IARD
CNP Caution

Water Agencies
Caisse des dépôts et consignations
Chambers of Agriculture
Chambers of Commerce and Industry
Chambers of Trades and Crafts
Public health establishments110
Public administrative establishments within the list of "other central government bodies" established by the National Institute of Statistics and Economic Studies (Insee)
Public establishments of a scientific, cultural and professional nature (EPSCP)
Overseas Issuing Institute (IEOM)111
National Social Security Bodies112
Société des Grands Projets
Union nationale interprofessionnelle pour l'emploi dans l'industrie et le commerce (Unédic).
(Non-exhaustive list)
Each European competent authority has declared to the EBA the public sector entities whose treatment can be assimilated to that of central, regional or local administrations. The EBA consolidates these declarations in the form of a list. For France, the list currently only includes public sector entities assimilable to the central administration.
Chambre de commerce et d’industrie de France (CCI France)
Agence de l'eau Adour-Garonne
Agence de l'eau Artois-Picardie
Agence de l'eau Loire-Bretagne
Agence de l'eau Rhin-Meuse
Agence de l'eau Rhône-Méditerranée-Corse
Agence de l'eau Seine-Normandie
AMUE (Agence pour la mutualisation des universités et établissements d’enseignement supérieur et de recherche)
110 This includes Assistance publique-Hôpitaux de Paris, Assistance publique-Hôpitaux de Marseille and Hospices civils de Lyon.
111 In the ZIEOM collectivities (CFP Franc emission zone), the IEOM can be considered a "central bank" within the meaning of the CRR Regulation and Delegated Regulation 2015/61.
112 These are the Caisse nationale de l'assurance maladie (CNAM), the Caisse nationale d'assurance vieillesse (CNAV), the Caisse nationale des allocations familiales (CNAF), the Caisse nationale de solidarité pour l'autonomie (CNSA) and the Agence centrale des organismes de sécurité sociale (ACOSS), as well as the Caisse d'amortissement de la dette sociale (CADES).

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Assistance publique-Hôpitaux de Marseille
Assistance publique-Hôpitaux de Paris
Caisse de garantie du logement locatif social
Caisse des dépôts et consignations
Caisse nationale des autoroutes
CNFPT (Centre national de la fonction publique)
Chambers of Agriculture
Chambers of Commerce and Industry
Chambers of Trades and Crafts
CNOUS (Centre national des œuvres universitaires et scolaires)
CNRS (Centre national de la recherche scientifique)
Cour des comptes
CROUS (Centres régionaux des œuvres universitaires et scolaires)
Public establishments of a scientific, cultural and professional nature
Public administrative establishments considered as ODAC (Other Central Government Bodies) by public accounting
Public health establishments
GNIS (Groupement national interprofessionnel des semences et plants)
Grandes écoles constituted as public establishments
Hospices civils de Lyon
IEOM (Institut d’émission d’Outre-mer) 113
INED (Institut national d’études démographiques)
INRAE (Institut national de la recherche pour l’agriculture, l’alimentation et l’environnement)
National social security bodies (including ACOSS and CADES)
Unédic
113 Notwithstanding the classification of the IEOM as a "public sector entity" assimilated to the central administration according to this list, the IEOM can be considered a "central bank" - within the meaning of the CRR Regulation and Delegated Regulation 2015/61 - in the ZIEOM collectivities (CFP Franc emission zone).

Notice 2025 on the Calculation and Publication of Prudential Ratios under CRD4 and MREL Requirements General Secretariat of the Prudential Control and Resolution Authority 128 List of French public sector entities to which Articles 116(1) and 116(2) of the CRR apply (Non-exhaustive list) This Annex B2 is intended to list French public sector entities not eligible for Annex B1 and therefore not assimilated to central administrations according to CRR Art. 116(4). Agence de l’urbanisme Agences des espaces verts de la région Ile de France AFPA (Association nationale pour la formation professionnelle des adultes) Bureaux d’aide sociale Caisse centrale de la mutualité agricole Caisse départementale de la mutualité agricole Caisses des écoles Centres régionaux de propriété forestière CNIEG (Caisse nationale de retraite des industries électriques et gazières) Enseignement secondaire du deuxième cycle - lycées Enseignement secondaire du deuxième cycle – collèges Private non-profit establishments admitted to participate in the execution of the public hospital service, including cancer treatment centers ODAL (Organismes divers d’administration locale) "social action" ODAL (Organismes divers d’administration locale) "crèches" Fondation nationale des sciences politiques Institut catholique de Lille Institut d’aménagement et d’urbanisme d’Ile de France Regional and departmental social security bodies SAFER (Sociétés d’aménagement foncier et d’établissement rural) Departmental rescue and fire protection services Syndicat des transports d’Ile de France

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Annex C
Correspondence Tables (Mappings) applicable to recognized external credit assessment institutions
Annex C1 Standard Approach – correspondence between ECAI ratings and CRR credit quality steps.
Annex C2 Securitization – correspondence between ratings and CRR credit quality steps.

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Annex C1
Standard Approach
Correspondence between ECAI ratings and CRR credit quality steps The European Commission published Implementing Regulation (EU) 2016/1799 on 7 October 2016 defining implementing technical standards relating to the mapping of credit assessments established by external credit assessment institutions for credit risk under Article 136(1) and Article 136(3) of the CRR. This regulation was amended by Regulation (EU) 2018/634 of 24 April 2018 to update the list of accredited ECAIs and by Regulation (EU) 2019/2028 of 29 November 2019 to update the mapping tables, then by Regulation (EU) 2021/2005 of 16 November 2021 to update the list of accredited ECAIs and the associated mapping tables. A fourth amendment is underway, following a proposal published by the joint committee of the European banking authorities (EBA) of an ITS draft on 13 November 2023, resulting in Implementing Regulation (EU) 2024/1872 of 1 July 2024. It notably removes the mapping for ECAIs to which registration has been withdrawn, and takes into account name changes of other ECAIs.

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Annex C2
Securitization
Correspondence between ratings and CRR credit quality steps114 Pursuant to Article 270e of the CRR as amended by Regulation EU 2017/2401, the EBA must submit a technical standard to the European Commission summarizing all ECAI mapping tables based on the new credit quality steps.
Until the formal adoption of the revised ITS and its publication in the OJEU115, credit institutions must apply the ECAI mappings below.
For short-term credit assessments, since no additional credit quality step is introduced in the CRR by Regulation EU 2017/2401, credit institutions must use the short-term rating mapping table from Annex II of Commission Implementing Regulation EU 2016/1801.
For long-term credit assessments, credit institutions must use the credit quality steps from the following mapping table based on long-term rating designations from Basel (Basel, July 2016, "revisions of the securitization framework")116 .
Credit Quality Step
Rating Agency
S.A de notation
ARC SA
Axesor SA de notation
Creditreform
DBRS Ratings Limited
Notation Fitch
AAASF
AAA(sf)
AAAsf
AAA (sf)
AAAsf
AA+SF
AA+(sf)
AA+sf
AA (high) (sf)
AA+sf
AASF
AA(sf)
AAsf
AA (sf)
AAsf
AA-SF
AA-(sf)
AA-sf
AA (low) (sf)
AA-sf
A+SF
A+(sf)
A+sf
A (high) (sf)
A+sf
ASF
A(sf)
Asf
A (sf)
Asf
A-SF
A-(sf)
A-sf
A (low) (sf)
A-sf
BBB+SF
BBB+(sf)
BBB+sf
BBB (high) (sf)
BBB+sf
BBBSF
BBB(sf)
BBBsf
BBB (sf)
BBBsf
BBB-SF
BBB-(sf)
BBB-sf
BBB (low) (sf)
BBB-sf
BB+SF
BB+(sf)
BB+sf
BB (high) (sf)
BB+sf
BBSF
BB(sf)
BBsf
BB (sf)
BBsf
BB-SF
BB-(sf)
BB-sf
BB (low) (sf)
BB-sf
B+SF
B+(sf)
B+sf
B (high) (sf)
B+sf
BSF
B(sf)
Bsf
B (sf)
Bsf
B-SF
B-(sf)
B-sf
B (low) (sf)
B-sf
CCC+SF
CCC SF
CCC- SF
CCC+(sf)
CCC (sf)
CCC- (sf)
CCC+sf
CCC sf
CCC- sf
CCC (high) (sf)
CCC (sf)
CCC (low) (sf)
CCC+sf
CCCsf
CCC-sf
All others
Below CCC-SF
Below CCC-(sf)
Below CCC-sf
Below CCC (low) (sf)
Below CCC-sf
114 The securitization mapping tables are derived from Commission Implementing Regulation (EU) 2016/1801 of 11 October 2016.
115 The revised ITS draft was published by the EBA on 7 March 2022.
116 The current state of rules applicable to the mapping table is summarized in Q&A 4274.

Credit Quality Step
Rating Agency
Japan Credit Rating Agency Ltd
Rating Agency
Kroll Bond
Moody's Investors Service
Standard & Poor's Rating Services
Scope Rating Agency
AAA
AAA (sf)
Aaa (sf)
AAA (sf)
AAASF
AA+
AA+ (sf)
Aa1 (sf)
AA+ (sf)
AA+SF
AA
AA (sf)
Aa2 (sf)
AA (sf)
AASF
AA-
AA- (sf)
Aa3 (sf)
AA- (sf)
AA-SF
A+
A+ (sf)
A1 (sf)
A+ (sf)
A+SF
A
A (sf)
A2 (sf)
A (sf)
ASF
A-
A- (sf)
A3 (sf)
A- (sf)
A-SF
BBB+
BBB+ (sf)
Baa1 (sf)
BBB+ (sf)
BBB+SF
BBB
BBB (sf)
Baa2 (sf)
BBB (sf)
BBBSF
BBB-
BBB- (sf)
Baa3 (sf)
BBB- (sf)
BBB-SF
BB+
BB+ (sf)
Ba1(sf)
BB+ (sf)
BB+SF
BB
BB (sf)
Ba2 (sf)
BB (sf)
BBSF
BB-
BB- (sf)
Ba3 (sf)
BB- (sf)
BB-SF
B+
B+ (sf)
B1(sf)
B+ (sf)
B+SF
B
B (sf)
B2 (sf)
B (sf)
BSF
B-
B- (sf)
B3 (sf)
B- (sf)
B-SF
CCC+
CCC
CCC-
CCC+ (sf)
CCC (sf)
CCC- (sf)
Caa1 (sf)
Caa2 (sf)
Caa3 (sf)
CCC+ (sf)
CCC (sf)
CCC- (sf)
CCC+SF
CCC SF
CCC- SF
All others
Below CCC-
Below CCC- (sf)
Below Caa3 (sf)
Below CCC- (sf)
Below CCC-SF

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Annex D
Main EBA Guidelines regarding the scope covered by the Notice (list as of 30 June 2024 19 December 2024) The list of EBA orientations and recommendations to which the ACPR has conformed (with the provisions that allowed it to conform and extend certain texts to financing companies) is available on the ACPR website.
Prudential own funds:
28 May 2015: Orientation on payment commitments to the Deposit Guarantee Fund (EBA/GL/2015/09) (partial conformity by the ACPR).
28 July 2021: Guidelines on monitoring the threshold constituting an intermediate parent company for third-country groups in the Union (EBA/GL/2021/08) Liquidity risk:
9 December 2019: Guidelines on harmonised models and definitions for credit institution funding plans (EBA/GL/2019/05); 21 June 2017: Guidelines on the publication of the LCR to complement the publication of liquidity risk management under Article 435 of Regulation (EU) No 575/2013 (EBA/GL/2017/01).
Interest rate and credit spread risk:
20 October 2022: Guidelines specifying the criteria for detecting, assessing, managing and mitigating risks arising from potential changes in interest rates and the assessment and monitoring of credit spread risk from non-trading book activities of institutions Credit risk:
18 January 2017: Guidelines on the application of the definition of default under Article 178 CRR (EBA/GL/2016/07); 12 May 2017: Guidelines on credit risk management practices and the recognition of expected credit losses by credit institutions (EBA/GL/2017/06); 20 November 2017: Guidelines on probability of default (PD) estimates, loss given default (LGD) estimates and on the treatment of exposures on which default has occurred (EBA/GL/2017/16); 31 October 2018: Guidelines on the management of non-performing exposures and restructured exposures (EBA/GL/2018/06); 6 March 2019: Guidelines on appropriate loss given default (LGD) estimates in the event of an economic slowdown (EBA/GL/2019/03); 2 April 2020: Guidelines on legislative and non-legislative moratoria on loan repayments applied due to the COVID-19 pandemic (EBA/GL/2020/02), as amended on 25 June 2020 (EBA/GL/2020/08) and 2 December 2020 (EBA/GL/2020/15) (consolidated version in English) (EBA/GL/2020/02).

Notice 2025 on the Calculation and Publication of Prudential Ratios under CRDIV and MREL Requirements General Secretariat of the Prudential Control and Resolution Authority 134 6 May 2020: Guidelines on credit risk mitigation for institutions applying the IRB approach with their own LGD estimates (EBA/GL/2020/05).
29 May 2020: Guidelines on lending and monitoring (EBA/GL/2020/06).
Securitization:
7 July 2014: Guidelines on significant transfer of credit risk (EBA/GL/2014/05); 3 October 2016: Guidelines on implicit support for securitisation transactions (EBA/GL/2016/08); 12 December 2018: Guidelines on STS criteria for ABCP securitisations (EBA/GL/2018/08) and Guidelines on STS criteria for non-ABCP securitisations (EBA/GL/2018/09); 4 May 2020: Guidelines on the determination of the weighted average maturity of the tranche, in accordance with Article 257(1)(a) of Regulation (EU) No 575/2013 (EBA/GL/2020/04). Market risks:
16 May 2012: EBA Guidelines on Value at Risk in crisis situations (VaR in crisis situations) (EBA/GL/2012/2); 16 May 2012: EBA Guidelines on additional default and migration risk (IRC) capital requirements (EBA/GL/2012/3); 4 January 2017: Guidelines on corrections for modified duration of debt securities (EBA/GL/2016/09) 29 July 2020: Guidelines on the treatment of structural foreign exchange positions under Article 352(2) of Regulation (EU) No 575/2013 (capital requirements regulation) (EBA/GL/2020/09) 13 July 2021: EBA Guidelines (EBA/GL/2021/07) specifying criteria relating to the use of input data in the internal market risk model Operational risk:
11 September 2017: Guidelines on the assessment of ICT-related risk within the Supervisory Review and Evaluation process (SREP)117(EBA/GL/2017/05); 25 February 2019: Guidelines on outsourcing (EBA/GL/2019/02); 28 November 2019: EBA Guidelines on ICT and security risk management (EBA/GL/2019/04). In the context of the entry into application of the DORA Regulation, these Guidelines were updated and published on 11 February 2025 (EBA/GL/2025/02). Systemically important institutions, financial conglomerates and buffers:
16 December 2014: Guidelines concerning the assessment of other systemically important institutions (other SII) (EBA/GL/2014/10); 117 These guidelines are addressed to supervisors, but the ACPR conforms to them and bases its supervision of the ICT risk of the institutions it supervises on this basis

Notice 2025 on the Calculation and Publication of Prudential Ratios under CRDIV and MREL Requirements General Secretariat of the Prudential Control and Resolution Authority 135 22 December 2014: Guidelines on the convergence of supervisory practices relating to the supervision of financial conglomerates (JC/GL/2014/01).
30 September 2020: Guidelines on appropriate sub-sets of sectoral exposures to which competent or designated authorities may apply a systemic risk buffer in accordance with Article 133(5)(f) of Directive 2013/36/EU (EBA/GL/2020/13) Large exposures:
14 December 2015: Guidelines on limits for exposures to entities in the shadow banking system that carry out banking activities outside a regulated framework under Article 395(2) of Regulation (EU) No 575/2013 (EBA/GL/2015/20); 15 November 2017: Guidelines concerning related clients within the meaning of Article 4(1)(39) of the CRR (EBA/GL/2017/15). 15 February 2021: Guidelines specifying the conditions for applying the alternative treatment of exposures of institutions related to "tripartite repo transactions", referred to in Article 403(3) of Regulation (EU) No 575/2013 for large exposures (EBA/GL/2021/01) 15 September 2021: Guidelines specifying the criteria to assess exceptional cases when institutions exceed the high exposure limits set out in Article 395(1) of the Treaty on the Functioning of the European Union Regulation (EU) No 575/2013 and the timeframes and measures for returning to compliance with the provisions provided for in Article 396(3) of Regulation (EU) No 575/2013 (EBA/GL/2021/09). Pillar 2:
20 December 2013: Guidelines on capital measures provided for by the Supervisory Review and Evaluation Process (SREP) concerning foreign currency loans to uncovered borrowers (EBA/GL/2013/02); 19 December 2014: Guidelines on common procedures and methodologies to be applied within the framework of the Supervisory Review and Evaluation Process (EBA/GL/2014/13); 3 November 2016: Guidelines on the collection of information relating to ICAAP and ILAAP within the framework of the SREP (EBA/GL/2016/10); 19 July 2018: Revised guidelines on common procedures and methodologies to be applied within the framework of the Supervisory Review and Evaluation Process and prudent stress tests, amending the EBA/GL/2014/13 guidelines of 19 December 2014 (EBA/GL/2018/03). See also the revised version adopted by the EBA on 18 March 2022 and applicable from 1 January 2023. 23 July 2020: Guidelines on the pragmatic Supervisory Review and Evaluation Process 2020 in the light of the COVID-19 crisis (EBA/GL/2020/10) Financial communication (Pillar 3):
27 June 2014: Guidelines on the publication of information on encumbered and unencumbered assets (EBA/GL/2014/03); 23 December 2014: Guidelines on the significance, sensitivity and confidentiality and on the frequency of publication of information under Article 432(1) and (2) and Article 433 of Regulation (EU) No 575/2013 (EBA/GL/2014/14);

Notice 2025 on the Calculation and Publication of Prudential Ratios under CRDIV and MREL Requirements General Secretariat of the Prudential Control and Resolution Authority 136 11 August 2020: Guidelines amending EBA/GL/2018/01 on uniform publications under Article 473bis of Regulation (EU) No 575/2013 (CRR) relating to the transitional period to mitigate the impact of the introduction of the IFRS standard (EBA/GL/2020/12) 4 November 2020: Guidelines concerning the specification of systemic importance indicators and their publication (EBA/GL/2020/14) Detailed information on the exercise of the notification of conformity by competent authorities, including the SSM, is published and regularly updated.

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Annex E
Technical standards and delegated acts related to CRD4118:
List of Implementing and Delegated Acts for (EU) No 575/2013 (europa.eu) 118 The RTS/ITS finalized by the EBA as well as the state of adoption of the DAs are available on the European Commission website: https://ec.europa.eu/info/law/banking-prudential-requirements-regulation-eu-no-575-2013/amending-and-supplementary-acts/implementing-and-delegated-acts_en

Annex F
Main decisions, recommendations and main ECB regulations regarding the areas covered by the Notice The full text of all decisions, regulations, guidelines and communications adopted by the ECB related to the areas covered by this Notice, as well as letters to the industry, can be found on the ECB website, including:

Options and discretions
For Significant Institutions (SIs):
Regulation (EU) 2025/1520 amending ECB Regulation 2016/445 of 14 March 2016 on the exercise of options and discretions provided for by Union law. The binding regulation concerns general O&D directly applicable in law.
ECB Guide on options and discretions available in Union law. The guide concerns individual O&D. Its purpose is to frame the case-by-case assessment of individual requests by the supervisor.

For Less Significant Institutions (LSIs):
ECB Orientation (EU) 2025/1521 of 15 July 2025 amending ECB Orientation (EU) 2017/697 of 4 April 2017 relates to general options and discretions regarding less significant institutions. The provisions of the Orientations will enter into application on 1 January 2026. The Orientation reproduces the general O&D of the Regulation intended for SIs and extends them to LSIs. In France, this Orientation is implemented by Decision No. 2025-C-33 of 16 October 2025 of the ACPR College. Recommendation 2025/26 of 15 July 2025 amending ECB Recommendation 2017/10 of 4 April 2017 on the exercise of certain options and faculties provided for by Union law by national competent authorities regarding LSIs. The non-binding Recommendation gathers individual O&D.

EU Regulation 2022/504 amending Regulation (EU) 2016/445 of 14 March 2016 (consolidated version) and ECB Consolidated Guide of March 2022 regarding options and faculties provided for by Union law (significant institutions) ECB Orientation BCE/2022/508 of 25 March 2022 amending ECB Orientation BCE/2017/9 and ECB Recommendation BCE/2022/12 of 25 March 2022 amending ECB Recommendation 2017/10 of 4 April 2017 and the corrigendum to the orientation (credit institutions other than significant institutions) ECB Decision BCE/2021/27 of 18 June 2021 declaring the existence of exceptional circumstances allowing the temporary exclusion of certain exposures to Eurosystem central banks from the total exposure measure regarding the COVID-19 pandemic

Quality of own funds and dividend distribution Public guidelines concerning the assessment of the qualification of capital instruments as Additional Tier 1 capital instruments and Tier 2 capital instruments of 6 June 2016 ECB Decision (EU) 2015/656 of 4 February 2015 on the conditions under which credit institutions may include their interim or year-end profits in their Common Equity Tier 1 capital in accordance with Article 26(2) of the CRR (BCE/2015/4) ECB Recommendation 2020/19 of 27 March 2020 on dividend distributions ECB Decision (EU) 2021/1439 of 3 August 2021 amending Decision (EU) 2018/546 on the delegation of the power to adopt decisions on own funds (BCE/2021/35)

Credit risk, counterparty risk and securitisation Guide on the notification of securitisation transactions (Articles 6 to 8 of the Securitisation Regulation) of 18 March 2022 ECB Regulation EU 2018/1845 of 21/11/2018 on the exercise of the faculty under Article 178(2) of the CRR (significant institutions)

ECB Orientations (EU) 2020/978 of 25 June 2020 on the exercise, by national competent authorities regarding less significant institutions, of the faculty under Article 178(2)(d) of Regulation (EU) No 575/2013 of the European Parliament and of the Council concerning the threshold for assessing the significance of arrears on credit obligations (BCE/2020/32) (credit institutions other than significant institutions) Public guidelines concerning leveraged loans, of 17 May 2017 Guidelines for banks on non-performing loans, of 20 March 2017 Addendum to the ECB guidelines for banks on non-performing loans: prudential expectations regarding prudent provisioning for non-performing exposures (NPL), of 15 March 2018 Communication on ECB prudential expectations regarding NPL provisioning of 22 August 2019 and letter Public guidelines concerning the recognition of a significant transfer of credit risk of 24 March 2016 Public guidelines concerning information on transactions going beyond the contractual obligations of a sponsoring or originating institution in accordance with Article 248(1) of Regulation (EU) No 575/2013, of 28 July 2017 Letter concerning the process of recognizing the risk reduction effect of novation contracts and clearing agreements of 10 October 2019 and FAQ ECB Guide on the assessment of the significance (EGMA) of extensions and modifications to IMM and A-CVA models of 25 September 2017 ECB Guide on internal models, February 2024 version (not translated)

Pillar 2 and information submissions
ECB Regulation (EU) 2015/534 of 17 March 2015 on the reporting of prudential financial information (BCE/2015/13) and consultation of 17 February 2017 SSM prudential guidelines on bank governance and risk appetite frameworks, June 2016 Prudential expectations regarding ICAAP and ILAAP and harmonized collection of information on this matter, of 8 January 2016, Results of the 2020 Supervisory Review and Evaluation Process (SREP) and announcement of prudential priorities for 2021 (28 January 2021) SSM supervisory methodology 2021 Decision of 27 June 2017 on the submission of financing plans (consolidated version)

Other topics
Guide on banking supervision, November 2014
SSM Supervisory Manual, March 2018
ECB banking supervision: SSM prudential priorities 2018 of 18 December 2017 LSI supervision within the SSM of 8 November 2017 Communication of 30 September 2015 on the treatment of central bank reserves in the context of the LCR liquidity ratio (not translated into French) Letter from Danièle Nouy, Chair of the Supervisory Board, to Mr Giegold, MEP, on the liquidity coverage ratio (not translated into French) of 11 July 2016 Guide on the approach adopted for the recognition of institutional protection schemes for prudential purposes of 12 July 2016 ECB Orientation (EU) 2016/1993 of 4 November 2016 on institutional protection schemes including significant institutions and less significant institutions (BCE/2016/37) Stocktake of IT risk supervision practices, 16 November 2016 (not translated) Letter on the reform of reference rates of 3 July 2019 (not translated)

Guide to the method of setting administrative pecuniary penalties pursuant to Article 18(1) and (7) of Council Regulation (EU) No 1024/2013 (not translated) of March 2021 Guide on the supervisory approach to consolidation in the banking sector (January 2021) Guide on climate and environmental risks for banks (November 2020) Best practices on governance and counterparty risk management (October 2023) (not translated) The ECB details the guidelines and recommendations of the EBA applicable since the establishment of the SSM on the following webpage.

Annex G
Useful sites and documents
European Banking Authority: The Single Rulebook

The EBA has developed an interactive version of the 'Single Rule Book', an online tool that provides, for CRR, CRD4 and BRRD texts, a link to the corresponding technical standards developed by the EBA and adopted by the European Commission, and related Q&As.
An interactive detailed summary of prudential information to be transmitted to national competent authorities has also been developed, which refers to the Q&As associated with filling out these forms.
This Interactive Single Rule Book is designed as a tool for assistance and documentation. The EBA and the ACPR do not assume responsibility for its content. The official versions of the applicable texts are those published in the Official Journal.
European Banking Authority: Single Rulebook Q&A Process (EBA Q&A site)
EBA homepage on the different versions of prudential reporting forms (the version applicable from 1 June 2025 is Reporting Framework 4.1; the version applicable from 31 December 2022 is Reporting Framework 3.2, with a phased entry into application from June to December 2022)

Commission and European Parliament

European Commission: CRD4 – Frequently Asked Questions
European Parliament site on CRD4
European Commission site on banks
CRD6: Directive - EU - 2024/1619 - FR - EUR-Lex https://eur-lex.europa.eu/legal-content/FR/TXT/?uri=OJ%3AL_202401619
CRR3: https://eur-lex.europa.eu/legal-content/FR/TXT/?uri=CELEX%3A32019R0876

4.6. CRD4 – consolidated version
5.7. CRR – consolidated version
6.8. CRR2 Regulation and CRD5 Directive of 20 May 2019
7.9. Consolidated delegated regulation on the liquidity coverage ratio modified + Regulation 2022/786 of 10 February 2022
8.10. Regulation (EU) 2017/2402 ('horizontal securitisation regulation' or 'STS regulation') and Regulation (EU) 2017/2401 amending the CRR on securitisation
9.11. Regulation 2019/2160 on covered bonds amending CRR.
10.12. Regulation (EU) 2019/2033 and Directive (EU) 2019/2034 on the prudential regime for investment firms
11.13. Regulation (EU) 2020/873 of 24 June 2020 (Quickfix)
12.14. Tracking tables of delegated acts, ITS and RTS associated with CRR and CRD 4 – European Commission site

ACPR Decisions

Decision No. 2025-C-33 of 16 October 2025 on the implementation of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation 648/2012
1.2. Decision No. 2021-C-25 of 7 July 2021 implementing Regulation (EU) No 2019/2033 of the European Parliament and of the Council of 27 November 2019 on prudential requirements applicable to investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (IFR)
Decision No. 2022-C-21 of 13 July 2022 repealing No. 2021-C-23 of 28 June 2021 implementing Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements applicable to credit institutions and investment firms and amending Regulation (EU) No 648/2013
Decision 2021-C-22 of 24 June 2021 on the existence of exceptional circumstances allowing the temporary exclusion of certain exposures to Eurosystem central banks from the total exposure measure of the leverage ratio regarding the COVID-19 epidemic under paragraph 5 of Article 429bis of Regulation (EU) No 575/2013
4.3. Decision No. 2016-C-26 on the implementation of the provisions of paragraph 2 of Article 420 of the CRR Regulation (LCR)

Basel Committee: the consolidated Basel framework
Annex H
Evolution of the Notice during the year

Initial version of 28 June 2024
Updated version of XX December 2024
Previous update of the Notice: 30 December 2024

Notice 2025 on the Calculation and Publication of Prudential Ratios under CRD4 and MREL Requirements

Calculation and Publication of Prudential Ratios under CRD4 and MREL Requirements – 2025

▪ Liquidation entities and similar, which are in principle not subject to any MREL decision

▪ Resolution entities subject to an external MREL target on a consolidated basis

▪ Non-resolution subsidiaries subject to an internal MREL target on an individual or sub-consolidated basis (Article 12 octies of the MRU regulation, Article 45 septies of the BRRD directive)

▪ Entities benefiting from an MREL exemption decision

5.4 Calibration of the overall MREL requirement

5.5 Subordination requirements

▪ "8% TLOF" subordination requirement for so-called "Pillar 1" banks

▪ Subordination requirement expressed in TREA and TEM for so-called "Pillar 1" banks

▪ Ad hoc subordination requirement for banks other than so-called "Pillar 1" banks

5.6 Eligibility rules

5.7 "Daisy chains" regime applicable to intermediate entities

Lineage: In force