PRUDENTIAL CONTROL AUTHORITY

Instruction No. 2011-I-12

Amending Instruction No. 2007-02 of 26 March 2007 on capital requirements applicable to credit institutions and investment firms

The Prudential Control Authority,

Having regard to Directive 2010/76/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 2006/48/EC and 2006/49/EC as regards capital requirements for the trading book and for securitisations, and the prudential supervision of remuneration policies;

Having regard to the Monetary and Financial Code, particularly Article L. 612-24 thereof;

Having regard to the Order of 20 February 2007 amended relating to capital requirements applicable to credit institutions and investment firms;

Having regard to the Regulation of the Banking Regulation Committee No. 90-02 of 23 February 1990 amended relating to own funds;

Having regard to the Regulation of the Banking and Financial Regulation Committee No. 2000-03 of 6 September 2000 amended relating to prudential supervision on a consolidated basis;

Having regard to Instruction No. 2007-02 amended of the Banking Commission relating to capital requirements applicable to credit institutions and investment firms;

Having regard to the opinion of the Consultative Committee on Prudential Affairs dated 21 September 2011;

Decides:

Article 1

The third paragraph of Article 2.2 of Instruction No. 2007-02 is replaced by the following:

3. Statements relating to market risks:
   • MKR SA TDI statement: standard approach market risks relating to interest rate positions,
   • MKR SA EQU statement: standard approach market risks relating to equity positions,
   • MKR SA FX statement: standard approach market risks relating to foreign exchange positions,
   • MKR SA COM statement: standard approach market risks relating to commodity positions,
   • MKR IM statement: internal model approach market risks,
   • MKR IM Details statement: detailed information on internal models for market risks,
   • MKR SA CTP statement: standard approach for specific risk for correlation portfolio positions,
   • MKR SA SEC statement: securitisations in the trading book.

Article 2

Annex 2 "1. State CA (solvency ratio synthesis statement)" to Instruction No. 2007-02 of 26 March 2007 is amended as follows:

State CA is replaced by the following State CA:

1. State CA (Solvency Ratio Synthesis Statement)

Subject institutions shall complete all lines of State CA, unless otherwise indicated in the first column of the statement:

• I: Line to be declared only by institutions subject to IFRS standards;
• NI: Line to be declared only by institutions other than those subject to IFRS standards;
• C: Line to be declared only by institutions subject to prudential supervision on a consolidated basis.

ID	Denomination	Declared Amounts	Regulatory References	Formulas
1	TOTAL OWN FUNDS FOR THE CALCULATION OF THE SOLVENCY RATIO			= 1.1 + 1.2 + 1.3 + 1.6 + 1.7<br>= 1.4 + 1.5 + 1.6 + 1.7
1.1	CORE OWN FUNDS
	Core own funds are determined in accordance with the provisions set out in Articles 2, 2a, and 2b of Regulation No. 90-02.			= 1.1.1 + 1.1.2 + 1.1.3 + 1.1.4 + 1.1.5
1.1.1	Capital		Article 2a) and 2c) of Regulation No. 90-02	= 1.1.1.1 + 1.1.1.2 + 1.1.1.3 + 1.1.1.4
1.1.1*	Of which: instruments pari passu with ordinary shares in the event of liquidation, and in going concern		Cf. Article 2a) first indent of Regulation No. 90-02: instruments pari passu with ordinary shares in the event of liquidation; report here the nominal amount as well as the premium attached to the instruments considered.
1.1.1**	Of which: instruments conferring preferential rights in terms of dividend payments on a non-cumulative basis		Cf. Article 2a) first indent of Regulation No. 90-02: instruments granting preferential rights in terms of dividend payments; report here the nominal amount as well as the premium attached to the instruments considered.
1.1.1.1	Called-up capital		= Article 2a), first indent, and Article 2c), first indent, of Regulation No. 90-02
1.1.1.2	(-) Own shares		= Article 2c) second indent of Regulation No. 90-02: "shall be deducted (...) own shares held, valued at their accounting value".
1.1.1.3	Share premiums		= Article 2a) third indent of Regulation No. 90-02
1.1.1.4	Other elements assimilated to capital		= Last paragraph of Article 2a) of Regulation No. 90-02 "sums which stand in lieu of or are assimilated to them, in accordance with the legislation in force, in the accounting of institutions governed by a special status, notably the definitively acquired provisions or the fixed or variable capital represented by social shares effectively paid up or by cooperative investment or partner certificates".
1.1.2	Eligible reserves			= 1.1.2.1 + 1.1.2.2 + 1.1.2.3 + 1.1.2.5 + 1.1.2.6
1.1.2.1	Reserves and retained earnings		= Article 2a) second indent and fourth indent - Article 2c) third indent of Regulation No. 90-02.<br>This line does not include revaluation differences made before 31/12/2004.<br>It includes credit acquisition differences (for non-IFRS institutions) and translation differences.
1.1.2.1.01	Reserves (including valuation differences)		= Article 2a) second indent of Regulation No. 90-02<br>FINREP: reserve + revalued reserves
1.1.2.1.02	Part of reserves to be filtered, in case of valuation differences		Cf. Article 2a) second indent of Regulation No. 90-02.<br>Part of reserves subject to CEBS prudential filters.
C	1.1.2.2	Minority interests	= Article 7 fourth indent of Regulation No. 90-02.	= 1.1.2.2.01 + 1.1.2.2.02 + 1.1.2.2.03
1.1.2.2*	01	Of which: equity instruments that must be converted in situations of emergency	Cf. Regulation No. 90-02, Article 2b)
1.1.2.2*	02	Of which: equity instruments without redemption option accompanied by a progressive remuneration	Cf. Regulation No. 90-02, Article 2b)
1.1.2.2*	03	Of which: equity instruments with a redemption option accompanied by a progressive remuneration	Cf. Regulation No. 90-02, Article 2b)
1.1.2.2*	04	Of which: equity instruments without redemption option accompanied by a progressive remuneration benefiting from a grandfather clause and subject to limits	Cf. Regulation No. 90-02, Article 5 I and II
1.1.2.2*	05	Of which: equity instruments with a redemption option accompanied by a progressive remuneration benefiting from a grandfather clause and subject to limits	Cf. Regulation No. 90-02, Article 5 I and II
1.1.2.2.01	Minority interests (including valuation differences)		FINREP: minority interests
1.1.2.2.02	Part of minority interests to be filtered, in case of valuation differences		Part of minority interests subject to CEBS prudential filters
1.1.2.2.03	(-) Adjustments		Non-eligible minority interests in capital
1.1.2.3	Intermediate profit or (-) loss			= 1.1.2.3.01 + 1.1.2.3.02
1.1.2.3.01	Intermediate result		Intermediate losses are deducted in accordance with Article 2c) fifth indent of Regulation No. 90-02. Intermediate profits may only be included when they meet the conditions set out in the penultimate paragraph of Article 2a) of Regulation No. 90-02.
1.1.2.3.02	(-) Of which: income from unrealized gains or losses subject to prudential adjustments		Positive items referred to in lines 1.1.2.6.07 and 1.1.2.6.11
1.1.2.5	(-) Net gains arising from the capitalization of future income of securitized assets		Cf. first paragraph of Article 2a) of Regulation No. 90-02: "For originating institutions subject to securitization, net gains arising from the capitalization of future income of securitized assets and which constitute the credit enhancement of securitization positions are not included."
I	1.1.2.6	Unrealized or deferred gains or losses	Institutions subject to IFRS standards shall include here the unrealized or deferred gains or losses referred to in Article 2bis of Regulation No. 90-02. For the purposes of the declaration to the Prudential Control Authority, subject institutions shall report all elements referred to below. The declaration of these elements does not prevent some of these elements from being included in supplementary own funds.	Sum 1.1.2.6.i, i = 01 to 16
I	1.1.2.6.01	Unrealized gains or losses on available-for-sale equity instruments		First indent of the 7th paragraph of Article 2bis of Regulation No. 90-02: cash flow hedges relating to available-for-sale equity instruments are included here.
I	1.1.2.6.02	Prudential adjustment of unrealized gains or losses on available-for-sale equity instruments		First indent of the 7th paragraph of Article 2bis of Regulation No. 90-02: "for equity instruments, net unrealized gains are deducted from core own funds, currency by currency, net of the amount of tax already deducted accountingly and are included, currency by currency, before tax in supplementary own funds to the extent of 45%. Net unrealized losses are not adjusted."
I	1.1.2.6.03	Unrealized gains or losses on loans and receivables available for sale		Second indent of the 7th paragraph of Article 2bis of Regulation No. 90-02 for institutions subject to IFRS standards: cash flow hedges on loans and receivables available for sale are included here.
I	1.1.2.6.04	Prudential adjustment of unrealized gains or losses on loans and receivables available for sale		Second indent of the 7th paragraph of Article 2bis of Regulation No. 90-02: concerns loans and receivables, the unrealized gains or losses on which are neutralized.
I	1.1.2.6.05	Unrealized gains or losses on other financial assets available for sale (i.e. debt securities)		Second indent of the 7th paragraph of Article 2bis of Regulation No. 90-02 for institutions subject to IFRS standards. Cash flow hedges on available-for-sale debt instruments are included here.
I	1.1.2.6.06	Prudential adjustment of unrealized gains or losses on other financial assets available for sale (i.e. debt securities)		Second indent of the 7th paragraph of Article 2bis of Regulation No. 90-02: concerns notably debt instruments, the unrealized gains or losses on which are neutralized.
I	1.1.2.6.07	Unrealized gains or losses, due to the evolution of own credit risk, recorded on debts valued at fair value through profit or loss		Annex 4 of the present Instruction No. 2007-02: "Other core own funds with the agreement of the Prudential Control Authority".
I	1.1.2.6.08	Prudential adjustment of unrealized gains or losses, due to the evolution of own credit risk, recorded on debts valued at fair value through profit or loss		Annex 4 of the present Instruction No. 2007-02: "unrealized gains or losses, due to the evolution of own credit risk - 'own credit risk' -, recorded on debts valued at fair value through profit or loss, must be neutralized for their net amount of tax already deducted accountingly".
I	1.1.2.6.09	Unrealized gains or losses on cash flow hedges, not related to available-for-sale financial assets		8th paragraph of Article 2bis of Regulation No. 90-02 for institutions subject to IFRS standards. Notably on interest rate product hedges (excluding available-for-sale securities).
I	1.1.2.6.10	Prudential adjustment of unrealized gains or losses on cash flow hedges		8th paragraph of Article 2bis of Regulation No. 90-02: "Unrealized gains or losses recorded accountingly directly in equity due to a cash flow hedge operation are neutralized." Notably on interest rate product hedges (excluding available-for-sale securities).
I	1.1.2.6.11	Unrealized gains or losses on investment property		10th paragraph of Article 2bis of Regulation No. 90-02 for institutions subject to IFRS standards (gross amount reduced by tax provision). Only unrealized gains or losses subsequent to the first application of IFRS standards are included.
I	1.1.2.6.12	Prudential adjustment of unrealized gains or losses on investment property		10th paragraph of Article 2bis of Regulation No. 90-02: "Unrealized gains on investment property recorded accountingly due to the application of the fair value model are deducted from core own funds, building by building, net of the amount of tax already deducted accountingly and are included, building by building, before tax in supplementary own funds to the extent of 45%. Unrealized losses are not adjusted."
1.1.2.6.13	Revaluation difference on tangible fixed assets		Articles 2bis and 2ter of Regulation No. 90-02 (gross amount reduced by tax provision). For institutions subject to IFRS standards, only revaluation differences subsequent to the first application of IFRS standards are included here.
1.1.2.6.14	Prudential adjustment of revaluation differences on tangible fixed assets		Articles 2bis and 2ter of Regulation No. 90-02: revaluation differences recorded on tangible fixed assets are deducted from core own funds, asset by asset, net of the amount of tax already deducted accountingly and are included, asset by asset, before tax in supplementary own funds to the extent of 45%.
1.1.2.6.15	Other unrealized gains or losses affecting reserves		Last indent of Article 2b) and 3rd, 4th and 5th paragraphs of Article 2bis of Regulation No. 90-02. This refers to:<br>- unamortized portions of hybrid debts included in accounting equity;<br>- positive impacts of derivative components on own shares;<br>- net actuarial gains from pension schemes.
1.1.2.6.16	Prudential adjustments of other unrealized gains or losses impacting reserves		Last indent of Article 2b) and 3rd, 4th and 5th paragraphs of Article 2bis of Regulation No. 90-02
NI	1.1.3	General Banking Risk Provision		Article 2a) sixth indent and Article 3 of Regulation No. 90-02. Only institutions other than those subject to IFRS standards shall complete this line.
1.1.4	Other core own funds with the agreement of the Prudential Control Authority and others		Cf. Article 2b), last paragraph of Article 2bis and Article 13 of Regulation No. 90-02	= 1.1.4.1a + 1.1.4.3 + 1.1.4.4
1.1.4.1a	Equity instruments issued directly		Cf. Regulation No. 90-02, Article 2b)	= 1.1.4.1a.01 + 1.1.4.1a.02 + 1.1.4.1a.03 + 1.1.4.1a.04 + 1.1.4.1a.05
1.1.4.1a.01	Equity instruments that must be converted in situations of emergency		Cf. Regulation No. 90-02, Article 2b)
1.1.4.1a.02	Equity instruments without redemption option accompanied by a progressive remuneration		Cf. Regulation No. 90-02, Article 2b)
1.1.4.1a.03	Equity instruments with a redemption option accompanied by a progressive remuneration		Cf. Regulation No. 90-02, Article 2b)
1.1.4.1a.04	Equity instruments without redemption option accompanied by a progressive remuneration benefiting from a grandfather clause and subject to limits		Cf. Regulation No. 90-02, Article 5 I and II
1.1.4.1a.05	Equity instruments with a redemption option accompanied by a progressive remuneration benefiting from a grandfather clause and subject to limits		Cf. Regulation No. 90-02, Article 5 I and II
I	1.1.4.3	Revaluation differences on tangible fixed assets and investment property related to the first application of IFRS standards		= Penultimate paragraph of Article 2bis of Regulation No. 90-02
1.1.4.4	Other core own funds		Cf. last paragraph of Article 2bis of Regulation No. 90-02
1.1.5	(-) Deductions from core own funds (other than own shares)			= 1.1.5.1 + 1.1.5.2a + 1.1.5.3a + 1.1.5.4
1.1.5.1	(-) Intangible fixed assets (including setup costs)		Article 2c) fourth indent of Regulation No. 90-02.<br>This line includes debit acquisition differences (goodwill).
1.1.5.1*	Of which: debit acquisition differences (goodwill)		3rd paragraph of Article 7 of Regulation No. 90-02
1.1.5.2a	(-) Part of equity instruments not taken into account due to exceeding the limit set by the Prudential Control Authority		Result of the application of the limits of Article 5 I of Regulation No. 90-02, concerning instruments with a redemption option issued indirectly	= 1.1.5.2a01 + 1.1.5.2a02 + 1.1.5.2a03 + 1.1.5.2a04
1.1.5.2a.01	Of which: equity instruments that must be converted in situations of emergency		Cf. Result of the application of the limits of Article 5 I of Regulation No. 90-02
1.1.5.2a.02	Of which: equity instruments without redemption option accompanied by a progressive remuneration and subject to limits		Cf. Result of the application of the limits of Article 5 I of Regulation No. 90-02
1.1.5.2a.03	Of which: equity instruments with a redemption option accompanied by a progressive remuneration		Cf. Result of the application of the limits of Article 5 I of Regulation No. 90-02
1.1.5.2a.04	Of which: equity instruments benefiting from a grandfather clause		Cf. Result of the application of the limits of Article 5, points I and II, of Regulation No. 90-02
1.1.5.3a	(-) Additional adjustments corresponding to assets valued at fair value through profit or loss		Article 2bis of Regulation No. 90-02
1.1.5.4	(-) Other deduction from core own funds			= 1.1.5.4.1 + 1.1.5.4.2
I	1.1.5.4.1	(-) Prudential adjustment of positive impacts of revaluation differences on tangible fixed assets and investment property carried out during the first application of IFRS standards		Penultimate paragraph of Article 2bis of Regulation No. 90-02. For institutions subject to IFRS standards, the positive impacts of revaluations carried out during the first application of IFRS standards on tangible fixed assets or investment property, whether they are subsequently valued at amortized cost or not under IFRS, are deducted from core own funds, asset by asset, net of the amount of tax already deducted accountingly and are included, asset by asset, before tax in supplementary own funds to the extent of 45%.
1.1.5.4.2	(-) Others (including positive difference from equity method on shares held in entities with an insurance activity)		Article 6 point II of Regulation No. 90-02
1.2	SUPPLEMENTARY OWN FUNDS		Articles 1, 4 and 4bis of Regulation No. 90-02	= 1.2.1 + 1.2.2 + 1.2.3
1.2.1	First-tier supplementary own funds			= 1.2.1.1 + 1.2.1.2 + 1.2.1.3 + 1.2.1.4 + 1.2.1.5 + 1.2.1.6 + 1.2.1.7 + 1.2.1.8
1.2.1.1	Part of equity instruments exceeding limits for inclusion in core own funds and included in supplementary own funds		Article 4a) of Regulation No. 90-02	= -1.1.5.2a
I	NI	1.2.1.2	Prudential adjustments of unrealized gains or losses in core own funds carried over to first-tier supplementary own funds	Article 4a) of Regulation No. 90-02: "elements included in supplementary own funds in accordance with Articles 2bis, 2ter and 2quater".
I	1.2.1.2.01	Prudential adjustments of unrealized gains or losses on available-for-sale equity instruments carried over to first-tier supplementary own funds		Article 2bis of Regulation No. 90-02: "Unrealized gains or losses on available-for-sale financial assets recorded accountingly directly in equity are adjusted as follows:<br>- for equity instruments, net unrealized gains are deducted from core own funds, currency by currency,"

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