Communication of 4 December 2024: Voluntary Application of CRR3 Provisions to Financial Intermediaries

Communication of 4 December 2024. Voluntary application to Financial Intermediaries of the provisions provided for by Regulation (EU) 2024/1623 (CRR3).

The current prudential regulation for financial intermediaries listed in the register indicated in Article 106 of the TUB (“Intermediaries 106”) is based on the principle of equivalent supervision; these intermediaries are therefore subject to a prudential regime comparable to that of banks, applying – with some adaptations – the provisions of Regulation (EU) No 2013/575 (“CRR”).

Starting from 1 January 2025, the prudential regulation for banks and banking groups will be modified due to the application of Regulation (EU) 2024/1623 (“CRR3”), which amends the CRR.

For Intermediaries 106, in line with the aforementioned principle of equivalent supervision, the Bank of Italy will assess the extension of the new banking rules according to the usual methods, which require the modification of applicable supervisory provisions (in particular Circular No. 288/2015) following public consultation and impact analysis. This process, which will take place during 2025, will also allow for the assessment of whether and to what extent it is necessary to maintain or introduce specific treatments, to take into account and enhance the characteristics of Intermediaries 106 in compliance with the principle of proportionality. The new provisions will apply no earlier than 1 January 2026.

Pending the completion of the regulatory update process as described above, some intermediaries, mostly belonging to banking groups, have requested from the Bank of Italy the ability to adopt the new CRR3 rules already from 1 January 2025, also with the aim of containing costs arising from the application of different rules at the individual and consolidated levels (Intermediaries 106 would apply the current rules at the individual level while the new CRR3 rules would apply at the consolidated level – so-called “dual track”).

To address the need represented, this regulatory communication provides that Intermediaries 106 that make express communication to the Bank of Italy may apply, on a voluntary basis, the rules provided for by CRR3 starting from 1 January 2025, according to the methods indicated in the annex. This choice is not reversible and cannot be used selectively: an Intermediary 106 that decides to use this option will apply the CRR3 rules, as specified in the annex, for all affected risk profiles.

Furthermore, the regime provided for in this communication is temporary; once the prudential regulatory framework for Intermediaries 106 is updated, even those that have exercised the option for early application of CRR3 based on this regulatory communication must comply with what will be provided for in Circular 288/2015.

Intermediaries 106 wishing to avail themselves of the option transmit a specific communication to the Bank of Italy by 31 December 2024 via PEC to the unit competent for supervision and to the Service for Surveys and Statistical Processing (1).

This communication enters into force the day following its publication on the Bank of Italy’s website.

1 At the address res@pec.bancaditalia.it

Annex

1. Recipients This communication is addressed to financial intermediaries and financial groups subject to the provisions of Circular 288/2015, Title IV respectively on an individual and consolidated basis.

2. Prudential and reporting regime A) Prudential regime Intermediaries 106 that exercise the option for early application of CRR3 respect from 1 January 2025 the prudential regime specified below. In particular, Intermediaries 106 apply:

• with reference to own funds (Title IV, Chapter 3) and minimum requirements (Title IV, Chapter 4), the current discipline provided by Circ. 288. Article 468 CRR also applies, as modified by CRR3 regarding the “Temporary treatment of unrealized profits and losses measured at fair value recognized in other comprehensive income”; Intermediaries 106 wishing to apply the treatment provided for in Article 468 CRR give express indication in the communication with which they exercise the option; in the event that the latter is carried out by the parent company, the communication indicates for each of the Intermediaries 106 for which the option is exercised the intention to avail themselves of the temporary treatment of Article 468 CRR on an individual basis;

• with reference to credit risk, the rules contained in Part 3, Title II, Chapters 1, 2 (standard method), Chapter 3 (IRB) and Chapter 4 (CRM) of the CRR as modified by CRR3. Intermediaries 106 continue to apply the specific treatment regarding purchased commercial credits that allows, in the case of pro-solvendo purchases, to attribute the exposure to the assigned debtors and not to the assignor, upon the occurrence of certain conditions as currently regulated by Title IV, Chapter 5, Section II, para. 3 of Circ. 288/2015, as well as the treatment provided for exposures to collective investment undertakings as regulated by Title IV, Chapter 5, Section II, para. 6 of Circ. 288/2015. Finally, financial intermediaries apply the provisions of Part Ten, Chapter IV, Articles 500 (Correction in case of large-scale sales), 500-bis (Temporary treatment of public debt issued in the currency of another Member State), 501 (Adjustments to risk-weighted non-defaulted SME exposures) and 501-bis (Adjustments to own fund requirements for credit risk for exposures to entities that manage or finance physical structures or plants, systems and networks that provide or support essential public services) of the CRR, as modified by CRR3;

• with reference to the transitional regimes introduced by CRR3, the treatments provided for in Articles 494-quinquies (Return to less sophisticated methods), 495 (Treatment of exposures in equity instruments under the IRB method), 495-bis (Transitional provisions for exposures in equity instruments), 495-ter (Transitional provisions for exposures from specialized financing), 495-quater (Transitional provisions for exposures from leasing as a credit risk mitigation technique), 495-quinquies (Transitional provisions for irrevocable unconditional commitments), 495-sexies (Transitional provisions for the credit assessment of an ECAI by institutions) (2), 495-septies (Transitional provisions for real estate revaluation requirements), 495-octies (Transitional provisions for certain public guarantee systems); 501-quinquies (Transitional provisions on the prudential treatment of crypto-assets).

2 According to the choice of exercising discretion that the Bank of Italy will make for banks in Circ. 285.

• with reference to the regulation of securitizations, the current discipline provided for in Title IV, Chapter 8 of Circ. 288/2015 6th update.

• with reference to counterparty risk, the current discipline provided for in Title IV, Chapter 9 of Circ. 288/2015, 7th update;

• with reference to credit valuation adjustment risk, the rules contained in Part 3, Title VI of the CRR, as modified by CRR3, which provide for the use of three new calculation methodologies for the capital requirement (Base, Simplified and Standard);

• with reference to operational risk, the rules contained in Part 3, Title III of the CRR, as modified by CRR3;

• with reference to market risks, the current regime provided for by Circ. 288/2015, Title IV, Chapter 11; furthermore, Intermediaries 106 apply the materiality thresholds introduced by Regulation (EU) 2019/876 (“CRR2”) (Article 94) which expand the possibility of availing themselves of simplified regimes (derogation) for small trading portfolios;

• with reference to large exposures, the current regime provided for by Circ. 288/2015, Title VI, Chapter 12, with the exception of what is provided for by Articles 400, para. 1 point (i), 402 and 493, para. 3 points a) and i), of the CRR, as modified by CRR3, as the modifications made to the cited articles are correlated to those introduced for the types of exposures indicated (off-balance sheet exposures, covered bonds and exposures guaranteed by real estate) in the regulation for the calculation of requirements against credit risk.

It is specified that, even in the event of exercising the option, Intermediaries 106 are not subject to:

• in line with the current regime, to capital conservation buffer and countercyclical capital buffer, liquidity, leverage ratio and prudential backstop requirements;

• on an individual basis to the rules on the output floor provided for in Article 92 of the CRR, as modified by CRR3, as well as the related transitional regimes provided for in Article 465 of the CRR, as also modified by CRR3. For financial intermediaries belonging to banking groups, the application of the aforementioned provisions at the consolidated group level remains unchanged.

B) Reporting regime With reference to reporting rules, for risk profiles where the exercise of the option entails alignment with the discipline defined by CRR3 as specified above (i.e., for credit, operational, and CVA risk profiles), Intermediaries 106 apply version 4.0 of the reporting templates provided for in Annex 1 of Implementing Regulation (EU) No 451/2021, as modified by the EBA (3), except as specified below.

3 https://www.eba.europa.eu/activities/single-rulebook/regulatory-activities/supervisory-reporting/implementing-technical-standards-supervisory-reporting-changes-related-crr3crd6-step-1

Intermediaries 106 do not send information referring to:

• Credit Risk – IRB Methodology

• Credit risk and non-simultaneous settlement transactions: IRB method applied to capital requirements: distribution by PD intervals (see form C 08.03);
• Credit risk and non-simultaneous settlement transactions: IRB method applied to capital requirements: RWEA tables (see form C 08.04);
• Credit risk and non-simultaneous settlement transactions: IRB method applied to capital requirements: PD retrospective test (see form C 08.05);
• Credit risk and non-simultaneous settlement transactions: IRB method applied to capital requirements: PD retrospective test pursuant to Article 180, paragraph 1, letter f) (see form C 08.05.1);
• Credit risk and non-simultaneous settlement transactions: IRB method applied to capital requirements: scope of application of IRB and SA methods (see form C 08.07);
• Credit risk and non-simultaneous settlement transactions: IRB exposures subject to output floor (see form C 10.00)

The reporting of losses on real estate credits continues not to be provided for.

• Operational Risk (4)

• Credit risk and non-simultaneous settlement transactions: IRB method applied to capital requirements: distribution by PD intervals (see form C 08.03);

• Output Floor

• Information regarding the output floor required in the various schemes of the COREP 4.0 framework is not reported.

Intermediaries 106 report minimum requirements using form C 02.00 of the COREP 4.0 framework.

Exposures in crypto-assets are reported in form C 36 of the COREP 4.0 framework.

Information regarding counterparty risk is reported in the templates related to credit risk (according to the COREP 4.0 framework).

In line with what is provided for banks, the deadlines for sending the report referring to 31 March 2025 are extended until 30 June 2025.

For risk profiles not subject to this communication, Intermediaries 106 continue to apply what is provided for by Circular 286/2015.

C) Technical specifications Intermediaries 106 that exercise the option send information on risk profiles aligned with CRR3 and version 4.0 of the EBA DPM via a new information base; for the remaining information areas, the version of the DPM and the information bases remain unchanged.

4 We reserve the right to issue further communications regarding reporting requirements that will be adopted by the EBA for reference dates subsequent to June 2025.

Below is a summary table of the information bases and DPMs applicable to Intermediaries 106 that exercise the option.

Module EBA DPM Information Base First reporting deadline (March 2025) COREP Own Funds consolidated COREP_OF 4.0 PRCFO 30 June 2025 individual COREP_OF 4.0 PRIFO 30 June 2025 COREP Large Exposures consolidated COREP_LE_Con 2.9 LECF 12 May 2025 individual COREP_LE_Ind 2.9 LEIF 12 May 2025 FINREP consolidated FINREP9_Con_IFRS 3.0 FICF 12 May 2025