Instruction No. 2011-I-11 amending Instruction No. 2007-02 of March 26, 2007 as amended

Prudential Control Authority

Instruction No. 2011-I-11 amending Instruction No. 2007-02 of March 26, 2007 as amended

The Prudential Control Authority,

Having regard to Council Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions;

Having regard to Council Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of credit institutions and investment firms;

Having regard to the Monetary and Financial Code, particularly Article L. 613-8 thereof;

Having regard to Ordinance No. 2005-1516 of 8 December 2005 relating to electronic exchanges between users and administrative authorities and between administrative authorities;

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

Having regard to the Order of 20 February 2007 amending the regulations of the Banking Regulation Committee No. 90-02, No. 90-15, No. 92-12, No. 93-05 and No. 95-02 and the regulations of the Banking and Financial Regulation Committee No. 97-02, No. 97-04, No. 98-04, No. 99-06, No. 99-07, No. 99-15, No. 99-16, No. 2000-03, No. 2002-13, in application of the Order of 20 February 2007 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 as amended relating to own funds;

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

Having regard to Instruction No. 94-09 of 17 October 1994 as amended relating to documents intended for the Banking Commission;

Decides:

Article 1

Instruction No. 2007-02 is amended as follows:

• in the first four bullet points of point 3 of Article 2.2, the word "relatif" (singular) is replaced by the word "relatifs" (plural);
• in Article 2.3, the words "visées au chapitre 2 du titre II avec les catégories visées à l’article 40.1 de l’arrêté du 20 février 2007 s’effectue" are replaced by the words "visées au chapitre 2 du titre II de l’arrêté du 20 février 2007 avec les catégories visées à l’article 40.1 du même arrêté s’effectue";
• in Article 4, the words "Sans préjudice de l’article 5.5," are deleted.

Article 2

Annexes 1, 2 and 4 of Instruction No. 2007-02 are replaced by the annexes to the present instruction.

Paris, 15 June 2011

The President of the Prudential Control Authority [Christian NOYER]

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Prudential Control Authority

Instruction No. 2011-I-11 amending Instruction No. 2007-02 of March 26, 2007 as amended

Annex 1

(Annex 1 to Instruction No. 2007-02)

Mapping of exposures

visited under Title II with the exposure categories

visited under Title III of the Order of 20 February 2007

Internal Ratings-Based Approach Exposure Categories	Standard Approach Exposures
Central Governments and Central Banks	- Central Governments and Central Banks;<br>- Public sector entities treated as central governments regarding their risk level in accordance with Article 13 of the Order of 20 February 2007;<br>- Multilateral Development Banks referred to in Article 14.b) of the Order of 20 February 2007;<br>- Regional and Local Governments referred to in paragraphs b) and c) of Article 12 of the Order of 20 February 2007;<br>- International Organisations referred to in Article 15 of the Order of 20 February 2007;<br>- Finance lease contracts and real estate loans concluded with counterparties belonging to this category in accordance with Articles 20 and 21 of the Order of 20 February 2007;<br>- Exposures referred to above subject to payment arrears.
Institutions	- Institutions referred to in Article 4.1.b) of the Order of 20 February 2007;<br>- Regional or Local Governments treated in accordance with Article 12 of the Order of 20 February 2007;<br>- Multilateral Development Banks referred to in Article 14.a) of the Order of 20 February 2007;<br>- Public sector entities treated as institutions in accordance with Article 13 of the Order of 20 February 2007;<br>- Covered bonds referred to in Article 24 of the Order of 20 February 2007;<br>- Finance lease contracts and real estate loans concluded with counterparties belonging to this category in accordance with Articles 20 and 21 of the Order of 20 February 2007;<br>- Exposures referred to above subject to payment arrears.
Enterprises	- Enterprises, excluding small and medium-sized entities related to the retail customer category referred to in Article 18 of the Order of 20 February 2007;<br>- Finance lease contracts and real estate loans concluded with counterparties belonging to this category in accordance with Articles 20 and 21 of the Order of 20 February 2007;<br>- International Organisations not referred to in Article 15 of the Order of 20 February 2007;<br>- Exposures referred to above subject to payment arrears.
Retail Customers	- Retail customers referred to in Article 18 of the Order of 20 February 2007;<br>- Real estate loans referred to in Article 19 of the Order of 20 February 2007;<br>- Exposures referred to above subject to payment arrears.

Exposures in the form of investments taken in units of collective investment undertakings:

• referred to in Article 26 b) are included in the categories corresponding to their prudential treatment;
• referred to in Articles 26 a), 26 c) and 26 g) are included in the CR SA equity statement for the corresponding weighting.

Securities in recovery referred to in Article 27 c) of the Order of 20 February 2007 are declared in the exposure category to which they relate.

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Prudential Control Authority

Instruction No. 2011-I-11 amending Instruction No. 2007-02 of March 26, 2007 as amended

Annex 2

(Annex 2 to Instruction No. 2007-02)

Presentation and regulatory references of declaration forms

Subject institutions apply the following sign convention: any amount that increases own funds or capital requirements is recorded as a positive figure. Conversely, any amount that reduces own funds or capital requirements is recorded as a negative figure.

When the label of a cell is preceded by a negative sign (-), only a negative amount may be declared.

1. CA Statement (summary statement of the solvency ratio)

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

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

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 TIER 1 CAPITAL		The core tier 1 capital is determined in accordance with the provisions referred to in Articles 2, 2 bis and 2 ter 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: pari passu instruments with ordinary shares in the event of liquidation, and in going concern		Cf. Article 2a) first bullet of Regulation No. 90-02: pari passu instruments 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 bullet of Regulation No. 90-02: instruments conferring 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	Paid-in capital		= Article 2a), 1st bullet, and Article 2c), 1st bullet, of Regulation No. 90-02
1.1.1.2	(-) Own shares		= Article 2c) 2nd bullet of Regulation No. 90-02: "own shares held, evaluated at their accounting value, shall be deducted (...)".
1.1.1.3	Share premiums		= Article 2a) 3rd bullet 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 capital, 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 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) 2nd bullet and 4th bullet - Article 2c) 3rd bullet of Regulation No. 90-02.<br>This line does not include revaluation differences made before 31/12/2004.<br>It includes credit exchange differences (for non-IFRS institutions) and conversion differences.
1.1.2.1.01	Reserves (including valuation differences)		= Article 2a) 2nd bullet 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) 2nd bullet of Regulation No. 90-02.<br>Part of reserves subject to CEBS prudential filters
1.1.2.2	Minority interests		= Article 7 4th bullet 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 emergency situations		Cf. Regulation No. 90-02, Article 2b)
1.1.2.2* 02	Of which: equity instruments without a 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 a redemption option accompanied by a progressive remuneration benefiting from a grandfathering 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 grandfathering 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		Ineligible minority interests for capital
1.1.2.3	Interim profit or (-) loss			=1.1.2.3.01+1.1.2.3.02
1.1.2.3.01	Interim result		Interim losses are deducted in accordance with Article 2c) 5th bullet of Regulation No. 90-02. Interim profits may only be included when they meet the conditions referred to in the penultimate paragraph of Article 2a) of Regulation No. 90-02.
1.1.2.3.02	(-) Of which income from latent capital gains or losses subject to prudential adjustments		Positive elements referred to in lines 1.1.2.6.07 and 1.1.2.6.11
1.1.2.5	(-) Net gains resulting from the capitalization of future income from securitized assets		Cf. first paragraph of Article 2a) of Regulation No. 90-02: "For originating institutions subject to securitization, net gains resulting from the capitalization of future income from securitized assets and which constitute the credit enhancement of securitization positions are not included."
I	1.1.2.6	Latent or deferred gains or losses	Subject institutions subject to IFRS standards include here the latent or deferred gains or losses referred to in Article 2 bis of Regulation No. 90-02. For the purposes of the declaration to the Prudential Control Authority, subject institutions report all elements referred to above. 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	Latent capital gains or losses on available-for-sale equity instruments		1st bullet of the 7th paragraph of Article 2 bis 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 latent capital gains or losses on available-for-sale equity instruments		1st bullet of the 7th paragraph of Article 2 bis of Regulation No. 90-02: "for equity instruments, net latent capital gains are deducted from core tier 1 capital, currency by currency, net of the amount of tax already deducted accounting-wise and are included, currency by currency, before tax in supplementary own funds to the extent of 45%. Net latent capital losses are not adjusted."
I	1.1.2.6.03	Latent capital gains or losses on loans and receivables available for sale		2nd bullet of the 7th paragraph of Article 2 bis of Regulation No. 90-02 for subject 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 latent capital gains or losses on loans and receivables available for sale		2nd bullet of the 7th paragraph of Article 2 bis of Regulation No. 90-02: refers to loans and receivables, the latent capital gains or losses of which are neutralized.
I	1.1.2.6.05	Latent capital gains or losses on other financial assets available for sale (i.e. debt securities)		2nd bullet of the 7th paragraph of Article 2 bis of Regulation No. 90-02 for subject institutions subject to IFRS standards. Cash flow hedges on debt instruments available for sale are included here.
I	1.1.2.6.06	Prudential adjustment of latent capital gains or losses on other financial assets available for sale (i.e. debt securities)		2nd bullet of the 7th paragraph of Article 2 bis of Regulation No. 90-02: refers notably to debt instruments, the latent capital gains or losses of which are neutralized.
I	1.1.2.6.07	Latent capital gains or losses, due to the evolution of own credit risk ("own credit risk"), recorded on debts evaluated at fair value by option through the income statement		Annex 4 of the present Instruction No. 2007-02: "Other core tier 1 capital on agreement of the Prudential Control Authority".
I	1.1.2.6.08	Prudential adjustment of latent capital gains or losses, due to the evolution of own credit risk, recorded on debts evaluated at fair value by option		Annex 4 of the present Instruction No. 2007-02: "latent capital gains or losses, due to the evolution of own credit risk – 'own credit risk' –, recorded on debts evaluated at fair value by option through the income statement, must be neutralized for their net amount of tax already deducted accounting-wise".
I	1.1.2.6.09	Latent capital gains or losses on cash flow hedging operations, not related to financial assets available for sale		8th paragraph of Article 2 bis of Regulation No. 90-02 for subject institutions subject to IFRS standards. Notably on interest rate product hedging operations (excluding available-for-sale securities).
I	1.1.2.6.10	Prudential adjustment of latent capital gains or losses on cash flow hedging operations		8th paragraph of Article 2 bis of Regulation No. 90-02: "Latent capital gains or losses recorded accounting-wise directly in equity due to a cash flow hedging operation are neutralized." Notably on interest rate product hedging operations (excluding available-for-sale securities).
I	1.1.2.6.11	Latent capital gains or losses on investment property		10th paragraph of Article 2 bis of Regulation No. 90-02 for subject institutions subject to IFRS standards (gross amount reduced by tax provision). Only latent capital gains or losses subsequent to the first application of IFRS standards are included.
I	1.1.2.6.12	Prudential adjustment of latent capital gains or losses on investment property		Prudential adjustment of latent capital gains or losses on investment property<br>10th paragraph of Article 2 bis of Regulation No. 90-02: "Latent capital gains on investment property recorded accounting-wise due to the application of the fair value model are deducted from core tier 1 capital, building by building, net of the amount of tax already deducted accounting-wise and are included, building by building, before tax in supplementary own funds to the extent of 45%. Latent capital losses are not adjusted."
1.1.2.6.13	Revaluation difference on tangible fixed assets		Articles 2 bis and 2 ter of Regulation No. 90-02 (gross amount reduced by tax provision). For subject 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		Article 2 bis and ter of Regulation No. 90-02: revaluation differences recorded on tangible fixed assets are deducted from core tier 1 capital, asset by asset, net of the amount of tax already deducted accounting-wise and are included, asset by asset, before tax in supplementary own funds to the extent of 45%.
1.1.2.6.15	Other latent capital gains or losses affecting reserves		Last bullet of Article 2b) and 3rd, 4th and 5th paragraphs of Article 2 bis 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 latent capital gains or losses impacting reserves		Last bullet of Article 2b) and 3rd, 4th and 5th paragraphs of Article 2 bis of Regulation No. 90-02
NI	1.1.3	General Banking Risk Provision		Article 2a) 6th bullet and Article 3 of Regulation No. 90-02. Only subject institutions other than those subject to IFRS standards complete this line.
1.1.4	Other core tier 1 capital on agreement of the Prudential Control Authority and others		Cf. Article 2b), last paragraph of Article 2 bis 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 emergency situations		Cf. Regulation No. 90-02, Article 2b)
1.1.4.1a.02	Equity instruments without a 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 a redemption option accompanied by a progressive remuneration benefiting from a grandfathering 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 grandfathering 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 2 bis of Regulation No. 90-02
1.1.4.4	Other core tier 1 capital		Cf. last paragraph of Article 2 bis of Regulation No. 90-02
1.1.5	(-) Deductions of core tier 1 capital (other than own shares)			1.1.5.1+1.1.5.2a+1.1.5.4
1.1.5.1	(-) Intangible fixed assets (including setup costs)		Article 2c) 4th bullet of Regulation No. 90-02.<br>This line includes debit exchange differences (goodwill).
1.1.5.1*	Of which debit exchange 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+1.1.5.2 à 03+1.1.5.2a04
1.1.5.2a.01	Of which: equity instruments that must be converted in emergency situations		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 a redemption option accompanied by a progressive remuneration and subject to limits		Cf. result...

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