Instruction No. 2023-I-11 of September 20, 2023, on the sectoral systemic risk buffer as defined by HCSF Decision No. D-HCSF-2023-3

PRUDENTIAL CONTROL AND RESOLUTION AUTHORITY

Instruction No. 2023-I-11 on the sectoral systemic risk buffer as defined by HCSF Decision No. D-HCSF-2023-3

The Prudential Control and Resolution Authority, Having regard to Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European System of National and Regional Accounts in the European Union, Text with EEA relevance; Having regard to Regulation (EU) No 2019/876 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, the own funds and eligible liabilities requirements, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures and reporting and disclosure requirements, and Regulation (EU) No 648/2012, hereinafter referred to as "CRR 2"; Having regard to Directive (EU) 2019/878 of the European Parliament and of the Council of 20 May 2019 amending Directive 2013/36/EU as regards exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers, and capital conservation measures, hereinafter referred to as "CRD V"; Having regard to the Monetary and Financial Code, particularly Articles L. 511-41-1 A, L. 533-2-1 and L. 631-2-1; Having regard to the European Banking Authority guidelines on appropriate subsets of sectoral exposures to which competent or designated authorities may apply a buffer for systemic risk in accordance with Article 133(5)(f) of CRD V, particularly point 9; Having regard to the HCSF notice on the implementation of the systemic risk buffer dated March 18, 2021; Having regard to the European Central Bank guidelines on leverage ratio operations dated May 2017, particularly Part 3; Having regard to the High Council for Financial Stability Decision No. D-HCSF-2023-3 of July 28, 2023 on the sectoral systemic risk buffer; Having regard to the opinion of the Prudential Affairs Consultative Commission of June 26, 2023;

DECIDES

Article 1: For the purposes of this instruction, the following terms are defined below: a) "subject institutions": all credit institutions, as defined in Article 4(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of June 26, 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, subject to the application of the sectoral systemic risk buffer, in accordance with Article 133 of Directive 2013/36/EU of the European Parliament and of the Council of June 26, 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, and in accordance with Article 1 of Decision No. D-HCSF-2023-3; b) "non-financial companies": all legal persons that, at their level and at the highest level of consolidation, belong to the institutional sector of non-financial companies, within the meaning of point 2.45 of Annex A to Regulation (EU) No 549/2013 of the European Parliament and of the Council of May 21, 2013; c) "French non-financial companies": non-financial companies within the meaning of point 2.45 of Annex A to Regulation (EU) No 549/2013 of the European Parliament and of the Council of May 21, 2013, having their registered office in France. d) "non-financial group of connected clients": when a non-financial company, as defined in b) of this Article, is part of a group, all entities connected to that company within the meaning of point 39 of Article 4 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of June 26, 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, form with it a non-financial group of connected clients; e) "leverage ratio": corresponds to the total debt/EBITDA ratio defined in point 9 of the European Banking Authority guidelines of September 30, 2020 (EBA/GL/2020/13) on appropriate subsets of sectoral exposures to which competent or designated authorities may apply a buffer for systemic risk in accordance with Article 133(5)(f) of Directive 2013/36/EU. It is the ratio between total financial debts, including undrawn credit lines, and EBITDA. EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization - is defined as income before interest, tax, depreciation and amortization. Any adjustment to EBITDA must be justified and assessed by a service independent of the front office. This ratio is calculated based on annual accounting aggregates, prepared in accordance with current standards, as presented in financial statements certified by a statutory auditor. In each case, it is assessed at the highest level of accounting consolidation of the French or foreign group.

f) "exposures": any asset or off-balance sheet item in the trading book or the non-trading book, referred to in Part Three, Title II, Chapter 2, without application of risk weights or risk degrees, as defined in Article 389 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of June 26, 2013 mentioned above; g) "final exposures": risk-weighted values after application of exemptions and the effect of credit risk mitigation, as defined by Articles 24, 389, 390 and 392 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of June 26, 2013, without application of risk weights or risk degrees. h) "risk exposure amounts": the risk exposure amount is equal, as specified in Article 92 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of June 26, 2013 mentioned above, to the sum: a. risk exposure amounts for credit and dilution risk, b. own fund requirements for trading book exposures, c. own fund requirements for market risk, d. own fund requirements for settlement risk, e. own fund requirements for credit valuation adjustment risk inherent in over-the-counter derivatives other than credit derivatives recognized as reducing risk-weighted exposure amounts for credit risk, f. risk-weighted exposure amounts for counterparty credit risk arising from the trading book. As stipulated in paragraph 4 of Article 92 of the aforementioned Regulation, the following provisions apply when calculating the total risk exposure amount: i. the own fund requirements referred to in points c), d) and e) of that paragraph include own fund requirements arising from all activities of an institution; ii. institutions multiply the own fund requirements referred to in points b) to e) of that paragraph by 12.5.

Article 2: Subject institutions shall report quarterly the table titled "sSyRB Fr SNF" annexed to this instruction whenever their exposures measured at the end of the calendar quarter in question vis-à-vis non-financial groups of connected clients meet the following two cumulative conditions:

• The total amount of final exposure exceeds the threshold of 4% of the credit institution's Tier 1 capital;
• The ratio of total debt to EBITDA of the non-financial group at the highest level of consolidation is greater than or equal to 4 or negative.

The data to be transmitted is based on the structure of the regulatory declarations "Large Exposures" (LE1, LE2, LE3), supplemented with information on credit rating, leverage level, as well as the risk profile of the considered non-financial group of connected clients (risk exposure amount, including amounts arising from exposures to French entities of the connected client group), using accounting and public information bases, as well as risk surveillance information and indicators used by subject institutions.

Article 3: The rate of the sectoral systemic risk buffer, as defined by Decision No. D-HCSF-2023-3 of July 28, 2023, applies to the total risk exposure amount of the subject institution arising from all its exposures vis-à-vis French entities when:

• they are linked to a non-financial group whose leverage ratio at the highest level of consolidation is strictly greater than 6 or negative;
• and the total amount of final exposure vis-à-vis the non-financial group of connected clients to which they belong, referred to in Article 1, exceeds the threshold of 5% of the institution's Tier 1 capital.

Article 4: The "sSyRB SNF Fr" table shall be sent to the General Secretariat of the Prudential Control and Resolution Authority on a quarterly basis, no later than May 12, August 11, November 12, and February 11 respectively for the reporting dates of March 31, June 30, September 30, and December 31, and according to the technical specifications necessary for their processing as defined by the General Secretariat of the Prudential Control and Resolution Authority.

Article 5: By way of exception to the provisions of Article 4 of this instruction, the data relating to the September 2023 deadline shall be transmitted in a secure Excel format using a password to the address SATRISK-2777@acpr.banque-france.fr. From the December 2023 deadline onwards, to be submitted no later than February 11, 2024, institutions shall submit the sSyRB statement in accordance with the provisions of Article 4 of this instruction.

Article 6: This instruction applies to global systemically important institutions and other systemically important institutions listed by the ACPR in accordance with the provisions of Article L.511-41-1 A of the Monetary and Financial Code, based on their consolidated situation.

Article 7: This instruction shall enter into force the day following its publication in the Official Register of the Prudential Control and Resolution Authority.

Paris, September 20, 2023 The Designated President, Denis BEAU