Royal Decree of 21 December 2017 approving the Regulation of 12 December 2017 of the National Bank of Belgium

FEDERAL PUBLIC SERVICE FINANCES [C − 2017/32237] 21 DECEMBER 2017. — Royal Decree approving the regulation of 12 December 2017 of the National Bank of Belgium modifying the regulation of 4 March 2014 of the National Bank of Belgium concerning the implementation of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013

PHILIPPE, King of the Belgians, To all, present and to come, Greetings.

Having regard to the Act of 25 April 2014 on the status and supervision of credit institutions, Article 98, first paragraph, b); Having regard to the Act of 22 February 1998 laying down the organic statute of the National Bank of Belgium, Article 12bis, § 2; Having regard to Guideline (EU) 2017/697 of the European Central Bank of 4 April 2017 concerning the way in which national competent authorities exercise the options and discretions provided for by Union law with regard to less significant institutions (ECB/2017/9);

On the proposal of the Minister of Finance, We have decided and decide:

Article 1. The regulation of 12 December 2017 of the National Bank of Belgium modifying the regulation of 4 March 2014 of the National Bank of Belgium concerning the implementation of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013, annexed to this Decree, is approved.

Art. 2. This Decree shall enter into force on 1 January 2018.

Art. 3. The Minister who has Finance in his portfolio is charged with the execution of this Decree.

Given at Brussels, 21 December 2017.

PHILIPPE

By the King: The Minister of Finance, J. VAN OVERTVELDT

Annex to the Royal Decree of 21 December 2017 approving the regulation of 12 December 2017 of the National Bank of Belgium modifying the regulation of 4 March 2014 of the National Bank of Belgium concerning the implementation of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013.

The National Bank of Belgium,

Having regard to 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; Having regard to the Act of 25 April 2014 on the status and supervision of credit institutions and stock exchange companies, Article 98, first paragraph, b); Having regard to the Act of 22 February 1998 laying down the organic statute of the National Bank of Belgium, Article 12bis, § 2; Having regard to the regulation of 4 March 2014 of the National Bank of Belgium concerning the implementation of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013, as amended by the regulation of 26 July 2016 of the National Bank of Belgium modifying the regulation of 4 March 2014 of the National Bank of Belgium concerning the implementation of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 and repealing the regulation of 2 June 2015 of the National Bank of Belgium concerning the liquidity of credit institutions; Having regard to Guideline (EU) 2017/697 of the European Central Bank of 4 April 2017 concerning the way in which national competent authorities exercise the options and discretions provided for by Union law with regard to less significant institutions (ECB/2017/9); Having regard to the consultation of enterprises, represented by their professional association,

Decides:

Article 1. Article 2 of the regulation of the National Bank of Belgium of 4 March 2014 concerning the implementation of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 is replaced by the following:

"This regulation applies to Belgian law credit institutions referred to in Book II of the Act of 25 April 2014 on the status and supervision of credit institutions and stock exchange companies, and to Belgian law investment firms referred to in Article 4, paragraph 1, point 2), of Regulation No 575/2013, hereinafter referred to as "the institution" or "the institutions".

By way of derogation from the first paragraph, Articles 3, 4, 5, 9, 10, first paragraph, 11, 12, 13, 14, 15, 16bis, 35, 36 and 37 and the annex to this regulation shall only apply to Belgian law credit institutions which, pursuant to Article 6, paragraph 4, of the SSM Regulation, are not under the direct supervision of the European Central Bank, and to Belgian law investment firms referred to in Article 4, paragraph 1, point 2), of Regulation No 575/2013."

Art. 2. Article 5 of the same regulation is replaced by the following:

"Risk weighting and prohibition of qualifying participations outside the financial sector.

Art. 5. Without prejudice to Article 90 of Regulation (EU) No 575/2013, for the calculation of capital requirements in accordance with Part Three of Regulation (EU) No 575/2013, institutions shall apply a risk weight of 1250% to the higher of the following amounts: a) the amount of qualifying participations in undertakings referred to in Article 89, paragraph 1, of Regulation (EU) No 575/2013 exceeding 15% of the eligible capital of the institution; and b) the total amount of qualifying participations in undertakings referred to in Article 89, paragraph 2, of Regulation (EU) No 575/2013 exceeding 60% of the eligible capital of the institution."

Art. 3. Article 12 of the same regulation is replaced by the following:

"Art. 12. Institutions shall apply the 'more-than-90-days past due' rule for the categories of exposures referred to in Article 178, paragraph 1, point b), of Regulation (EU) No 575/2013."

Art. 4. Article 14 of the same regulation is replaced by the following:

"Art. 14. For the transactions referred to in Article 282, paragraph 6, of Regulation (EU) No 575/2013, institutions shall use the mark-to-market valuation method as defined in Article 274 of Regulation (EU) No 575/2013."

Art. 5. Article 16bis of the same regulation is replaced by the following:

"Art. 16bis. In accordance with Article 400, paragraph 2, of Regulation (EU) No 575/2013, the following exemptions shall apply: a) Exposures referred to in Article 400, paragraph 2, point a), of Regulation (EU) No 575/2013 shall be exempt from the application of Article 395, paragraph 1, of the said Regulation to the extent of 80% of the nominal value of covered bonds, provided that the conditions laid down in Article 400, paragraph 3, of the same Regulation are met; b) Exposures referred to in Article 400, paragraph 2, point b), of Regulation (EU) No 575/2013 shall be exempt from the application of Article 395, paragraph 1, of the said Regulation to the extent of 80% of their value, provided that the conditions laid down in Article 400, paragraph 3, of the same Regulation are met; c) Exposures referred to in Article 400, paragraph 2, point d), of Regulation (EU) No 575/2013 shall be fully exempt from the application of Article 395, paragraph 1, of the said Regulation, provided that the conditions laid down in Article 400, paragraph 3, of the same Regulation, as further specified in the annex to this regulation, are met; d) Exposures referred to in Article 400, paragraph 2, points e) to h), j) and k), of Regulation (EU) No 575/2013 shall be fully exempt from the application of Article 395, paragraph 1, of the said Regulation, and exposures referred to in Article 400, paragraph 2, point i), shall be exempt up to the maximum amount allowed by that provision, provided that the conditions laid down in Article 400, paragraph 3, of the same Regulation are met; e) Institutions shall assess whether the conditions laid down in Article 400, paragraph 3, of Regulation (EU) No 575/2013, as further specified in the annex to this regulation, are met.

Institutions shall make the documents referred to in the annex to this regulation available to the NBB upon first request."

Art. 6. Articles 7, 8 and 19 of the same regulation are repealed.

Art. 7. This regulation is supplemented by an annex, worded as follows:

"Annex: Conditions for the assessment of the exemption referred to in Article 400, paragraph 2, point d), of Regulation (EU) No 575/2013 and in Article 16bis, point c), of this regulation.

Art. 1. For the purposes of this annex, 'institution' or 'institutions' shall mean the credit institution or credit institutions referred to in Article 400, paragraph 2, point d), of Regulation (EU) No 575/2013, insofar as those credit institutions are not under the direct supervision of the European Central Bank pursuant to Article 6, paragraph 4, of the SSM Regulation.

Art. 2. § 1. Institutions shall apply the criteria set out in points a) and b) to determine whether an exposure referred to in Article 400, paragraph 2, point d), of Regulation (EU) No 575/2013 meets the exemption conditions of Article 400, paragraph 3, of the said Regulation. a) To assess whether the specific nature of the exposure, the central body or the regional entities with which the institution is associated within a network, or the relationship between the institution and the central body or the regional entities, eliminates or reduces the exposure risk in accordance with Article 400, paragraph 3, point a), of Regulation (EU) No 575/2013, institutions shall examine whether: i) there are, in law or in fact, significant current or foreseeable obstacles preventing the counterparty of the institution from making repayments of the exposure at maturity, except in a recovery or resolution situation in which the restrictions set out in Directive 2014/59/EU of the European Parliament and of the Council must be applied; ii) the exposures concerned are consistent with the normal business conduct and business model of the institution or are justified by the network financing structure; iii) the process for adopting a decision to approve an exposure of the institution on the central body or the regional entities, and the monitoring and review process applicable to such exposures, at the level of the institution and, where applicable, at consolidated level, are similar to those applied for the approval of an exposure on third parties; iv) the risk management procedures, the IT system and the internal reporting of the institution allow for continuous verification and assurance that the significant exposures on the central body or the regional entities are consistent with the institution's risk strategy. b) To assess whether a residual concentration risk can be addressed by other equally effective means, such as the arrangements, processes and mechanisms referred to in Article 81 of Directive 2013/36/EU of the European Parliament and of the Council, in accordance with Article 400, paragraph 3, point b), of Regulation (EU) No 575/2013, institutions shall examine whether: i) the institution has robust processes, procedures and controls to ensure that the use of the exemption does not result in a concentration risk that exceeds the framework of its risk strategy; ii) the institution has formally taken into account the concentration risk arising from exposures on the central body or the regional entities as part of its overall risk assessment framework; iii) the institution has a risk management framework that adequately monitors the exposures concerned; iv) the resulting concentration risk is clearly identified or will be identified in the Internal Capital Adequacy Assessment Process (ICAAP) of the institution and will be actively managed. The arrangements, processes and mechanisms for concentration risk management will be assessed during the Supervisory Review and Evaluation Process (SREP).

§ 2. To assess whether the central body or a regional entity with which the institution is associated within a network is responsible for the balancing of mutual monetary positions, as referred to in Article 400, paragraph 2, point d), of Regulation (EU) No 575/2013, institutions shall examine whether the statutes or articles of association of the central body or the regional entities explicitly determine that they have, among other things, the following responsibilities: a) market funding for the entire network; b) balancing of mutual monetary positions within the network, in accordance with Article 10 of Regulation (EU) No 575/2013; c) liquidity provision to affiliated institutions; d) absorption of the liquidity surplus of affiliated institutions."