Definitions

‘credit institution’ means an undertaking the business of which consists of any of the following:

‘investment firm’ means an investment firm as defined in point (1) (opens EUR-Lex in a new tab) of Article 4(1) (opens EUR-Lex in a new tab) of Directive 2014/65/EU (opens EUR-Lex in a new tab) which is authorised under that Directive but excludes credit institutions;

‘institution’ means a credit institution authorised under Article 8 of Directive 2013/36/EU or an undertaking as referred to in Article 8a(3) thereof;

‘insurance undertaking’ means insurance undertaking as defined in point (1) (opens EUR-Lex in a new tab) of Article 13 (opens EUR-Lex in a new tab) of Directive 2009/138/EC (opens EUR-Lex in a new tab) of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (⁽⁷⁾);

‘reinsurance undertaking’ means reinsurance undertaking as defined in point (4) (opens EUR-Lex in a new tab) of Article 13 (opens EUR-Lex in a new tab) of Directive 2009/138/EC (opens EUR-Lex in a new tab);

‘collective investment undertaking’ or ‘CIU’ means a UCITS as defined in Article 1(2) (opens EUR-Lex in a new tab) of Directive 2009/65/EC (opens EUR-Lex in a new tab) of the European Parliament and of the Council (⁽⁸⁾) or an alternative investment fund (AIF) as defined in point (a) (opens EUR-Lex in a new tab) of Article 4(1) (opens EUR-Lex in a new tab) of Directive 2011/61/EU (opens EUR-Lex in a new tab) of the European Parliament and of the Council (⁽⁹⁾);

‘public sector entity’ means a non-commercial administrative body responsible to central governments, regional governments or local authorities, or to authorities that exercise the same responsibilities as regional governments and local authorities, or a non-commercial undertaking that is owned by or set up and sponsored by central governments, regional governments or local authorities, and that has explicit guarantee arrangements, and may include self-administered bodies governed by law that are under public supervision;

‘management body’ means management body as defined in point (7) of Article 3(1) of Directive 2013/36/EU;

‘senior management’ means senior management as defined in point (9) of Article 3(1) of Directive 2013/36/EU;

‘systemic risk’ means systemic risk as defined in point (10) of Article 3(1) of Directive 2013/36/EU;

‘originator’ means an originator as defined in point (3) of Article 2 of Regulation (EU) 2017/2402 (⁽¹⁰⁾);

‘sponsor’ means a sponsor as defined in point (5) of Article 2 of Regulation (EU) 2017/2402;

‘original lender’ means an original lender as defined in point (20) of Article 2 of Regulation (EU) 2017/2402;

‘parent undertaking’ means an undertaking that controls, within the meaning of point (37), one or more undertakings;

‘subsidiary’ means an undertaking that is controlled, within the meaning of point (37), by another undertaking; subsidiaries of subsidiaries shall also be considered to be subsidiaries of the undertaking that is their original parent undertaking;

‘branch’ means a place of business which forms a legally dependent part of an institution and which carries out directly all or some of the transactions inherent in the business of institutions;

‘ancillary services undertaking’ means an undertaking the principal activity of which, whether provided to undertakings inside the group or to clients outside the group, consists of any of the following:

‘asset management company’ means an asset management company as defined in point (5) of Article 2 of Directive 2002/87/EC or an AIFM as defined in Article 4(1)(b) (opens EUR-Lex in a new tab) of Directive 2011/61/EU (opens EUR-Lex in a new tab), including, unless otherwise provided, third-country entities that carry out similar activities and that are subject to the laws of a third country which applies supervisory and regulatory requirements at least equivalent to those applied in the Union;

‘financial holding company’ means an undertaking that meets all of the following conditions:

‘investment holding company’ means an investment holding company as defined in Article 4(1), point (23) (opens EUR-Lex in a new tab), of Regulation (EU) 2019/2033 (opens EUR-Lex in a new tab);

‘mixed financial holding company’ means mixed financial holding company as defined in point (15) of Article 2 of Directive 2002/87/EC;

‘mixed activity holding company’ means a parent undertaking, other than a financial holding company or an institution or a mixed financial holding company, the subsidiaries of which include at least one institution;

‘third-country insurance undertaking’ means third-country insurance undertaking as defined in point (3) (opens EUR-Lex in a new tab) of Article 13 (opens EUR-Lex in a new tab) of Directive 2009/138/EC (opens EUR-Lex in a new tab);

‘third-country reinsurance undertaking’ means third-country reinsurance undertaking as defined in point (6) (opens EUR-Lex in a new tab) of Article 13 (opens EUR-Lex in a new tab) of Directive 2009/138/EC (opens EUR-Lex in a new tab);

‘recognised third-country investment firm’ means a firm meeting all of the following conditions:

‘financial institution’ means an undertaking that meets both of the following conditions:

‘pure industrial holding company’ means an undertaking that meets all of the following conditions:

‘financial sector entity’ means any of the following:

‘parent institution in a Member State’ means an institution in a Member State which has an institution or a financial institution as a subsidiary, or which holds a participation in an institution or financial institution, and which is not itself a subsidiary of another institution authorised in the same Member State, or of a financial holding company or mixed financial holding company set up in the same Member State;

‘EU parent institution’ means a parent institution in a Member State which is not a subsidiary of another institution authorised in any Member State, or of a financial holding company or mixed financial holding company set up in any Member State;

‘parent investment firm in a Member State’ means a parent undertaking in a Member State that is an investment firm;

‘EU parent investment firm’ means an EU parent undertaking that is an investment firm;

‘parent credit institution in a Member State’ means a parent institution in a Member State that is a credit institution;

‘EU parent credit institution’ means an EU parent institution that is a credit institution;

‘parent financial holding company in a Member State’ means a financial holding company which is not itself a subsidiary of an institution authorised in the same Member State, or of a financial holding company or mixed financial holding company set up in the same Member State;

‘EU parent financial holding company’ means a parent financial holding company in a Member State which is not a subsidiary of an institution authorised in any Member State or of another financial holding company or mixed financial holding company set up in any Member State;

‘parent mixed financial holding company in a Member State’ means a mixed financial holding company which is not itself a subsidiary of an institution authorised in the same Member State, or of a financial holding company or mixed financial holding company set up in that same Member State;

‘EU parent mixed financial holding company’ means a parent mixed financial holding company in a Member State which is not a subsidiary of an institution authorised in any Member State or of another financial holding company or mixed financial holding company set up in any Member State;

‘central counterparty’ or ‘CCP’ means a CCP as defined in point (1) (opens EUR-Lex in a new tab) of Article 2 (opens EUR-Lex in a new tab) of Regulation (EU) No 648/2012 (opens EUR-Lex in a new tab);

‘participation’ means a participating interest as defined in Article 2, point (2) (opens EUR-Lex in a new tab), of Directive 2013/34/EU (opens EUR-Lex in a new tab) of the European Parliament and of the Council (⁽¹²⁾), or the ownership, direct or indirect, of 20 % or more of the voting rights or capital of an undertaking;

‘qualifying holding’ means a direct or indirect holding in an undertaking which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking;

‘control’ means the relationship between a parent undertaking and a subsidiary, as described in Article 22 (opens EUR-Lex in a new tab) of Directive 2013/34/EU (opens EUR-Lex in a new tab), or in the accounting standards to which an institution is subject under Regulation (EC) No 1606/2002 (opens EUR-Lex in a new tab) of the European Parliament and of the Council (⁽¹³⁾), or a similar relationship between any natural or legal person and an undertaking;

‘close links’ means a situation in which two or more natural or legal persons are linked in any of the following ways:

‘group of connected clients’ means any of the following:

‘competent authority’ means a public authority or body officially recognised by national law, which is empowered by national law to supervise institutions as part of the supervisory system in operation in the Member State concerned;

‘consolidating supervisor’ means a competent authority responsible for the exercise of supervision on a consolidated basis in accordance with Article 111 of Directive 2013/36/EU;

‘authorisation’ means an instrument issued in any form by the authorities by which the right to carry out the business is granted;

‘home Member State’ means the Member State in which an institution has been granted authorisation;

‘host Member State’ means the Member State in which an institution has a branch or in which it provides services;

‘ESCB central banks’ means the national central banks that are members of the European System of Central Banks (ESCB), and the European Central Bank (ECB);

‘central banks’ means the ESCB central banks and the central banks of third countries;

‘consolidated situation’ means the situation that results from applying the requirements of this Regulation in accordance with Part One, Title II, Chapter 2 to an institution as if that institution formed, together with one or more other entities, a single institution;

‘consolidated basis’ means on the basis of the consolidated situation;

‘sub-consolidated basis’ means on the basis of the consolidated situation of a parent institution, financial holding company or mixed financial holding company, excluding a sub-group of entities, or on the basis of the consolidated situation of a parent institution, financial holding company or mixed financial holding company that is not the ultimate parent institution, financial holding company or mixed financial holding company;

‘financial instrument’ means any of the following:

‘initial capital’ means the amounts and types of own funds specified in Article 12 of Directive 2013/36/EU;

‘operational risk’ means the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including, but not limited to, legal risk, model risk or information and communication technology (ICT) risk, but excluding strategic and reputational risk;

‘legal risk’ means the risk of loss, including, expenses, fines, penalties or punitive damages, which an institution might incur as a consequence of events that result in legal proceedings, including the following:

‘model risk’ means the risk of loss resulting from decisions that are principally based on the output of internal models, due to errors in the design, development, parameter estimation, implementation, use or monitoring of such models, including the following:

‘ICT risk’ means the risk of loss related to any reasonably identifiable circumstances related to the use of network and information systems which, if materialised, might compromise the security of the network and information systems, of any technology-dependent tool or process, of operations and processes, or of the provision of services, by producing adverse effects in the digital or physical environment;

‘environmental, social and governance risk’ or ‘ESG risk’ means the risk of any negative financial impact on an institution stemming from the current or prospective impact of environmental, social or governance (ESG) factors on that institution’s counterparties or invested assets; ESG risks materialise through the traditional categories of financial risks;

‘environmental risk’ means the risk of any negative financial impact on an institution stemming from the current or prospective impact of environmental factors on that institution’s counterparties or invested assets, including factors related to the transition towards the objectives set out in Article 9 (opens EUR-Lex in a new tab) of Regulation (EU) 2020/852 (opens EUR-Lex in a new tab) of the European Parliament and of the Council (⁽¹⁴⁾); environmental risk includes both physical risk and transition risk;

‘physical risk’, as part of the environmental risk, means the risk of any negative financial impact on an institution stemming from the current or prospective impact of the physical effects of environmental factors on that institution’s counterparties or invested assets;

‘transition risk’, as part of the environmental risk, means the risk of any negative financial impact on an institution stemming from the current or prospective impact of the transition to an environmentally sustainable economy on that institution’s counterparties or invested assets;

‘social risk’ means the risk of any negative financial impact on an institution stemming from the current or prospective impact of social factors on its counterparties or invested assets;

‘governance risk’ means the risk of any negative financial impact on an institution stemming from the current or prospective impact of governance factors on that institution’s counterparties or invested assets;

‘dilution risk’ means the risk that an amount receivable is reduced through cash or non-cash credits to the obligor;

‘probability of default’ or ‘PD’ means the probability of default of an obligor or, where applicable, of a credit facility over a one-year period, and, in the context of dilution risk, the probability of dilution over a one-year period;

‘loss given default’ or ‘LGD’ means the ratio of the loss on an exposure related to a single facility due to the default of an obligor or, where applicable, of a credit facility to the amount outstanding at default or at a given reference date after the date of default, and, in the context of dilution risk, the loss given dilution meaning the ratio of the loss on an exposure related to a purchased receivable due to dilution, to the amount outstanding of the purchased receivable;

‘conversion factor’ or ‘credit conversion factor’ or ‘CCF’ means the ratio of the undrawn amount of a commitment from a single facility that could be drawn from that single facility from a certain point in time before default and therefore outstanding at default to the undrawn amount of the commitment from that facility, the extent of the commitment being determined by the advised limit, unless the unadvised limit is higher;

‘credit risk mitigation’ means a technique used by an institution to reduce the credit risk associated with an exposure or exposures which that institution continues to hold;

‘funded credit protection’ or ‘FCP’ means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of an institution is derived from the right of that institution, in the event of the default of the obligor or the credit facility, or on the occurrence of other specified credit events relating to the obligor, to liquidate, or to obtain transfer or appropriation of, or to retain certain assets or amounts, or to reduce the amount of the exposure to, or to replace it with, the amount of the difference between the amount of the exposure and the amount of a claim on the institution;

‘unfunded credit protection’ or ‘UFCP’ means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of an institution is derived from the obligation of a third party to pay an amount in the event of the default of the obligor or the credit facility, or the occurrence of other specified credit events;

‘cash assimilated instrument’ means a certificate of deposit, a bond, including a covered bond, or any other non-subordinated instrument, which has been issued by a lending institution, for which that lending institution has already received full payment and which shall be unconditionally reimbursed by the institution at its nominal value;

‘gold bullion’ means gold in the form of a commodity, including gold bars, ingots and coins, commonly accepted by the bullion market, where liquid markets for bullion exist, and the value of which is determined by the value of the gold content, defined by purity and mass, rather than by its interest to numismatists;

‘securitisation’ means a securitisation as defined in point (1) of Article 2 of Regulation (EU) 2017/2402;

‘securitisation position’ means a securitisation position as defined in point (19) of Article 2 of Regulation (EU) 2017/2402;

‘resecuritisation’ means a resecuritisation as defined in point (4) of Article 2 of Regulation (EU) 2017/2402;

‘re-securitisation position’ means an exposure to a re-securitisation;

‘credit enhancement’ means a contractual arrangement whereby the credit quality of a position in a securitisation is improved in relation to what it would have been if the enhancement had not been provided, including the enhancement provided by more junior tranches in the securitisation and other types of credit protection;

‘securitisation special purpose entity’ or ‘SSPE’ means a securitisation special purpose entity or SSPE as defined in point (2) of Article 2 of Regulation (EU) 2017/2402;

‘tranche’ means a tranche as defined in point (6) of Article 2 of Regulation (EU) 2017/2402;

‘marking to market’ means the valuation of positions at readily available close out prices that are sourced independently, including exchange prices, screen prices or quotes from several independent reputable brokers;

‘marking to model’ means any valuation which has to be benchmarked, extrapolated or otherwise calculated from one or more market inputs;

‘independent price verification’ means a process by which market prices or marking to model inputs are regularly verified for accuracy and independence;

‘eligible capital’ means the following:

‘recognised exchange’ means an exchange which meets all of the following conditions:

‘discretionary pension benefits’ means enhanced pension benefits granted on a discretionary basis by an institution to an employee as part of that employee's variable remuneration package, which do not include accrued benefits granted to an employee under the terms of the company pension scheme;

‘mortgage lending value’ means the value of immovable property as determined by a prudent assessment of the future marketability of the property taking into account long-term sustainable aspects of the property, the normal and local market conditions, the current use and alternative appropriate uses of the property;

‘property value’ means the value of a residential property or commercial immovable property determined in accordance with Article 229(1);

‘residential property’ means any of the following:

‘commercial immovable property’ means any immovable property that is not residential property;

‘income producing real estate exposure’ or ‘IPRE exposure’ means an exposure secured by one or more residential properties or commercial immovable properties where the fulfilment of the credit obligations related to the exposure materially depends on the cash flows generated by those immovable properties securing that exposure, rather than on the capacity of the obligor to fulfil the credit obligations from other sources; the primary source of such cash flows being lease or rental payments, or proceeds from the sale of the residential property or commercial immovable property;

‘non-income-producing real estate exposure’ or ‘non-IPRE exposure’ means any exposure secured by one or more residential properties or commercial immovable properties that is not an IPRE exposure;

‘exposure secured by residential property’ or ‘exposure secured by a mortgage on residential property’ means an exposure secured by residential property or an exposure regarded as such in accordance with Article 108(4);

‘exposure secured by commercial immovable property’ or ‘exposure secured by a mortgage on commercial immovable property’ means an exposure secured by a commercial immovable property;

‘exposure secured by immovable property’ or ‘exposure secured by a mortgage on immovable property’, or ‘exposure secured by immovable property collateral’ means an exposure secured by a residential property or commercial immovable property or an exposure regarded as such in accordance with Article 108(4);

‘market value’ means, for the purposes of immovable property, the estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion;

‘applicable accounting framework’ means the accounting standards to which the institution is subject under Regulation (EC) No 1606/2002 (opens EUR-Lex in a new tab) or Directive 86/635/EEC (opens EUR-Lex in a new tab);

‘one-year default rate’ means the ratio between the number of obligors or, where the definition of default is applied at credit facility level pursuant to Article 178(1), second subparagraph, credit facilities in respect of which a default is considered to have occurred during a period that starts from one year prior to a date of observation T, and the number of obligors, or where the definition of default is applied at credit facility level pursuant to Article 178(1), second subparagraph, credit facilities assigned to this grade or pool one year prior to that date of observation T;

‘land acquisition, development and construction exposures’, or ‘ADC exposures’, means exposures to corporates or special purpose entities financing any land acquisition for development and construction purposes, or financing the development and construction of any residential property or commercial immovable property;

‘non-ADC exposure’ means any exposure secured by one or more residential properties or commercial immovable properties that is not an ADC exposure;

‘trade finance’ means financing, including guarantees, connected to the exchange of goods and services through financial products of fixed short-term maturity, generally of less than one year, without automatic rollover;

‘officially supported export credits’ means loans or credits to finance the export of goods and services for which an official export credit agency provides guarantees, insurance or direct financing;

‘repurchase agreement’ and ‘reverse repurchase agreement’ mean any agreement in which an institution or its counterparty transfers securities or commodities or guaranteed rights relating to title to securities or commodities where that guarantee is issued by a recognised exchange which holds the rights to the securities or commodities and the agreement does not allow an institution to transfer or pledge a particular security or commodity to more than one counterparty at one time, subject to a commitment to repurchase them, or substituted securities or commodities of the same description at a specified price on a future date specified, or to be specified, by the transferor, being a repurchase agreement for the institution selling the securities or commodities and a reverse repurchase agreement for the institution buying them;

‘repurchase transaction’ means any transaction governed by a repurchase agreement or a reverse repurchase agreement;

‘simple repurchase agreement’ means a repurchase transaction of a single asset, or of similar, non-complex assets, as opposed to a basket of assets;

‘positions held with trading intent’ means any of the following:

‘trading book’ means all positions in financial instruments and commodities held by an institution either with trading intent or to hedge positions held with trading intent in accordance with Article 104;

‘multilateral trading facility’ means multilateral trading facility as defined in point 15 of Article 4 (opens EUR-Lex in a new tab) of Directive 2004/39/EC (opens EUR-Lex in a new tab);

‘qualifying central counterparty’ or ‘QCCP’ means a central counterparty that has been either authorised in accordance with Article 14 (opens EUR-Lex in a new tab) of Regulation (EU) No 648/2012 (opens EUR-Lex in a new tab) or recognised in accordance with Article 25 (opens EUR-Lex in a new tab) of that Regulation;

‘default fund’ means a fund established by a CCP in accordance with Article 42 (opens EUR-Lex in a new tab) of Regulation (EU) No 648/2012 (opens EUR-Lex in a new tab) and used in accordance with Article 45 (opens EUR-Lex in a new tab) of that Regulation;

‘pre-funded contribution to the default fund of a CCP’ means a contribution to the default fund of a CCP that is paid in by an institution;

‘trade exposure’ means a current exposure, including a variation margin due to the clearing member but not yet received, and any potential future exposure of a clearing member or a client, to a CCP arising from contracts and transactions listed in points (a), (b) and (c) of Article 301(1), as well as initial margin;

‘regulated market’ means regulated market as defined in point (14) (opens EUR-Lex in a new tab) of Article 4 (opens EUR-Lex in a new tab) of Directive 2004/39/EC (opens EUR-Lex in a new tab);

‘leverage’ means the relative size of an institution's assets, off-balance sheet obligations and contingent obligations to pay or to deliver or to provide collateral, including obligations from received funding, made commitments, derivatives or repurchase agreements, but excluding obligations which can only be enforced during the liquidation of an institution, compared to that institution's own funds;

‘risk of excessive leverage’ means the risk resulting from an institution's vulnerability due to leverage or contingent leverage that may require unintended corrective measures to its business plan, including distressed selling of assets which might result in losses or in valuation adjustments to its remaining assets;

‘credit risk adjustment’ means the amount of specific and general loan loss provision for credit risks that has been recognised in the financial statements of the institution in accordance with the applicable accounting framework;

‘internal hedge’ means a position that materially offsets the component risk elements between a trading book position and one or more non-trading book positions or between two trading desks;

‘reference obligation’ means an obligation used for the purposes of determining the cash settlement value of a credit derivative;

‘external credit assessment institution’ or ‘ECAI’ means a credit rating agency that is registered or certified in accordance with Regulation (EC) No 1060/2009 (opens EUR-Lex in a new tab) of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (⁽¹⁵⁾) or a central bank issuing credit ratings which are exempt from the application of Regulation (EC) No 1060/2009 (opens EUR-Lex in a new tab);

‘nominated ECAI’ means an ECAI nominated by an institution;

‘accumulated other comprehensive income’ has the same meaning as under International Accounting Standard (IAS) 1, as applicable under Regulation (EC) No 1606/2002 (opens EUR-Lex in a new tab);

‘basic own funds’ means basic own funds within the meaning of Article 88 (opens EUR-Lex in a new tab) of Directive 2009/138/EC (opens EUR-Lex in a new tab);

‘Tier 1 own-fund insurance items’ means basic own-fund items of undertakings subject to the requirements of Directive 2009/138/EC (opens EUR-Lex in a new tab) where those items are classified in Tier 1 within the meaning of Directive 2009/138/EC (opens EUR-Lex in a new tab) in accordance with Article 94(1) (opens EUR-Lex in a new tab) of that Directive;

‘additional Tier 1 own-fund insurance items’ means basic own-fund items of undertakings subject to the requirements of Directive 2009/138/EC (opens EUR-Lex in a new tab) where those items are classified in Tier 1 within the meaning of Directive 2009/138/EC (opens EUR-Lex in a new tab) in accordance with Article 94(1) (opens EUR-Lex in a new tab) of that Directive and the inclusion of those items is limited by the delegated acts adopted in accordance with Article 99 (opens EUR-Lex in a new tab) of that Directive;

‘Tier 2 own-fund insurance items’ means basic own-fund items of undertakings subject to the requirements of Directive 2009/138/EC (opens EUR-Lex in a new tab) where those items are classified in Tier 2 within the meaning of Directive 2009/138/EC (opens EUR-Lex in a new tab) in accordance with Article 94(2) (opens EUR-Lex in a new tab) of that Directive;

‘Tier 3 own-fund insurance items’ means basic own-fund insurance items of undertakings subject to the requirements of Directive 2009/138/EC (opens EUR-Lex in a new tab) where those items are classified in Tier 3 within the meaning of Directive 2009/138/EC (opens EUR-Lex in a new tab) in accordance with Article 94(3) (opens EUR-Lex in a new tab) of that Directive;

‘deferred tax assets’ has the same meaning as under the applicable accounting framework;

‘deferred tax assets that rely on future profitability’ means deferred tax assets the future value of which may be realised only in the event the institution generates taxable profit in the future;

‘deferred tax liabilities’ has the same meaning as under the applicable accounting framework;

‘defined benefit pension fund assets’ means the assets of a defined pension fund or plan, as applicable, calculated after they have been reduced by the amount of obligations under the same fund or plan;

‘distributions’ means the payment of dividends or interest in any form;

‘financial undertaking’ has the same meaning as under points (25)(b) and (d) of Article 13 (opens EUR-Lex in a new tab) of Directive 2009/138/EC (opens EUR-Lex in a new tab);

‘funds for general banking risk’ has the same meaning as under Article 38 (opens EUR-Lex in a new tab) of Directive 86/635/EEC (opens EUR-Lex in a new tab);

‘goodwill’ has the same meaning as under the applicable accounting framework;

‘indirect holding’ means any exposure to an intermediate entity that has an exposure to capital instruments issued by a financial sector entity or to liabilities issued by an institution where, in the event the capital instruments issued by the financial sector entity or the liabilities issued by the institution were permanently written off, the loss that the institution would incur as a result would not be materially different from the loss the institution would incur from a direct holding of those capital instruments issued by the financial sector entity or of those liabilities issued by the institution;

‘intangible assets’ has the same meaning as under the applicable accounting framework and includes goodwill;

‘other capital instruments’ means capital instruments issued by financial sector entities that do not qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments or Tier 1 own-fund insurance items, additional Tier 1 own-fund insurance items, Tier 2 own-fund insurance items or Tier 3 own-fund insurance items;

‘other reserves’ means reserves within the meaning of the applicable accounting framework that are required to be disclosed under the applicable accounting standard, excluding any amounts already included in accumulated other comprehensive income or retained earnings;

‘own funds’ means the sum of Tier 1 capital and Tier 2 capital;

‘own funds instruments’ means capital instruments issued by the institution that qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments;

‘minority interest’ means the amount of Common Equity Tier 1 capital of a subsidiary of an institution that is attributable to natural or legal persons other than those included in the prudential scope of consolidation of the institution;

‘profit’ has the same meaning as under the applicable accounting framework;

‘reciprocal cross holding’ means a holding by an institution of the own funds instruments or other capital instruments issued by financial sector entities where those entities also hold own funds instruments issued by the institution;

‘retained earnings’ means profits and losses brought forward as a result of the final application of profit or loss under the applicable accounting framework;

‘share premium account’ has the same meaning as under the applicable accounting framework;

‘temporary differences’ has the same meaning as under the applicable accounting framework;

‘synthetic holding’ means an investment by an institution in a financial instrument the value of which is directly linked to the value of the capital instruments issued by a financial sector entity or to the value of the liabilities issued by an institution;

‘cross-guarantee scheme’ means a scheme that meets all the following conditions:

‘distributable items’ means the amount of the profits at the end of the last financial year plus any profits brought forward and reserves available for that purpose, before distributions to holders of own funds instruments, less any losses brought forward, any profits which are non-distributable pursuant to Union or national law or the institution's by-laws and any sums placed in non-distributable reserves in accordance with national law or the statutes of the institution, in each case with respect to the specific category of own funds instruments to which Union or national law, institutions' by-laws, or statutes relate; such profits, losses and reserves being determined on the basis of the individual accounts of the institution and not on the basis of the consolidated accounts;

‘servicer’ means a servicer as defined in point (13) of Article 2 of Regulation (EU) 2017/2402;

‘resolution authority’ means a resolution authority as defined in point (18) of Article 2(1) of Directive 2014/59/EU;

‘relevant third-country authority’ means a third-country authority as defined in Article 2(1), point (90), of Directive 2014/59/EU;

‘resolution entity’ means a resolution entity as defined in point (83a) of Article 2(1) of Directive 2014/59/EU;

‘resolution group’ means a resolution group as defined in point (83b) of Article 2(1) of Directive 2014/59/EU;

‘global systemically important institution’ or ‘G-SII’ means a G-SII that has been identified in accordance with Article 131(1) and (2) of Directive 2013/36/EU;

‘non-EU global systemically important institution’ or ‘non-EU G-SII’ means a global systemically important banking group or a bank (G-SIBs) that is not a G-SII and that is included in the list of G-SIBs published by the Financial Stability Board, as regularly updated;

‘material subsidiary’ means a subsidiary that on an individual or consolidated basis meets any of the following conditions:

‘G-SII entity’ means an entity with legal personality that is a G-SII or is part of a G-SII or of a non-EU G-SII;

‘bail-in tool’ means a bail-in tool as defined in point (57) of Article 2(1) of Directive 2014/59/EU;

‘group’ means a group of undertakings of which at least one is an institution and which consists of a parent undertaking and its subsidiaries, or of undertakings that are related to each other as set out in Article 22 (opens EUR-Lex in a new tab) of Directive 2013/34/EU (opens EUR-Lex in a new tab) of the European Parliament and of the Council (⁽¹⁶⁾);

‘securities financing transaction’ means a repurchase transaction, a securities or commodities lending or borrowing transaction, or a margin lending transaction;

‘initial margin’ or ‘IM’ means any collateral, other than variation margin, collected from or posted to an entity to cover the current and potential future exposure of a transaction or of a portfolio of transactions in the period needed to liquidate those transactions, or to re-hedge their market risk, following the default of the counterparty to the transaction or portfolio of transactions;

‘market risk’ means the risk of losses arising from movements in market prices, including in foreign exchange rates or commodity prices;

‘foreign exchange risk’ means the risk of losses arising from movements in foreign exchange rates;

‘commodity risk’ means the risk of losses arising from movements in commodity prices;

‘trading desk’ means a well-identified group of dealers established by the institution in accordance with Article 104b(1) to jointly manage a portfolio of trading book positions, or the non-trading book positions referred to in paragraphs (5) and (6) of that Article, in accordance with a well-defined and consistent business strategy and operating under the same risk management structure;

‘small and non-complex institution’ means an institution that meets all the following conditions:

‘large institution’ means an institution that meets any of the following conditions:

‘large subsidiary’ means a subsidiary that qualifies as a large institution;

‘non-listed institution’ means an institution that has not issued securities that are admitted to trading on a regulated market of any Member State, within the meaning of point (21) (opens EUR-Lex in a new tab) of Article 4(1) (opens EUR-Lex in a new tab) of Directive 2014/65/EU (opens EUR-Lex in a new tab);

‘financial report’ means, for the purposes of Part Eight, a financial report within the meaning of Articles 4 (opens EUR-Lex in a new tab) and 5 (opens EUR-Lex in a new tab) of Directive 2004/109/EC (opens EUR-Lex in a new tab) of the European Parliament and of the Council (⁽¹⁷⁾);

‘commodity and emission allowance dealer’ means an undertaking the main business of which consists exclusively of the provision of investment services or activities in relation to commodity derivatives or commodity derivative contracts referred to in points (5), (6), (7), (9) and (10), derivatives of emission allowances referred to in point (4), or emission allowances referred to in point (11) of Section C of Annex I (opens EUR-Lex in a new tab) to Directive 2014/65/EU (opens EUR-Lex in a new tab).

‘revolving exposure’ means any exposure whereby the borrower’s outstanding balance is permitted to fluctuate based on its decisions to borrow and repay, up to an agreed limit;

‘transactor exposure’ means any revolving exposure that has at least 12 months of repayment history and that is one of the following:

‘fossil fuel sector entity’ means a company, enterprise or undertaking statistically classified as having its principal economic activity in the coal, oil or gas sector of economic activities, as set out in Annex XXXIX, Template 3, to Commission Implementing Regulation (EU) 2021/637 (⁽¹⁸⁾) and as identified by reference to the statistical classification of economic activities (NACE Revision 2) codes listed in Annex I, Sections B, C, D and G, to Regulation (EC) No 1893/2006 (opens EUR-Lex in a new tab) of the European Parliament and of the Council (⁽¹⁹⁾); where the principal economic activity of a company, enterprise or undertaking is not classified using the NACE Revision 2 codes set out in Regulation (EC) No 1893/2006 (opens EUR-Lex in a new tab), or a national classification derived therefrom, institutions shall conservatively determine whether such company, enterprise or undertaking has its principal activity in one of those sectors;

‘exposures subject to the impact of environmental or social factors’ means exposures hindering the ambition of the Union to achieve its regulatory objectives relating to ESG factors, in a way that could have a negative financial impact on institutions in the Union;

‘shadow banking entity’ means an entity that carries out banking activities outside the regulated framework.

For the purposes of the first subparagraph, points (1)(b)(ii) and (iii), where the undertaking is part of a third-country group, the total assets of each branch of the third-country group authorised in the Union shall be included in the combined total value of the assets of all undertakings in the group.

For the purposes of the first subparagraph, point (1)(b)(iii), the consolidating supervisor may request all relevant information from the undertaking in order to take its decision.

For the purposes of the first subparagraph, point (52a), legal risk shall not comprise refunds to third parties or employees and goodwill payments due to business opportunities, where no breach of any rules or ethical conduct has occurred and where the institution has fulfilled its obligations on a timely basis. Nor shall legal risk comprise external legal costs where the event giving rise to those external costs is not an operational risk event.

For the purposes of the first subparagraph, point (145)(e), of this paragraph, an institution may exclude derivative positions it entered with its non-financial clients and the derivative positions it uses to hedge those positions, provided that the combined value of the excluded positions calculated in accordance with Article 273a(3) does not exceed 10 % of the institution’s total on- and off-balance-sheet assets.