Key features and differences between P2R and P2G

P2R P2G

Nature

Expectation on top of the combined Requirement on top of Pillar 1 and below buffer requirement the combined buffer requirement set in accordance with Article 104 of the CRD

Scope

(1) Risk of unexpected losses over 12-months period not covered by minimum requirements; (2) risk of expected losses Quantitative outcomes of relevant over 12 months insufficiently covered by stress tests (other potential areas to provisions; (3) risk of underestimation of be explored further) risk due to model deficiencies; (4) risks arising from governance deficiencies

Determination

Calculation based on the maximum impact of the adverse scenario on Calculation takes into account ICAAP the CET1 ratio, adjusted, for figures, where assessed as reliable, example, for credible mitigating supported by, for example, supervisory actions and other factors, and offset benchmarks applied in relation to ICAAP against the own funds held to meet calculations, supervisory judgement, the CCB and in exceptional cases the etc. CCyB if it covers the same risks assumed in the stress test

Quality of capital

Regulatory eligible own funds, at least in [CET1 only] the same composition as Pillar 1

Relevance for the restrictions on distributions under Article 141 of Directive 2013/36/EU

Yes No

Communication to institution

As a separate ratio, not part of TSCR Part of the TSCR ratio articulated in or OCR, explaining how it affects all relation to all Pillar 1 ratios (total own capital ratios (T1 and total own funds, T1, CET1) funds)

Compliance

Institutions are expected to incorporate P2G into their capital Requirements to be met at all times, planning, risk management and including in stressed conditions recovery planning, and operate above P2G

Supervisory response to breaches

No automatic link between the level All supervisory measures can be applied; of own funds falling below P2G and a breach is a potential condition for the specific supervisory measures, but withdrawal of authorisation; an would trigger enhanced supervisory institution in breach is considered failing dialogue and engagement with an or likely to fail for resolution purposes institution, as there is a need to provide a credible capital plan