S.L. 371.16 Art. 9AAdditional own funds requirement.

(1) The additional own funds requirement referred to in regulation 9(1)(a) shall be imposed by the competent authority where, on the basis of the reviews carried out in accordance with regulations 3 and 7, it determines any of the following situations for an individual credit institution:

(a) the credit institution is exposed to risks or elements of risk that are not covered or not sufficiently covered, as specified in sub-regulation (2), by the own funds requirements set out in Parts Three, Four and Seven of the CRR and in Chapter 2 of Regulation (EU) 2017/ 2402;

(b) the credit institution does not meet the requirements set out in articles 17B and 17C of the Act or in Article 393 of the CRR and it is unlikely that other supervisory measures would be sufficient to ensure that those requirements can be met within an appropriate time-frame;

(c) the adjustments referred to in regulation 4(4) are deemed to be insufficient to enable the credit institution to sell or hedge out its positions within a short period without incurring material losses under normal market conditions;

(d) the evaluation carried out in accordance with regulation 7(4) reveals that the non-compliance with the requirements for the application of the permitted approach will likely lead to inadequate own funds requirements;

(e) the credit institution repeatedly fails to establish or maintain an adequate level of additional own funds to cover the guidance communicated in accordance with regulation 9B(3);

(f) other institution-specific situations deemed by the competent authority to raise material supervisory concerns:

Provided that the competent authority shall only impose the additional own funds requirement referred to in regulation 9(1)(a) to cover the risks incurred by individual credit institutions due to their activities, including those reflecting the impact of certain economic and market developments on the risk profile of an individual credit institution.

(2) For the purposes of sub-regulation (1)(a), risks or elements of risk shall only be considered as not covered or not sufficiently covered by the own funds requirements set out in Parts Three, Four and Seven of the CRR and in Chapter 2 of Regulation (EU) 2017/ 2402 where the amounts, types and distribution of capital considered adequate by the competent authority, taking into account the supervisory review of the assessment carried out by credit institutions in accordance with article 17C of the Act, are higher than the own funds requirements set out in Parts Three, Four and Seven of the CRR and in Chapter 2 of Regulation (EU) 2017/ 2402.

(3) For the purposes of sub-regulation (2), the competent authority shall assess, taking into account the risk profile of each individual credit institution, the risks to which the credit institution is exposed, including:

(a) institution-specific risks or elements of such risks that are explicitly excluded from or not explicitly addressed by the own funds requirements set out in Parts Three, Four and Seven of the CRR and in Chapter 2 of Regulation (EU) 2017/2402;

(b) institution-specific risks or elements of such risks likely to be underestimated despite compliance with the applicable requirements set out in Parts Three, Four and Seven of the CRR and in Chapter 2 of Regulation (EU) 2017/2402:

Provided that, to the extent that risks or elements of risk are subject to transitional arrangements or grandfathering provisions laid down in the Act and any regulations made and Banking Rules issued thereunder transposing the CRD, in any binding legal instruments issued under the CRD or in the CRR, they shall not be considered risks or elements of such risks likely to be underestimated despite compliance with the applicable requirements set out in Parts Three, Four and Seven of the CRR and in Chapter 2 of Regulation (EU) 2017/2402.

(4) For the purposes of sub-regulation (2), the capital considered adequate shall cover all risks or elements of risks identified as material pursuant to the assessment laid down in sub-regulation (3) that are not covered or not sufficiently covered by the own funds requirements set out in Parts Three, Four and Seven of the CRR and in Chapter 2 of Regulation (EU) 2017/2402: Provided that interest rate risk arising from non-trading book positions may be considered material at least in the cases referred to in regulation 4(5), unless the competent authority, in performing the review and evaluation, comes to the conclusion that the credit institution’s management of interest rate risk arising from non-trading book activities is adequate and that the credit institution is not excessively exposed to interest rate risk arising from non-trading book activities.

(5) Where additional own funds are required to address risks other than the risk of excessive leverage not sufficiently covered by point (d) of Article 92(1) of the CRR, the competent authority shall determine the level of the additional own funds required under sub-regulation (1)(a) as the difference between the capital considered adequate pursuant to sub-regulations (2) to (4) and the relevant own funds requirements set out in Parts Three and Four of the CRR and in Chapter 2 of Regulation (EU) 2017/2402: Provided that where additional own funds are required to address the risk of excessive leverage not sufficiently covered by point (d) of Article 92(1) of the CRR, the competent authority shall determine the level of the additional own funds required under sub-regulation (1)(a) as the difference between the capital considered adequate pursuant to sub-regulations (2) to (4) and the relevant own funds requirements set out in Parts Three and Seven of the CRR.

(6) The credit institution shall meet the additional own funds requirement imposed by the competent authority under regulation 9(1)(a) to address risks other than the risk of excessive leverage with own funds that satisfy the following conditions:

(a) at least three quarters of the additional own funds requirement shall be met with Tier 1 capital;

(b) at least three quarters of the Tier 1 capital referred to in paragraph (a) shall be composed of Common Equity Tier 1 capital.

(7) The credit institution shall meet the additional own funds requirement imposed by the competent authority under regulation 9(1)(a) to address the risk of excessive leverage with Tier 1 capital.

(8) By way of derogation from sub-regulations (6) and (7), the competent authority may require the credit institution to meet its additional own funds requirement with a higher portion of Tier 1 capital or Common Equity Tier 1 capital, where necessary, and having regard to the specific circumstances of the credit institution.

(9) Own funds that are used to meet the additional own funds requirement referred to in regulation 9(1)(a) imposed by the competent authority to address risks other than the risk of excessive leverage shall not be used to meet any of the following:

(a) own funds requirements set out in points (a), (b) and

(c) of Article 92(1) of the CRR;

(b) the combined buffer requirement;

(c) the guidance on additional own funds referred to in regulation 9B(3) where that guidance addresses risks other than the risk of excessive leverage.

(10) Own funds that are used to meet the additional own funds requirement referred to in regulation 9(1)(a) imposed by the competent authority to address the risk of excessive leverage not sufficiently covered by point (d) of Article 92(1) of the CRR shall not be used to meet any of the following:

(a) the own funds requirement set out in point (d) of Article 92(1) of the CRR;

(b) the leverage ratio buffer requirement referred to in Article 92(1a) of the CRR;

(c) the guidance on additional own funds referred to in regulation 9B(3), where that guidance addresses risks of excessive leverage.

(11) The competent authority shall duly justify in writing to the credit institution the decision to impose an additional own funds requirement under regulation 9(1)(a), at least by giving a clear account of the full assessment of the elements referred to in sub-regulations (1) to (10). That justification shall include, in the case set out in sub-regulation (1)(e), a specific statement of the reasons for which the imposition of guidance on additional own funds is no longer considered sufficient.