CRR exemption for commodity dealers
European Union Electricity Market Glossary


 

 

CRR Article 498

 

Exemption for Commodities dealers

 

1. This Regulation shall not apply to investment firms the main business of which consists exclusively of the provision of investment services or activities in relation to the financial instruments set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC and to which Directive 93/22/EEC did not apply on 31 December 2006.
The provisions on own funds requirements as set out in this exemption shall apply until 31 December 2017 or the date of entry into force of any amendments pursuant to paragraphs 2 and 3, whichever is the earlier.

 

2. By 31 December 2015, the Commission shall, on the basis of public consultations and in the light of discussions with the competent authorities, report to the European Parliament and the Council on:

 

(a) an appropriate regime for the prudential supervision of investment firms whose main business consists exclusively of the provision of investment services or activities in relation to the commodity derivatives or derivatives contracts set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC;

 

(b) the desirability of amending Directive 2004/39/EC to create a further category of investment firm whose main business consists exclusively of the provision of investment services or activities in relation to the financial instruments set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC relating to energy supplies, including electricity, coal, gas and oil.

 

3. On the basis of the report referred to in paragraph 2, the Commission may submit proposals to amend this Regulation.

 

Under Article 498(1) of CRR (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 and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1)) some commodity dealers falling within the scope of MiFID II are transitionally exempt from the CRR's provisions on own funds requirements until 31 December 2017 at the latest if their main business consists exclusively of providing investment services or activities relating to commodity derivatives

 

Commodity dealers, being a heterogenous category, are defined in this context as "investment firms whose main business consists exclusively of the provision of investment services or activities in relation to the financial instruments set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC and to whom Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field did not apply on 31 December 2006".

 

If the exemption was not extended, commodity dealers (among others energy firms) would have to begin complying with capital requirements in 2018.

 

Another commodity dealer exemption that - pursuant to Article 493(1) of the CRR - expire on 31 December 2017 is the one that exempts commodity dealers from large exposures requirements.

 

Both 'sunset clauses' were included in the CRR in order to allow time for regulators to determine a prudential regulation adapted to the risk profile of commodity dealers.

 

CRR required the European Commission to report by 31 December 2015 on an "appropriate regime for the prudential supervision of investment firms" that trade exclusively in commodity derivatives, as well as whether a new category of investment firm should be created for companies that exclusively trade certain commodity contracts.

 

As the above scoping excersise has not been finished by the set date, the European Commission proposed on 16 December 2015 (see the European Commission Proposal of 16 December 2015 for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards exemptions for commodity dealers, COM(2015) 648 final (2015/0295 (COD)) to extend commodity dealers exemption until 31 December 2020 and, consequently, to amend the CRR in the following way:

 

Article 1

Regulation (EU) No 575/2013 is amended as follows:


 

(1) in Article 493(1), the second sentence is replaced by the following:

"This exemption is available until 31 December 2020 or the date of entry into force of any amendments pursuant to paragraph 2 of this Article, whichever is the earlier.";

 

(2) in Article 498(1), the second subparagraph is replaced by the following:

"This exemption shall apply until 31 December 2020 or the date of entry into force of any amendments pursuant to paragraphs 2 and 3, whichever is the earlier." 

 

 

CRR Article 493

 

Transitional provisions for large exposures

 

1. The provisions on large exposures as laid down in Articles 387 to 403 shall not apply to investment firms whose main business consists exclusively of the provision of investment services or activities in relation to the financial instruments set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC and to whom Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field did not apply on 31 December 2006. This exemption is available until 31 December 2017 or the date of entry into force of any amendments pursuant to paragraph 2 of this Article, whichever is the earlier.

 

2. By 31 December 2015, the Commission shall, on the basis of public consultations and in the light of discussions with the competent authorities, report to the European Parliament and the Council on:

(a) an appropriate regime for the prudential supervision of investment firms whose main business consists exclusively of the provision of investment services or activities in relation to the commodity derivatives or derivatives contracts set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC;

(b) the desirability of amending Directive 2004/39/EC to create a further category of investment firm whose main business consists exclusively of the provision of investment services or activities in relation to the financial instruments set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC relating to energy supplies.

On the basis of this report, the Commission may submit proposals for amendments to this Regulation.

 

3. By way of derogation from Article 400(2) and (3), Member States may, for a transitional period until the entry into force of any legal act following the review in accordance with Article 507, but not after 2 January 2029, fully or partially exempt the following exposures from the application of Article 395(1):

(a) covered bonds falling within Article 129(1), (3) and (6);

(b) asset items constituting claims on regional governments or local authorities of Member States where those claims would be assigned a 20 % risk weight under Part Three, Title II, Chapter 2 and other exposures to or guaranteed by those regional governments or local authorities, claims on which would be assigned a 20 % risk weight under Part Three, Title II, Chapter 2;

(c) exposures, including participations or other kinds of holdings, incurred by an institution to its parent undertaking, to other subsidiaries of that parent undertaking or to its own subsidiaries, in so far as those undertakings are covered by the supervision on a consolidated basis to which the institution itself is subject, in accordance with this Regulation, Directive 2002/87/EC or with equivalent standards in force in a third country. Exposures that do not meet those criteria, whether or not exempted from Article 395(1) of this Regulation, shall be treated as exposures to a third party;

(d) asset items constituting claims on and other exposures, including participations or other kinds of holdings, to regional or central credit institutions with which the credit institution belongs to a network in accordance with legal or statutory provisions and which are responsible, under those provisions, for cash-clearing operations within the network;

(e) asset items constituting claims on and other exposures to credit institutions incurred by credit institutions, one of which operates on a non-competitive basis and provides or guarantees loans under legislative programmes or its statutes, to promote specified sectors of the economy under some form of government oversight and restrictions on the use of the loans, provided that the respective exposures arise from such loans that are passed on to the beneficiaries via credit institutions or from the guarantees of these loans;

(f) asset items constituting claims on and other exposures to institutions, provided that those exposures do not constitute such institutions' own funds, do not last longer than the following business day and are not denominated in a major trading currency;

(g) asset items constituting claims on central banks in the form of required minimum reserves held at those central banks which are denominated in their national currencies;

(h) asset items constituting claims on central governments in the form of statutory liquidity requirements held in government securities which are denominated and funded in their national currencies provided that, at the discretion of the competent authority, the credit assessment of those central governments assigned by a nominated ECAI is investment grade;

(i) 50 % of medium/low risk off-balance sheet documentary credits and of medium/low risk off-balance sheet undrawn credit facilities referred to in Annex I and subject to the competent authorities' agreement, 80 % of guarantees other than loan guarantees which have a legal or regulatory basis and are given for their members by mutual guarantee schemes possessing the status of credit institutions;

(j) legally required guarantees used when a mortgage loan financed by issuing mortgage bonds is paid to the mortgage borrower before the final registration of the mortgage in the land register, provided the guarantee is not used as reducing the risk in calculating the risk-weighted exposure amounts;

(k) assets items constituting claims on and other exposures to recognised exchanges.

 

  

 


 

 

The press release of 23 March 2016 refers to the European Council acceptance of the above proposition (Commodity dealers: Council agrees to extend exemption), which has been followed by the analogous decision of the European Parliament on 11 May 2016 (European Parliament legislative resolution of 11 May 2016 on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards exemptions for commodity dealers (COM(2015)0648 – C8- 0403/2015 – 2015/0295(COD)).

 

See also:

 

BP calls on EU to exempt oil trading from capital regulation

 

 

Last Updated on Saturday, 28 May 2016 09:06
 

Search

Copyright © 2009 - 2017 Michal Glowacki. All rights reserved.
The materials contained on this website are for general information purposes only and are subject to the disclaimer