
CHAPTER I
Article 1 
This Regulation specifies the technical principles and technical calculation methods listed in Annex I to Directive 2002/87/EC for the purposes of the alternatives to deduction referred to Article 49(1) of Regulation (EU) No 575/2013 and for the purposes of calculating own funds and supplementary capital adequacy requirement as provided for in Article 6(2) of Directive 2002/87/EC.
Article 2 
For the purposes of this Regulation, the following definitions shall apply:

((1)) ‘insurance-led financial conglomerate’ means a financial conglomerate the most important financial sector of which is insurance, in accordance with Article 3(2) of Directive 2002/87/EC;
((2)) ‘banking-led or investment-led financial conglomerate’ means a financial conglomerate the most important financial sector of which is either the banking sector or the investment services sector, in accordance with Article 3(2) of Directive 2002/87/EC.
CHAPTER II
Article 3 
Own funds which result directly or indirectly from intra-group transactions shall not be included when calculating the supplementary capital adequacy requirements at the level of a financial conglomerate.
Article 4 

1. Own funds recognised at the level of a regulated entity, that exceed those needed to meet sectoral solvency requirements as specified in Article 9, shall not be included in the calculation of the own funds of a financial conglomerate, or of the sum of the own funds of each regulated and non-regulated financial sector entity in a financial conglomerate, unless there is no current or foreseen practical or legal impediment to the transfer of the funds between entities in the financial conglomerate.
2. The entity referred to in the fifth subparagraph of Article 6(2) of Directive 2002/87/EC shall, when submitting the results of the calculation and the relevant data for the calculation referred to in that subparagraph to the coordinator, confirm and provide evidence to the coordinator that paragraph 1 is complied with.
Article 5 

1. Own funds referred to in paragraph 2 which are available at the level of a regulated entity shall be eligible for the coverage of risks arising from the sector that recognises those own funds, and shall not be taken into account as eligible for the coverage of risks of other financial sectors.
2. The own funds referred to in paragraph 1 are own funds that are not the following:
(a) Common Equity Tier 1, Additional Tier 1 or Tier 2 items within the meaning of Regulation (EU) No 575/2013;
(b) basic own-fund items of undertakings subject to the requirements of Directive 2009/138/EC where those items are classified in Tier 1 or in Tier 2 in accordance with Article 94(1) and (2) of that Directive.
Article 6 

1. Where there is a deficit of own funds at the financial conglomerate level, only own fund items that are eligible under the sectoral rules for both the banking sector and the insurance sector shall be used to meet that deficit.
2. The own funds referred to in paragraph 1 are the following:
(a) Common Equity Tier 1 capital as defined in Article 50 of Regulation (EU) No 575/2013;
(b) basic own-fund items where those items are classified in Tier 1 in accordance with Article 94(1) of Directive 2009/138/EC and the inclusion of those items is not limited by the delegated acts adopted in accordance with Article 99 of that Directive;
(c) Additional Tier 1 capital as defined in Article 61 of Regulation (EU) No 575/2013;
(d) basic own-fund items where those items are classified in Tier 1 in accordance with Article 94(1) of Directive 2009/138/EC and the inclusion of those items is limited by the delegated acts adopted in accordance with Article 99 of that Directive;
(e) Tier 2 capital as defined in Article 71 of Regulation (EU) No 575/2013; and
(f) basic own-fund items where those items are classified in Tier 2 in accordance with Article 94(2) of Directive 2009/138/EC.
3. Own funds items that are used to meet the deficit shall comply with Article 4(1).
Article 7 
The regulated entities or the mixed financial holding company in a financial conglomerate shall apply the calculation method in a consistent manner over time.
Article 8 
In relation to insurance-led financial conglomerates, method 1 for calculating the group solvency of insurance and reinsurance undertakings, as laid down in Articles 230, 231 and 232 of Directive 2009/138/EC, shall be considered as equivalent to method 1 for calculating the supplementary capital adequacy requirements of the regulated entities in a financial conglomerate, as laid down in Annex I to Directive 2002/87/EC, provided that the scope of group supervision under Title III of Directive 2009/138/EC is not materially different from the scope of supplementary supervision under Chapter II of Directive 2002/87/EC.
Article 9 

1. Where the rules for the insurance sector are to be applied, the Solvency Capital Requirement referred to in Articles 100 and 218 of Directive 2009/138/EC including any capital add-on applied in accordance with Article 37 of that Directive, following from Article 216(4), Article 231(7), Article 232, Article 233(6), Article 238(2) and (3) of that Directive shall be considered to be the solvency requirements; for the purpose of the calculation of the supplementary capital adequacy requirements.
2. Where the rules for the banking or investment services sector are to be applied, own funds requirements as laid down in Chapter 1 of Title I of Part Three of Regulation (EU) No 575/2013 and requirements pursuant to that Regulation or to Directive 2013/36/EU to hold own funds in excess of those requirements, including a requirement arising from the internal capital adequacy assessment process in Article 73 of that Directive, any requirement imposed by a competent authority pursuant to Article 104(1)(a) of that Directive, the combined buffer requirement as defined in Article 128(6) of that Directive, and measures adopted pursuant to Articles 458 or 459 of Regulation (EU) No 575/2013 shall be considered to be the solvency requirements for the purpose of the calculation of the supplementary capital adequacy requirements.
Article 10 

1. Subject to paragraphs 7, 8 and 9 of Article 14, the financial conglomerate's own funds and solvency requirements shall be calculated in accordance with the definitions and limits established in the relevant sectoral rules.
2. The own funds of asset management companies shall be calculated in accordance with Article 2(1)(l) of Directive 2009/65/EC of the European Parliament and of the Council. The solvency requirements of asset management companies shall be the requirements set out in Article 7(1)(a) of that Directive.
3. The own funds of alternative investment fund managers shall be calculated in accordance with Article 4(1)(ad) of Directive 2011/61/EU of the European Parliament and of the Council. The solvency requirements of alternative investment fund managers shall be the requirements set out in Article 9 of that Directive.
Article 11 

1. Where an entity in a banking- or investment-led financial conglomerate has a holding in a financial sector entity which belongs to the insurance sector and which is deducted pursuant to Articles 14(3) or 15(3) no supplementary capital adequacy requirement shall arise in respect of that holding at the level of the financial conglomerate.
2. Where the application of paragraph 1 results in a direct change in the expected loss amount under the Internal Ratings Based approach within the meaning of Chapter 3 of Title II of Part Three of Regulation (EU) No 575/2013, an amount equivalent to that change shall be added to the own funds of the financial conglomerate.
Article 12 

1. Where a mixed financial holding company has a holding in a non-regulated financial sector entity, the notional own funds and the notional solvency requirements for that entity shall be calculated in accordance with the sectoral rules of the most important sector in the financial conglomerate.
2. For a non-regulated financial sector entity other than one referred to in paragraph 1, the notional own funds and the notional solvency requirements shall be calculated in accordance with the sectoral rules of the closest financial sector of the non-regulated financial sector entity. The determination of the closest financial sector shall be based on the range of activities of the relevant entity and the extent to which it carries out those activities. If it is not possible to clearly identify the closest financial sector, the sectoral rules of the most important sector in the financial conglomerate shall be used.
Article 13 
The sectoral rules applied in the calculation of the supplementary capital adequacy requirements shall include any transitional or grandfathering provisions that apply at sectoral level.
CHAPTER III
Article 14 

1. The own funds of a financial conglomerate shall be calculated on the basis of the consolidated accounts according to the relevant accounting framework applied to the scope of supplementary supervision under Directive 2002/87/EC and shall take paragraph 5 into account where applicable.
2. With regard to banking-led or investment-led financial conglomerates the following treatments shall be applied to unconsolidated investments when calculating the own funds of the financial conglomerate:
(a) unconsolidated significant investments held in a financial sector entity, within the meaning of Article 43 of Regulation (EU) No 575/2013, which belongs to the insurance sector, shall be fully deducted from the conglomerate's own funds;
(b) unconsolidated investments, other than those referred to in point (a), held in a financial sector entity which belongs to the insurance sector shall be fully deducted from the conglomerate's own funds in accordance with Article 46 of Regulation (EU) No 575/2013.
3. Subject to paragraph 2, any own funds issued by an entity in a financial conglomerate and held by another entity in that financial conglomerate shall be deducted from the conglomerate's own funds if not already eliminated in the accounting consolidation process.
4. An undertaking which is a jointly controlled entity for the purpose of the relevant accounting framework shall be treated in accordance with sectoral rules on proportional consolidation or the inclusion of proportional shares.
5. Where an entity within the scope of Directive 2009/138/EC forms part of a financial conglomerate, the calculation of the supplementary capital adequacy requirements at the level of the financial conglomerate shall be based on the valuation of assets and liabilities calculated in accordance with Section 1 and 2 of Chapter VI of Title I of Directive 2009/138/EC.
6. Where asset or liability values are subject to prudential filters and deductions in accordance with Title I of Part 2 of Regulation (EU) No 575/2013, the asset or liability values used for the purpose of the calculation of the supplementary capital adequacy requirements shall be those attributable to the relevant entities under that Regulation, excluding assets and liabilities attributable to other entities of the financial conglomerate.
7. Where calculation of a threshold or limit is required by sectoral rules, the threshold or limit at conglomerate level shall be calculated on the basis of the consolidated data of the financial conglomerate and after deductions required by paragraphs 2 and 3.
8. For the purposes of calculating thresholds or limits, regulated entities in a financial conglomerate which fall within the scope of an institution's consolidated situation pursuant to Section 1 of Chapter 2 of Title II of Part One of Regulation (EU) No 575/2013 shall be considered together.
9. For the purpose of calculating thresholds or limits, regulated entities in a financial conglomerate which fall within the scope of group supervision according to Title III of Directive 2009/138/EC shall be considered together.
10. For the purposes of calculating thresholds or limits at the regulated entity level, regulated entities in a financial conglomerate to which neither paragraph 8 nor paragraph 9 applies, shall calculate their respective thresholds and limits on an individual basis according to the sectoral rules of the regulated entity.
11. When summing the relevant sectoral solvency requirements there shall be no adjustment other than as required by Article 11 or as a result of adjustments to sectoral thresholds and limits pursuant to paragraph 7.
Article 15 

1. Where the own funds of a regulated entity are subject to a prudential filter pursuant to the relevant sectoral rules, one of the following treatments shall apply:
(a) the filtered amount, being the net amount that shall be taken into account in the calculation of own funds of participations, shall be added to the book value of participations in accordance with subparagraph 2 of Article 6(4) of Directive 2002/87/EC, if the filtered amount increases regulatory capital;
(b) the filtered amount referred to in point (a) shall be deducted from the book value of participations in accordance with subparagraph 2 of Article 6(4) of Directive 2002/87/EC, if the filtered amount decreases regulatory capital.
2. For banking-led or investment-led financial conglomerates, significant investment in a financial sector entity within the meaning of Article 43 of Regulation (EU) No 575/2013, which belongs to the insurance sector and which is not a participation shall be fully deducted from the own funds items of the entity holding the instrument, in accordance with sectoral rules applicable to that entity.
3. Intra-group investments in any capital instruments that are eligible as own funds in accordance with sectoral rules, taking into account relevant sectoral limits, shall be deducted or excluded from the own funds calculation.
4. The calculation of supplementary capital requirements shall be carried out in accordance with the formula in the Annex.
Article 16 

1. Competent authorities may only allow the application of method 3 as referred to in Annex I to Directive 2002/87/EC in either of the following circumstances:
(a) it is not reasonably feasible to apply either method 1 as referred to in Annex I to Directive 2002/87/EC to all entities or method 2 as referred to in Annex I to Directive 2002/87/EC to all entities within a financial conglomerate, in particular because method 1 cannot be used for one or more entities because they are outside the scope of consolidation, or because a regulated entity is established in a third country and it is not possible to obtain sufficient information to apply one of the methods to that entity;
(b) the entities which would apply one of the methods are collectively of negligible interest with respect to the objectives of supervision of regulated entities in a financial conglomerate.
2. Either method 1 or method 2 shall be used by all regulated entities in a financial conglomerate which are not referred to in paragraph 1.
3. The application of method 3 allowed by a competent authority in relation to a financial conglomerate shall be consistent over time.
CHAPTER IV
Article 17 
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
Article 5, Article 6(2), Article 8, Article 9(1) and Article 14(5) and (9) shall apply from the date of application referred to in Article 309(1) of Directive 2009/138/EC.
This Regulation shall be binding in its entirety and directly applicable in all Member States.Done at Brussels, 21 January 2014.
For the Commission
The President
José Manuel BARROSO
ANNEX

The calculation of supplementary capital adequacy requirements under method 2 shall be carried out on the basis of the applicable accounting framework of each of the entities in the group following the formulaic expression below:
scar=∑i=1GfinxiOF i−∑i=1GfinREQ i+∑j=1GB Vj
scar≥0
where own funds (OFi) exclude intra-group capital instruments that are eligible as own funds in accordance with sectoral rules.
The supplementary capital adequacy requirements (scar) shall thus be calculated as the difference between:

1.. the sum of the own funds (OFi) of each regulated and non-regulated financial sector entity (i) in the financial conglomerate; the elements eligible are those which qualify in accordance with the relevant sectoral rules; and
2.. the sum of the solvency requirements (REQi) for each regulated and non-regulated financial sector entity (i) in the group (G); the solvency requirements shall be calculated in accordance with the relevant sectoral rules; and the book value (BVj) of the participations in other entities (j) of the group.
In the case of non-regulated financial sector entities, a notional solvency requirement shall be calculated in accordance with Article 12. Own funds and solvency requirements shall be taken into account for their proportional share (x) as provided for in Article 6(4) of Directive 2002/87/EC and in accordance with Annex I to that Directive.
The difference shall not be negative.
