Report from the Commission to the European Parliament and the Council on the review of the appropriateness of the definition of ‘eligible capital’ pursuant to Article 517 of Regulation (EU) No 575/2013

The capital requirements applicable to investment firms with limited investment services, the prudential treatment of an institution's qualifying holdings outside the financial sector and the definition of institutions' 'large exposures' and its limits have been based, until 31 December 2013, on the notion of 'own funds'.

The 'own funds' definition was substituted from 1 January 2014 with the definition of 'eligible capital' for the purposes to be used in the above mentioned fields regulated by Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms of 26 June 2013 (hereafter the Capital Requirement Regulation or CRR).

The definition of 'eligible capital' was introduced without conducting an impact assessment. For this reason, the implementation of the new regime is subject to a three-year transitional period (ending on 31 December 2016) and it is subject to review before its full implementation.

This report fulfils the obligation laid down in Article 517 of the Capital Requirement Regulation, according to which the Commission shall review and report to the European Parliament and the Council on the appropriateness of the definition of 'eligible capital' being applied for the purposes of Title III of Part Two and Part Four of the CRR and, if deemed appropriate, submit a legislative proposal.

The report is based on the opinion issued by the European Banking Authority (EBA) in consultation with national competent authorities on 17 February 2015.

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