               9.3.2020

               EN

               Official Journal of the European Union

               C 76/206

      P8_TA(2018)0227
      Libya
      European Parliament recommendation of 30 May 2018 to the Council, the Commission and the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy on Libya (2018/2017(INI))
      (2020/C 76/25)

         The European Parliament,

                  —

                  having regard to UN Security Council resolution 2259 (2015) and subsequent resolutions,

                  —

                  having regard to the Libyan Political Agreement,

                  —

                  having regard to the report of the Secretary-General on the UN Support Mission in Libya, of 22 August 2017,

                  —

                  having regard to UN Security Council resolution 1973 (2011) and all subsequent UNSC resolutions concerning Libya, including 2380 (2017),

                  —

                  having regard to the report of the UN Secretary-General pursuant to Security Council resolution 2312 (2016),

                  —

                  having regard to the statement of the UN High Commissioner for Human Rights of 14 November 2017 on the suffering of migrants in Libya which is an outrage to conscience of humanity,

                  —

                  having regard to the Report of the Office of the UN High Commissioner for Human Rights of April 2018 entitled ‘Abuse Behind Bars: Arbitrary and unlawful detention in Libya’,

                  —

                  having regard to its resolutions of 18 September 2014 (1), 15 January 2015 (2) and 4 February 2016 (3) on the situation in Libya,

                  —

                  having regard to the Declaration of the Co-Presidents of the ACP-EU Joint Parliamentary Assembly on the situation of migrants in Libya, of 20 December 2017,

                  —

                  having regard to the United Nations Convention on the Law of the Sea,

                  —

                  having regard to the EU Global Approach to Migration and Mobility,

                  —

                  having regard to the joint communication from the Commission and the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy of 25 January 2017 entitled ‘Migration on the Central Mediterranean route – Managing flows, saving lives’ (JOIN(2017)0004),

                  —

                  having regard to the Malta Declaration of 3 February 2017,

                  —

                  having regard to the Joint Africa-EU Strategy and its action plan,

                  —

                  having regard to the Joint Statement on the Migrant Situation in Libya, agreed at the African Union - European Union Summit 2017 and the establishment of the high-level trilateral AU-EU-UN Task Force,

                  —

                  having regard to the Council conclusions on Libya of 17 July 2017,

                  —

                  having regard to the European Council conclusions of 19 October 2017,

                  —

                  having regard to Rule 113 of its Rules of Procedure,

                  —

                  having regard to the report of the Committee on Foreign Affairs (A8-0159/2018),

                  A.

                  whereas the situation in Libya is highly fragile and the country is facing a number of complex, interrelated challenges regarding political stability, economic development, and security;

                  B.

                  whereas the crisis in Libya has an enormous impact on the people of Libya and also affects the whole surrounding region and the EU, and it is therefore crucial, for the sake of the Libyan population as well as neighbouring countries and the Sub-Saharan and Mediterranean regions, to ensure political stability in Libya, as a fundamental prerequisite for improving the country’s economic and social situation;

                  C.

                  whereas stability in the south of Libya is a particular concern given the fragile state of its neighbouring countries, with a potential jihadist insurgency threatening weakened governments in the Sahel-Sahara region;

                  D.

                  whereas the EU should communicate more proactively on its diplomatic efforts and its large financial contribution towards consolidating the security and socio-economic situation in Libya;

                  E.

                  whereas the conflict in Libya can only be solved through a coherent, comprehensive and inclusive approach involving all international actors and stakeholders, including representatives of the various local communities, the tribal chiefs and civil society activists, and by ensuring Libyan ownership of and inclusiveness in the peace process;

                  F.

                  whereas the Libyan Political Agreement and the UN Action Plan for Libya currently constitute the only viable framework for a solution to the crisis;

                  G.

                  whereas, through diplomatic action and concrete support, the EU is assisting Libya’s political transition towards a stable, functioning country and is supporting the UN-led mediation efforts in this regard;

                  H.

                  whereas it is of the utmost importance that all Member States speak with one voice, strengthening EU mediation efforts and emphasising the central role of the UN and of the UN action plan; whereas individual initiatives by Member States are in all cases to be welcomed only if they are taken within the European framework and are fully in line with EU foreign policy;

                  I.

                  whereas EU action is showing results on the migration front, given that the figures fell by one third at the end of 2017 compared to 2016 and for the early months of 2018 the figures are 50 % down on those for the same period last year;

                  J.

                  whereas Libya is a key point of transit and departure for migrants attempting to reach Europe, particularly from sub-Saharan Africa; whereas thousands of migrants and refugees fleeing the violence in Libya have lost their lives in attempting to cross the Mediterranean in order to reach Europe;

                  K.

                  whereas migrants are among those suffering the most as a result of the security problems in Libya, as they are often the victims of arbitrary violence, arrest and detention by non-state operators, and experience extortion, kidnapping with the aim of obtaining a ransom, and exploitation;

                  L.

                  whereas many migrants, particularly those from sub-Saharan Africa, have been subjected to arbitrary detention by various armed groups in the country;

                  M.

                  whereas the forced return to Libya by Niger of at least 132 Sudanese who were receiving assistance from the UNHCR is a source of great concern;

                  N.

                  whereas the problem of internally displaced persons remains a topical one; whereas such persons find themselves facing critical threats such as crossing conflict zones, the presence of landmines and unexploded devices, and the violence of the various militias;

                  O.

                  whereas Libya has become a transit country for human trafficking; whereas Libya continues to host hundreds of thousands of migrants and asylum seekers of different nationalities, many of whom are living in tragic conditions and thus constitute a target for smugglers; whereas there have been allegations of slavery in Libya;

                  P.

                  whereas the daily life of ordinary Libyans is characterised by ever more difficult living circumstances, further complicated by a cash crisis, water cuts and frequent power outages, and the generally catastrophic state of the country’s healthcare system;

                  Q.

                  whereas the political climate in Libya is characterised by deep mistrust between the main political and military actors from different regions;

                  R.

                  whereas the internationally recognised Government of National Accord (GNA) increasingly relies on several militias for its own security; whereas these militias have acquired an unprecedented degree of influence over state institutions in Tripoli, thus threatening the UN’s ongoing attempts to create a more viable political framework in the country;

                  S.

                  whereas countries such as Turkey, Qatar, Egypt and the UAE have a significant influence on various groups of the warring factions;

                  T.

                  whereas the subnational identities of the various Libyan communities, tribes and ethnic groups have always constituted the underlying socio-cultural fabric of Libya and play a key role in the social and political dynamics and security issues of the country; whereas Libyan society has strong traditions of informal dispute resolution processes between cities, tribes and ethnic communities;

                  U.

                  whereas currently the country does not have a clear and widely accepted legislative framework with regard to the electoral system; whereas no constitution has been adopted, thus leaving the country without the necessary legal framework to hold new elections; whereas the prevalence of the current climate of impunity, widespread unlawfulness, corruption and the role of the armed groups and tribal and regional tensions in Libya are contributing to a further decrease in trust in the already weak public and government institutions;

                  V.

                  whereas Libya has seen a continued increase in extrajudicial killings, torture, arbitrary detention and indiscriminate attacks on residential areas and infrastructure, as well as an increase in hate speech and incitement to violence;

                  W.

                  whereas the Madkhalist Salafist extremist group is becoming stronger and more relevant in the east as well as in the west of Libya; whereas Madkhalists oppose elections, are eager to maintain the status quo, completely reject any model of democracy and are heavily armed, and thus represent a concrete risk of further extremism and violence in the country;

                  X.

                  whereas the collapse of the criminal justice system enhances impunity in the country, narrowing avenues for victims to seek protection and remedy; whereas in several regions, even in cases where police reports have been filed after a crime, little action has followed to open prompt, thorough, effective, impartial and independent investigations and to bring perpetrators to justice; whereas no perpetrator of a crime who belongs to an armed group has been convicted in Libya since 2011;

                  Y.

                  whereas the cycle of violence in Libya has been continuously fed by overarching impunity for serious human rights violations; whereas, unless this is properly addressed, the continued absence of the rule of law will make the narrative of peaceful coexistence and fighting violent extremism meaningless for the population;

                  Z.

                  whereas dozens of political and human rights activists, media professionals and other public figures have been abducted or threatened; whereas the UN has received reports of arbitrary detention and torture and ill-treatment by both sides;

                  AA.

                  whereas escalating attacks on members of the judiciary, local civil society organisations, human rights defenders and media workers – as well as refugees and migrants – have been accelerating the deterioration of the human rights situation for all civilians on Libyan territory; whereas the absence of the rule of law and impunity for grave human rights violations, including torture, arbitrary detention, extrajudicial killings and indiscriminate attacks on civilians and infrastructure, continue to fuel the cycle of violence in the country;

                  AB.

                  whereas the porosity of Libya’s borders encourages unlawful cross-border traffic; whereas the proliferation of armed groups in the border areas has recently exacerbated the conflict between rival traffickers for control of and access to cross-border resources; whereas the so-called foreign fighters who arrive in the country and the various criminal networks are continuing to benefit from the unchecked proliferation of arms;

                  AC.

                  whereas political insecurity and instability have made Libya a fertile ground for the activities of extremist groups; whereas the Fezzan region is structurally unstable and has historically been a place of transit to Europe for refugees and migrants, and for the smuggling of oil, gold, arms, drugs and for human trafficking; whereas the region has been suffering from increased ethnic and tribal tensions since the fall of Colonel Gaddafi and the struggle for control of the country’s resources; whereas stabilising Fezzan is key in stabilising the country as a whole;

                  AD.

                  whereas local Libyan authorities play a key role in preventing conflicts and providing essential public services to residents;

                  AE.

                  whereas the city of Derna has been subject to escalating ground, air and artillery assault since 7 May 2018; whereas numerous civilians have been killed, while aid and medical access have been severely limited and the humanitarian situation is dramatic;

                  AF.

                  whereas an official Parliament delegation carried out a mission to Libya on 20-23 May 2018;

                  1.

                  Recommends the following to the Council, the Commission and the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy:

                              (a)

                              to ensure the strongest support for the UN Action Plan for Libya presented in September 2017 by the UN Special Representative Ghassan Salamé, for the stabilisation of Libya and for a political and inclusive national reconciliation process that will enable all Libyan actors, including all tribal entities, to reach a stable and long-lasting political agreement while paying due attention to the involvement of women and minorities; to take into account the results of the inclusive consultative processes presented to the UNSC on 21 May 2018; to strongly condemn any attempt at undermining the UN-led peace process; to continue to cooperate closely with the UN Support Mission in Libya (UNSMIL);

                              (b)

                              to intensify their diplomatic efforts to support the UN plan and help consolidate a Libyan Government in its efforts to create political consent, guarantee security and extend its authority to the whole territory of Libya, beyond the narrow territorial control of the internationally recognised GNA, as the necessary precondition for an inclusive political solution that promotes the stabilisation, reconstruction and reconciliation of the country, for state building and for any peacekeeping operation based on democracy, the rule of law and human rights; to ensure Libyan ownership of the stabilisation process and the decision about the future form of the state; to support the strengthening of local mechanisms and capacities in the country with regard to mediation, dispute resolution and ceasefires and to connect them to the UN Action Plan as part of a coherent and integrated approach that will lead to concrete and lasting results;

                              (c)

                              to support the so-called ‘town hall meetings’ taking place in several municipalities under the UN umbrella, as an effective bottom-up reconciliation initiative which aims to encourage dialogue among different communities, thus concretely contributing to the development of a sustainable and viable solution to the Libyan crisis and helping to create a national culture of civic sense;

                              (d)

                              to work on means of fostering institution building, building up a true civil society and jump-starting the economy, and to move away from an overly stretched public service to foster sustainable private sector development, which are necessary to ensure the long-term stability and prosperity of the country;

                              (e)

                              to support Libyan efforts to work on a new constitutional order which should include a formula for the just distribution of oil wealth, as well as a clear division of tasks and obligations for the historic regions on the one side and any national government on the other; to recall that such a new constitution, which could be inspired by elements of the amended 1963 constitution, would help efforts to organise country-wide elections to be held only once the new constitution is adopted and the necessary conditions are properly met in order to ensure a high turnout as well as public acceptance and legitimacy;

                              (f)

                              to further prioritise work within the EU institutions on how better to address all aspects of the Libyan crisis, and which instruments and sectors to engage, including by devoting greater attention to local dynamics, in order to put in place an effective comprehensive approach towards the country and show unity of purpose and initiative among all institutions and the Member States in order to ensure coherence of the measures by all actors involved, as part of a broader regional strategy;

                              (g)

                              to enhance its presence, visibility and understanding of the complexity of the situation in the country by re-establishing the EU delegation in Tripoli and by returning permanent EU staff to the delegation;

                              (h)

                              to continue to emphasise that there can be no military solution to the Libyan crisis and to reaffirm the need for all parties and armed groups in Libya to commit to Article 42 of the Libyan Political Agreement, respect the principles of international humanitarian law and international human rights law, and refrain from violent rhetoric and from the use of violence, and to demobilise and commit to a peaceful solution to the conflict, thus avoiding further damage and loss of life; considers that negotiations should serve to unify the Libyan security forces from all regions in order to build a civilian-controlled national security architecture, under the inclusive internationally recognised Libyan government, with guarantees of transparency and accountability and respecting Libya’s international human rights obligations, and should also lead to the signing of a protocol that commits all armed groups to renouncing the use of force and violence, within the framework of a coherent and comprehensive disarmament, demobilisation and reintegration (DDR) process aimed at reintegrating members of armed groups into society and security system reform (SSR) process guided by the Skhirat principles of non-discrimination and transparency; believes that the signing of such a protocol should allow for implementation of the peace agreement, paving the way to holding free and fair elections, and should bring about economic and financial incentives and prompt the signatories to work towards building the new state’s institutions;

                              (i)

                              to bear in mind the need to develop tailor-made programmes to reintegrate individuals, not groups, from militias into the regular security apparatus, thus limiting divided loyalties;

                              (j)

                              to support UN efforts aimed at holding elections in Libya by the end of 2018 and only once a new constitution is adopted; to support particularly efforts to register voters as currently only around 50 % of eligible voters have been registered; to make sure that an agreement on a transitional arrangement is adopted before the elections in order to rebuild trust and thus strengthen the new government’s international and national legitimacy; to support, including by technical means, the process for the establishment of a sound constitutional framework and the electoral process as a whole, linking European financial contributions to the adoption of an electoral law that complies, as much as possible, with the international principles laid down by the Venice Commission;

                              (k)

                              to put pressure on those obstructing the political peace talks and to effectively enforce the UN arms embargo on Libya; to consider introducing new sanctions on those supporting illegal oil deals;

                              (l)

                              to intensify cooperation with all international organisations and other actors on the ground in order to strengthen the coherence and convergence of international action; to step up diplomatic efforts with all regional actors and neighbouring countries, to ensure they contribute to a positive solution to the crisis in Libya in line with the UN Action Plan – currently the only possible framework for a solution to the crisis; to support the ongoing process of the National Conference inside Libya with the objective of achieving an agreement between the different Libyan parties on the next steps to complete the transition; to discourage regional actors from considering any unilateral or multilateral military intervention lacking any legal base or the political consent of the Libyan government;

                              (m)

                              to support the deployment of lawmakers, judges and specialised prosecutors in Libya who can assist in the revision of Libya’s counter-terrorism laws and ensure they are properly equipped to preside over and carry out counter-terrorism cases in compliance with the rule of law;

                              (n)

                              to reflect on the crisis in Libya in a wider, regional and pan-African context, bearing in mind that Libya is key to the stability of North Africa, the Sahel, and the Mediterranean; to promote and facilitate Libyan cooperation with its Sahel neighbours; to consider, as part of this reflection, the impact of the situation in Libya on the dynamics and challenges with which the EU is confronted; to develop a comprehensive policy towards Libya which takes into account the regional and pan-African perspective covering broader development, security and migration policies and the protection of human rights and fundamental freedoms, countering terrorism and the fight against slavery and exploitation; to ensure that this policy is backed by adequate and sufficient funding for its implementation, including the next Multiannual Financial Framework, in order to yield concrete results; to continue and intensify where possible the cooperation between NATO’s Operation Sea Guardian and the EUNAVFOR Med Operation Sophia;

                              (o)

                              to ensure permanent and active involvement in counter-terrorism and counter-trafficking efforts, not only through intelligence integration, financial cooperation and tactical support, but also with social and educational programmes for healthcare and education that support the training and deployment of social actors and key opinion-formers to counter violent extremism and promote a message of coexistence and peaceful cooperation;

                              (p)

                              to bear in mind that, while Daesh/IS might have been significantly weakened in Libya, there are new forms of extremism on the rise in the country, such as that represented by Madkhalists; to recall that the most effective answer to the radical militant presence in the country lies ultimately in the establishment of inclusive domestic institutions that can uphold the rule of law, provide public services and local security, and effectively fight the groups that are threatening the stability of the country and the wider region;

                              (q)

                              to ensure, in line with the Paris Declaration of 25 July 2017, that EU funds are effectively deployed in order to guarantee intergovernmental coordination in restoring public infrastructure through the EU stabilisation facilities; to prioritise funding for projects and initiatives that support actors promoting accountability and democratic change, and that foster locally embedded dialogue, reconciliation and conflict-resolution mechanisms, involving women and working with young people to prevent them from engaging in criminal activities such as joining militias involved in smuggling and trafficking; to continue strengthening civil society, notably human rights defenders, and to support the political process, security and mediation activities, notably through the European Neighbourhood Instrument (ENI) and the Instrument contributing to Stability and Peace (IcSP); to promote the implementation of representative governance at local and national levels to better respond to the challenges linked to reconciliation, stabilisation and the re-establishment of security; to ensure the money under the EU Emergency Trust Fund is only granted when it abides by its original objectives and is accompanied by a sound analysis of local authorities and recipients and subsequent evaluation;

                              (r)

                              to support municipalities in their delivery of essential services and in building local governance; to ensure basic standards of living for the population, bearing in mind that a closer understanding of the local political and economic system is critical in taking the reconciliation process to the people and in counteracting illegal trafficking; to ensure that the EU funds are effectively deployed in projects that help the Libyan population and civil society; to promote communication between civil society organisations and local government authorities;

                              (s)

                              to support initiatives such as that fostered by the Misrata-Tawergha Reconciliation Committee, in which the two cities of Misrata and Tawergha reached an agreement based on a doctrine of peaceful coexistence, opening the way for the return of Tawergha’s displaced population to their city;

                              (t)

                              to further encourage the Libyan institutions to work more effectively and transparently towards improving the living conditions of all Libyans by, among other things, reinstating priority public services and rebuilding public infrastructure, to enhance the economic governance of the country, to resolve the liquidity crisis, and to implement the necessary financial and economic reforms requested by the international financial institutions to help economic recovery and stabilisation; to assist the country in establishing a market-based economy capable of delivering to all Libyans; to urge the Libyan authorities to make sure that revenues from natural resources and deriving benefits are used for the benefit of the whole population, including at local level; to call on the Libyan authorities to commit to high standards of transparency in the domestic extractive sector, and in particular to sign up to the requirements of the Extractive Industries Transparency Initiative (EITI) as rapidly as possible; to help the Libyan authorities to fight against any illegal activity that hampers the national economy, as recently reported in the interim report of the Panel of Experts established pursuant to resolution 1973 (2011) concerning Libya;

                              (u)

                              to continue to resolutely condemn human rights abuses and the violations of international humanitarian law and to intensify efforts to provide humanitarian assistance to the population in need and to all parts of the country, in particular regarding healthcare and energy facilities; to increase the effectiveness of humanitarian financial assistance and to enhance support for and cooperation with humanitarian organisations on the ground; to condemn the numerous, ever-increasing attempts to shrink the space for civil society, notably through a repressive legal framework and attacks on human rights defenders and the judiciary; to call for the AU, UN and EU to continue working together and to take strong measures for an immediate end of these human rights violations; to strengthen civil society and support the development and independence of local media;

                              (v)

                              to accelerate efforts regarding the UNHCR emergency evacuation mechanism funded by the EU that has allowed around 1 000 of the most vulnerable refugees in need of protection to be evacuated from Libya; to encourage the Libyan counterparts to expand the current number of nationalities which Libya currently allows UNHCR to work with;

                              (w)

                              to address the issue of irregular migration through and from Libya, bearing in mind the need for long-term, effective and viable solutions that should address the root causes of migration in Africa in the countries of origin and transit and define the legal basis for international migration processes, currently based on resettlements through the Emergency Transit Mechanism or direct resettlements; to focus the EU’s efforts on protecting migrants in Libya; to assist the Libyan authorities in ensuring the return of internally displaced persons (IDPs) to their own homes and to support local communities in coping with the challenges, while ensuring that the return of IDPs does not amount merely to an exchange between monetary compensation that favours the various militias and the right of return; to alert the international community to the need for measures to tackle development, human rights and security challenges in Libya and the Sahelo-Saharan region, including means to counter the trafficking of human beings and smuggling of migrants; to ensure that measures to counter smuggling and the trafficking of human beings are not hindering freedom of movement in view of the region’s economic development;

                              (x)

                              to step up the joint efforts carried out by the EU, the African Union and the UN to improve the protection of migrants and refugees in Libya, paying particular attention to vulnerable individuals; to investigate thoroughly and immediately the allegations about abuses and inhuman treatment of migrants and refugees in Libya by criminal groups, as well as allegations of slavery; to devise initiatives to prevent any such incidents from occurring in the future; to improve the conditions of refugees and migrants held in detention centres and to urge the Libyan authorities to close as soon as possible those facilities which are found not to be in line with international standards; to continue and step up assisted voluntary returns and resettlement efforts carried out in cooperation with the UN and the African Union, underlining in this context the importance of abolishing the Libyan requirement for ‘exit visas’; to encourage the Libyan authorities to stop arbitrary detentions and to avoid the detention of vulnerable persons, in particular children; to ensure that migrants are treated with full respect for international human rights standards and to allocate the necessary funding from the EU budget for this purpose; to call on Libya to sign and ratify the 1951 Geneva Convention relating to the Status of Refugees and its 1967 Protocol; to ensure that the EU Border Assistance Mission (EUBAM) in Libya, EUNAVFOR Med Operation Sophia and the Frontex Operation Themis jointly focus on how to disrupt illicit activities, including the smuggling of migrants, human trafficking and terrorism in the Central Mediterranean; to ensure that EUBAM, in line with its mandate, remains actively engaged with and assists the Libyan authorities in priority areas related to border management, law enforcement and the broader criminal justice system;

                              (y)

                              to further develop its efforts against all acts of people smuggling and human trafficking into, through and from Libyan territory and off the coast of Libya which undermine the process of stabilisation of Libya and endanger the lives of thousands of people; to ensure in that sense the continuity of the EU’s contribution to countering these problems by assisting Libyan counterparts in building the long-needed capacity to secure the country’s land and sea borders and engaging with the Libyan authorities to put in place a comprehensive border management strategy;

                              (z)

                              to support a durable solution for the more than 180 000 internally displaced persons in Libya, including an estimated 40 000 former residents of Tawargha, through resettlement possibilities or the facilitation of safe returns to their homes and through increased support to UNHCR and IOM to this end;

                              (aa)

                              to address the cross-over between the activities of international criminal groups and terrorist groups by carrying out thorough investigations, particularly into human trafficking and sexual violence perpetrated in time of conflict;

                              (ab)

                              to support engagement with the Libyan Coast Guard which allowed almost 19 000 migrants to be rescued in Libyan territorial waters between January and the end of October 2017; to assist the Libyan authorities in formally notifying their Search and Rescue (SAR) area, to put in place a set of clear standard operating procedures for disembarkation and to ensure a functioning monitoring system for the Libyan Coast Guard in order to set up a clear and transparent register of all persons disembarked on the Libyan shores, ensuring that they are properly taken care of in accordance with international humanitarian standards; to further engage with the Libyan authorities to step up preparatory work on a maritime rescue coordination centre in Libya with the aim of enhancing their search and rescue capacity; to ensure the continuation of specialised training provided by IOM and UNHCR to the Libyan Coast Guard on international protection, refugee law and human rights;

                              (ac)

                              to step up their humanitarian and civilian aid in order to alleviate the plight of the Libyan population and meet the most urgent needs of those seriously affected by the conflict in Libya, particularly in the most affected areas, and to be ready to respond to any deterioration in the situation; urges the EU to support the empowerment of civil society organisations, in particular women’s groups, which seek non-violent solutions to the multiple crises in the country;

                              (ad)

                              to release all the financial and human resources required to help refugees and to provide appropriate humanitarian aid to those who have been displaced, in order to address the humanitarian crisis in Libya, which has forced thousands of people to flee the country;

                              (ae)

                              to step up international efforts to dismantle migrant smuggling and human trafficking networks and to intensify efforts to combat this crime and bring the perpetrators to justice; to continue and intensify the work of EUNAVFOR Med Operation Sophia to disrupt the business model of traffickers and smugglers, develop the capacity of the Libyan Coast Guard and support the implementation of the UN Security Council resolutions on the arms embargo and illegal oil trafficking; to continue to provide support to Libya through the civilian CSDP missions; to increase capacities related to the search and rescue of people in distress and capacities to be deployed by all states, and to acknowledge the support provided by private actors and NGOs in carrying out rescue operations at sea and on land, bearing in mind the existing international legal framework and security concerns;

                              (af)

                              to reaffirm its full support for the International Criminal Court’s mandate on ongoing human rights violations in Libya, recalling that international accountability mechanisms such as the ICC and universal jurisdiction play an important role in the implementation of the peace plan within a framework that sets out steps toward accountability and the respect of human rights in Libya; to support the International Criminal Court in its efforts to bring perpetrators of atrocity crimes to justice; to support the UN Special Representative for Libya in his call of November 2017 to the international community to assist Libya in combatting impunity for war crimes and to consider options for joint tribunals; to call on the EU and Member States to support international mechanisms in providing the national justice system with all necessary means to start investigating previous and ongoing grave violations and to support the future legitimate Libyan authorities in fulfilling this mission by themselves; to consider that fair trials would bring justice for all victims of human rights violations on Libyan territory which will pave the way to sustainable reconciliation and peace;

                              (ag)

                              to express concern about the growing presence of Daesh and other terrorist groups in Libya, which is destabilising the country and threatening its neighbouring countries, as well as the EU;

                              (ah)

                              to call in particular on the Libyan authorities and militias to ensure external access to detention facilities, particularly those for migrants;

                              (ai)

                              to clarify the situation with regard to the payment of stock dividends, bond income and interest payments on the frozen assets in the EU of the Libyan Investment Authority; to provide a detailed report on the total amount of interest drawn from the Gaddafi assets since they were frozen in 2011 and a list of the individuals or entities that have benefited from these interest payments; to address the concerns about a possible loophole in the EU sanctions regime related to this issue as a matter of priority;

                              (aj)

                              to promote projects intended to bring about the economic development of the Fezzan region and the legal economy through close cooperation with the various municipalities, particularly those situated along migration routes, in order to combat the illegal activities of criminal networks and the violent extremism of terrorist groups through the creation of alternative sources of income, particularly for young people;

                              (ak)

                              to continue the embargo on the export of arms to Libya, thus stopping these falling into the hands of extremists and armed groups, a factor which further feeds into the insecurity and instability of Libya as a whole;

                              (al)

                              to take urgent diplomatic action in order to protect civilians and address the humanitarian situation in Derna;

                  2.

                  Instructs its President to forward this recommendation to the Council, the Commission and the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy and, for information, to the Libyan Government of National Accord.

         (1)  OJ C 234, 28.6.2016, p. 30.

         (2)  OJ C 300, 18.8.2016, p. 21.

         (3)  OJ C 35, 31.1.2018, p. 66.


title: Recommendation of the European Systemic Risk Board of 27 May 2020 on restriction of distributions during the COVID-19 pandemic (ESRB/2020/7) 2020/C 212/01

text:
                  26.6.2020

                  EN

                  Official Journal of the European Union

                  C 212/1

         RECOMMENDATION OF THE EUROPEAN SYSTEMIC RISK BOARD
         of 27 May 2020
         on restriction of distributions during the COVID-19 pandemic
         (ESRB/2020/7)
         (2020/C 212/01)
         THE GENERAL BOARD OF THE EUROPEAN SYSTEMIC RISK BOARD,
         Having regard to the Treaty on the Functioning of the European Union,
         Having regard to Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macroprudential oversight of the financial system and establishing a European Systemic Risk Board (1), and in particular Article 3(2)(b), (d) and (f) and Articles 16 to 18 thereof,
         Having regard to Decision ESRB/2011/1 of the European Systemic Risk Board of 20 January 2011 adopting the Rules of Procedure of the European Systemic Risk Board (2), and in particular Article 15(3)(e) and Articles 18 to 20 thereof,
         Whereas:

                     (1)

                     The coronavirus disease 2019 (COVID-19) crisis has developed rapidly from a dramatic medical emergency into a severe economic shock, which has the potential to evolve into a systemic financial crisis. It is neither certain for how long this crisis will last, nor how severe it may be. It is clear that there is a need for financial institutions to maintain a sufficiently high amount of capital to mitigate systemic risk and contribute to economic recovery.

                     (2)

                     A number of European Systemic Risk Board (ESRB) member institutions, namely the European Banking Authority (3) (EBA), the European Insurance and Occupational Pensions Authority (4) (EIOPA), the European Central Bank (5) (ECB) and many national authorities have encouraged banks, insurers and reinsurers in the Union to refrain from making voluntary pay-outs (e.g. dividends, bonuses, and share buybacks aimed at remunerating shareholders). These measures can enhance the resilience of the financial sector, strengthening its capacity to lend to the real economy in stressed conditions and reducing the risk of failures of financial institutions due to COVID-19 related risks.

                     (3)

                     The ESRB is responsible for the macroprudential oversight of the financial system within the Union and should contribute to the smooth functioning of the internal market thereby ensuring a sustainable contribution of the financial sector to economic growth. Whilst the ESRB welcomes and fully supports the initiatives of its member institutions, it also considers it necessary to issue a recommendation to ensure that financial institutions across the financial sector that may pose a risk to financial stability maintain high levels of capital.

                     (4)

                     This Recommendation acknowledges the procyclical behaviour of banks, as well as the fact that they play a critical function in the economy. It aims at limiting banks’ profit and capital distribution in order to increase their resilience during the crisis and promote necessary lending to the real economy. It also aims at reducing the risk that in instances where governments support banks during the crisis, shareholders and senior management shift capital allocation for their own benefit. In addition, if banks use dividend payments as a signal of strength to the market, such actions could undermine the relative position of more prudent financial institutions that may become stigmatised. The latter argument speaks in favour of broad-based, coordinated and mandatory action. Investment firms are included in the list of financial institutions under this Recommendation, as they play an important role in market functioning and may present similar risks to banks.

                     (5)

                     This Recommendation recognises the risk imposed by this crisis on the solvency of insurers and reinsurers. It is probable that there will be a reduction in cash flows from new business, combined with higher liabilities due to an extended period of very low interest rates and lower asset returns in the future. Given that insurers and reinsurers play a critical role in the financial sector there is also the risk of a common de-risking strategy, such as the sale of higher-yield corporate bonds, which would be amplified by large scale downgrades. In addition, the same argument raised for banks concerning dividend payments being a signal of strength to the market and the associated stigma of restrictions also pertains to insurers and reinsurers.

                     (6)

                     This Recommendation is designed to cover central counterparties (CCPs) given their systemically important role in clearing financial market transactions. By maintaining additional own resources, CCPs would be able to meet non-default losses, which is particularly relevant with regard to operational risk, which CCPs cover with their own resources rather than contributions from clearing members. This Recommendation will ensure consistency across financial institutions at a time where CCPs revenues might benefit from higher market transactions volumes, and where relevant, will allow CCPs to increase their skin-in-the-game in the default waterfall on a voluntary basis, in light of generally increased risks due to higher market volatility. Finally, it is envisaged that the maintenance of own funds in CCPs would reduce the likelihood of recourse to tax-payers money in case of losses (related or not to defaults) in a time where fiscal spending is already particularly under pressure. Overall, it is important for CCPs to maintain adequate prefunded own resources in addition to initial margins and default funds.

                     (7)

                     This Recommendation intends to cover those actions by financial institutions that result in a reduction in the amount and quality of their own funds or in a reduction of their loss absorbing capacity for the duration of the COVID-19 related crisis. This includes payment of dividends, buy-backs of ordinary shares and paying variable remuneration. If a financial institution wanted to replace ordinary shares, this would be in compliance with this Recommendation.

                     (8)

                     This Recommendation acknowledges the principles governing the Single Market and the growth-enhancing role of free capital movement and risk sharing within the Union. It aims to account for risks of potential negative externalities arising from cross-border financial institution decisions during distressed times. A flight to safety or a home-bias as often realised during times of financial distress can have negative effects on local economies. This Recommendation advocates that the relevant authorities enter a dialogue when considering imposing pay-out restrictions on subsidiaries of Union financial institutions.

                     (9)

                     Regulatory regimes vary across sectors and Member States and relevant authorities should consider using any supervisory tool available to them, both under Union and national law, such as recommendations or guidelines, to achieve the objectives of this Recommendation, to the extent permitted by law.

                     (10)

                     This Recommendation provides for a list of financial institutions which should, as a minimum, be subject to the restrictions. Authorities are free to impose the restrictions on other financial institutions that provide lending to the real economy, such as financial leasing companies.

                     (11)

                     This Recommendation is designed to support the previous initiatives of the ECB, EBA, EIOPA and national authorities and to strengthen the case for a uniform approach across the Union and across different segments of the financial sector, whilst taking into account the critical role of these segments for the real economy during crisis times. The ultimate aim is to have sufficient levels of capital and loss absorbing capacity remaining in the financial institutions to mitigate the impact of the current crisis and thereby contribute to a smoother recovery for the pan-European economy as a whole.

                     (12)

                     This Recommendation is without prejudice to the monetary policy mandates of the central banks in the Union.

                     (13)

                     Recommendations of the ESRB are published after the addressees have been informed, and after the General Board has informed the Council of the European Union of its intention to do so and provided the Council with an opportunity to react,

               HAS ADOPTED THIS RECOMMENDATION:
         SECTION 1

            RECOMMENDATION

            Recommendation A – Restriction on distributions

         It is recommended that at least until 1 January 2021 relevant authorities request financial institutions under their supervisory remit (6) to refrain from undertaking any of the following actions:

                     (a)

                     make a dividend distribution or give an irrevocable commitment to make a dividend distribution;

                     (b)

                     buy-back ordinary shares;

                     (c)

                     create an obligation to pay variable remuneration to a material risk taker,

               which has the effect of reducing the quantity or quality of own funds at the EU group level (or at the individual level where the financial institution is not part of an EU group), and, where appropriate, at the sub-consolidated or individual level.
         SECTION 2

            IMPLEMENTATION

         1.   Definitions

                     1.

                     For the purposes of this Recommendation the following definitions apply:

                                 (a)

                                 ‘relevant authority’ means:

                                             (i)

                                             a competent authority;

                                             (ii)

                                             an authority entrusted with the adoption and/or activation of macroprudential policy measures, including but not limited to:

                                                         1.

                                                         a designated authority pursuant to Chapter 4 of Title VII of Directive 2013/36/EU of the European Parliament and of the Council (7) or Article 458(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council (8);

                                                         2.

                                                         a macroprudential authority with the objectives, arrangements, tasks, powers, instruments, accountability requirements and other characteristics set out in Recommendation ESRB/2011/3 (9);

                                 (b)

                                 ‘competent authority’ means the competent or supervisory authority as defined in point (40) of Article 4(1) of Regulation (EU) No 575/2013, in Article 13(10) of Directive 2009/138/EC of the European Parliament and of the Council (10), or referred to in Article 22 of Regulation (EU) No 648/2012 of the European Parliament and of the Council (11), as applicable;

                                 (c)

                                 ‘financial institution’ means any of the following undertakings that have their head office or registered office in the Union:

                                             (i)

                                             an institution as defined in point (3) of Article 4(1) of Regulation (EU) No 575/2013;

                                             (ii)

                                             an insurance undertaking as defined in of Article 13(1) of Directive 2009/138/EC;

                                             (iii)

                                             a reinsurance undertaking as defined in Article 13(4) of Directive 2009/138/EC;

                                             (iv)

                                             a central counterparty as defined in Article 2(1) of Regulation (EU) No 648/2012;

                                 (d)

                                 ‘material risk taker’ means a member of a category of staff whose professional activities have a material impact on the financial institution’s risk profile, including a member of a category of staff referred to in Article 92(2) of Directive 2013/36/EU or point (c) of Article 275(1) of Commission Delegated Regulation (EU) 2015/35 (12) or the senior management of a central counterparty as defined in Article 2(29) of Regulation (EU) No 648/2012, as applicable;

                                 (e)

                                 ‘resolution authority’ means the authority as defined in point (18) of Article 2(1) of Directive 2014/59/EU (13).

               2.   Exemptions

         Relevant authorities may exempt a financial institution from the restriction to undertake any of the actions in points (a) to (c) of Recommendation A if that financial institution is legally obliged to undertake that action.
         3.   Criteria for implementation

                     1.

                     The following criteria apply to the implementation of this Recommendation by the relevant authorities:

                                 (a)

                                 due regard should be paid to the principle of proportionality, taking into account, in particular, the nature of financial institutions and their ability to contribute to the mitigation of systemic risk to financial stability that arises from the COVID-19 crisis and to the economic recovery;

                                 (b)

                                 regulatory arbitrage should be avoided;

                                 (c)

                                 relevant authorities should regularly assess the impact of restrictions on distributions they have imposed in light of the objectives of this Recommendation.

                     2.

                     The following specific criteria apply to the implementation of Recommendation A(a) and (b): In assessing whether it is appropriate to apply the restrictions at sub-consolidated or at individual level, relevant authorities are recommended to adhere to the following principles:

                                 (a)

                                    Principle 1: Whilst taking into account the need to prevent or mitigate systemic risk to financial stability in their Member State and in the Union, relevant authorities should support the smooth functioning of the internal market and recognise the need for the financial sector to provide a sustainable contribution to economic growth in Member States and the Union as a whole.

                                 (b)

                                    Principle 2: Relevant authorities should ensure that any restriction does not entail disproportionate adverse effects on the whole or parts of the financial system in other Member States or in the Union as a whole.

                                 (c)

                                    Principle 3: Relevant authorities should closely cooperate with each other and with the relevant resolution authorities, including in colleges, where applicable.

               4.   Timeline for the follow-up

         In accordance with Article 17(1) of Regulation (EU) No 1092/2010 addressees must communicate to the European Parliament, the Council, the Commission and to the ESRB the actions undertaken in response to this Recommendation or substantiate any inaction. Communications must be sent by submitting the form in the Annex by 31 July 2020.
         5.   Amendments to this Recommendation

         The General Board will decide if and when this Recommendation needs to be amended. Such amendments could include, in particular, extending the period during which Recommendation A applies.
         6.   Monitoring and assessment

                     1.

                     The General Board will assess the actions and justifications communicated by the addressees and, where appropriate, may decide that this Recommendation has not been followed and that an addressee has failed to provide adequate justification for its inaction.

                     2.

                     The methodology set out in the Handbook on the assessment of compliance with ESRB recommendations, which describes the procedure for assessing compliance with ESRB recommendations will not apply.

            Done at Frankfurt am Main, 27 May 2020.

                  The Head of the ESRB Secretariat,

                  on behalf of the General Board of the ESRB

               Francesco MAZZAFERRO

            (1)  OJ L 331, 15.12.2010, p. 1.

            (2)  OJ C 58, 24.2.2011, p. 4.

            (3)  https://eba.europa.eu/eba-provides-additional-clarity-on-measures-mitigate-impact-covid-19-eu-banking-sector.

            (4)  https://www.eiopa.europa.eu/content/eiopa-statement-dividends-distribution-and-variable-remuneration-policies-context-covid-19_en.

            (5)  Recommendation ECB/2020/19 of the European Central Bank of 27 March 2020 on dividend distributions during the COVID-19 pandemic and repealing Recommendation ECB/2020/1 (OJ C 102 I, 30.3.2020, p. 1).

            (6)  This does not include branches of financial institutions.

            (7)  Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49EC (OJ L 176, 27.6.2013, p. 338).

            (8)  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).

            (9)  Recommendation ESRB/2011/3 of the European Systemic Risk Board of 22 December 2011 on the macro-prudential mandate of national authorities (OJ C 41, 14.2.2012, p. 1).

            (10)  Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 335, 17.12.2009, p. 1).

            (11)  Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1).

            (12)  Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 12, 17.1.2015, p. 1).

            (13)  Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).

            ANNEX
            Communication of the actions undertaken in response to this Recommendation
            1.   Details of addressee

                        Recommendation

                        Country of the Addressee

                        Institution

                        Capacity (*1)

                        Name and contact details of the respondent

                        Date of communication

                  2.   Communication of actions

                        Recommendation

                        Do you comply? (yes/no/not applicable)

                        Please describe the actions taken to comply

                        If you do not comply, or comply partially, provide adequate justification

                        Please provide the details (e.g. link, Government Gazette, publication number) of the measure adopted in response to this Recommendation

                        Recommendation A(a)

                        Recommendation A(b)

                        Recommendation A(c)

                  3.   Notes

                        1.

                        This form is used for the communication required by Article 17(1) of Regulation (EU) No 1092/2010.

                        2.

                        Each addressee should submit the completed form to the ESRB via the ESRB Secretariat electronically via DARWIN in the dedicated folder or by email to notifications@esrb.europa.eu. (The ESRB Secretariat will arrange for the transmission of the communications to the European Parliament, the Council and the Commission, on an aggregated basis).

                        3.

                        Addressees are expected to provide all relevant information and documentation related to the implementation of this Recommendation and the criteria for implementation, including information on the substance (such as on the legal form of the measure and on the type of financial institutions covered) and timing of the actions taken.

                        4.

                        If an addressee only partially complies, it should provide a full explanation of the extent of non-compliance, as well as other details of partial compliance. The explanation should specify clearly the relevant parts of the recommendation which the addressees do not comply with.

               (*1)  Please indicate in what capacity you respond, i.e. the competent or supervisory authority under point (40) of Article 4(1) of Regulation (EU) No 575/2013, Article 13(10) of Directive 2009/138/EC, the competent authority referred to in Article 22 of Regulation (EU) No 648/2012, or the macroprudential authority.


title: Recommendation of the European Systemic Risk Board of 2 June 2020 amending Recommendation ESRB/2015/2 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures (ESRB/2020/9) 2020/C 217/01

text:
               1.7.2020

               EN

               Official Journal of the European Union

               C 217/1

      RECOMMENDATION OF THE EUROPEAN SYSTEMIC RISK BOARD
      of 2 June 2020
      amending Recommendation ESRB/2015/2 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures
      (ESRB/2020/9)
      (2020/C 217/01)
      THE GENERAL BOARD OF THE EUROPEAN SYSTEMIC RISK BOARD,
      Having regard to the Treaty on the Functioning of the European Union,
      Having regard to Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board (1), and in particular Article 3 and Articles 16 to 18 thereof,
      Having regard to Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (2), and in particular Article 134(4) thereof,
      Having regard to Decision ESRB/2011/1 of the European Systemic Risk Board of 20 January 2011 adopting the Rules of Procedure of the European systemic Risk Board (3), and in particular Article 18 to 20thereof,
      Whereas:

                  (1)

                  In order to ensure effective and consistent national macroprudential policy measures, it is important to complement the mandatory reciprocity required under Union law with voluntary reciprocity.

                  (2)

                  The framework on voluntary reciprocity for macroprudential policy measures set out in Recommendation ESRB/2015/2 of the European Systemic Risk Board (4) aims to ensure that all exposure-based macroprudential policy measures activated in one Member State are reciprocated in the other Member States.

                  (3)

                  On 24 June 2016, pursuant to Recommendation ESRB/2016/4 of the European Systemic Risk Board (5), Recommendation ESRB/2015/2 was amended in order to recommend the reciprocation of the 1 per cent systemic risk buffer rate applied by Eesti Pank in accordance with Article 133 of Directive 2013/36/EU to the domestic exposures of all credit institutions authorised in Estonia.

                  (4)

                  In response to Eesti Pank’s decision of 6 April 2020 to reduce the level of the systemic risk buffer rate to 0 per cent, with effect from 1 May 2020, the General Board of the European Systemic Risk Board (ESRB) has decided to exclude the Estonian measure from the list of macroprudential policy measures which are recommended to be reciprocated under Recommendation ESRB/2015/2.

                  (5)

                  Therefore, Recommendation ESRB/2015/2 should be amended accordingly,

            HAS ADOPTED THIS RECOMMENDATION:

         AMENDMENTS

      Recommendation ESRB/2015/2 is amended as follows:

                  1.

                  in Section 1, sub-recommendation C(1) is replaced by the following:

                              ‘1.

                              The relevant authorities are recommended to reciprocate the macroprudential policy measures adopted by other relevant authorities and recommended for reciprocation by the ESRB. It is recommended that the following measures, as further described in the Annex, be reciprocated:

                                          Finland:

                                                      —

                                                      a 15 per cent floor for the average risk-weight on residential mortgage loans secured by a mortgage on housing units in Finland applied in accordance with Article 458(2)(d)(vi) of Regulation (EU) No 575/2013 to credit institutions authorised in Finland, using the Internal Ratings Based (IRB) Approach for calculating regulatory capital requirements;

                                          Belgium:

                                                      —

                                                      a risk-weight add-on for retail exposures secured by residential immovable property located in Belgium, applied in accordance with Article 458(2)(d)(vi) of Regulation (EU) No 575/2013 to credit institutions authorised in Belgium, using the IRB Approach for calculating regulatory capital requirements and composed of:

                                                                  (a)

                                                                  a flat risk-weight add-on of 5 percentage points; and

                                                                  (b)

                                                                  a proportionate risk-weight add-on consisting of 33 per cent of the exposure-weighted average of the risk-weights applied to the portfolio of retail exposures secured by residential immovable property located in Belgium;

                                          France:

                                                      —

                                                      a tightening of the large exposure limit provided for in Article 395(1) of Regulation (EU) No 575/2013, applicable to exposures to highly-indebted large non-financial corporations having their registered office in France to 5 per cent of eligible capital, applied in accordance with Article 458(2)(d)(ii) of Regulation (EU) No 575/2013 to global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) at the highest level of consolidation of their banking prudential perimeter;

                                          Sweden:

                                                      —

                                                      a credit institution-specific floor of 25 per cent for the exposure-weighted average of the risk weights applied to the portfolio of retail exposures to obligors residing in Sweden secured by immovable property in accordance with Article 458(2)(d)(vi) of Regulation (EU) No 575/2013 to credit institutions authorised in Sweden using the IRB Approach for calculating regulatory capital requirements.’;

                  2.

                  The Annex is replaced by the Annex to this Recommendation.

         Done at Frankfurt am Main, 2 June 2020.

               The Head of the ESRB Secretariat,

               on behalf of the General Board of the ESRB

            Francesco MAZZAFERRO

         (1)  OJ L 331, 15.12.2010, p. 1.

         (2)  OJ L 176, 27.6.2013, p. 338.

         (3)  OJ C 58, 24.2.2011, p. 4.

         (4)  Recommendation ESRB/2015/2 of the European Systemic Risk Board of 15 December 2015 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures (OJ C 97, 12.3.2016, p. 9).

         (5)  Recommendation ESRB/2016/4 of the European Systemic Risk Board of 24 June 2016 amending Recommendation ESRB/2015/2 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures (OJ C 290, 10.8.2016, p. 1).

         ANNEX
         The Annex to Recommendation ESRB/2015/2 is replaced by the following:

                  ‘ANNEX

                     Finland

                        A credit institution-specific minimum level of 15 per cent for the average risk-weight on loans secured by a mortgage on housing units in Finland applicable to credit institutions using the Internal Ratings Based (IRB) Approach (hereinafter ‘IRB credit institutions’) under Article 458(2)(d)(vi) of Regulation (EU) No 575/2013.

                  I.   Description of the measure

                              1.

                              The Finnish measure, applied in accordance with Article 458(2)(d)(vi) of Regulation (EU) No 575/2013, consists of a credit institution-specific average risk weight floor of 15 per cent for IRB credit institutions, at the portfolio level, for residential mortgage loans secured by housing units in Finland.

                        II.   Reciprocation

                              2.

                              In accordance with Article 458(5) of Regulation (EU) No 575/2013, relevant authorities of the Member States concerned are recommended to reciprocate the Finnish measure and apply it to IRB credit institutions’ portfolios of retail mortgage loans secured by housing units in Finland issued by domestically authorised branches located in Finland. For the purposes of this paragraph, the deadline specified in sub-recommendation C(3) applies.

                              3.

                              Relevant authorities are also recommended to reciprocate the Finnish measure and apply it to IRB credit institutions’ portfolios of retail mortgage loans secured by housing units in Finland issued directly across borders by credit institutions established in their respective jurisdictions. For the purposes of this paragraph, the deadline specified in sub-recommendation C(3) applies.

                              4.

                              In accordance with sub-recommendation C(2), the relevant authorities are recommended to apply, following consultation with the ESRB, a macroprudential policy measure available in their jurisdiction that has the effect most equivalent to the above measure recommended for reciprocation, including adopting supervisory measures and powers laid down in Title VII, Chapter 2, Section IV of Directive 2013/36/EU. The relevant authorities are recommended to adopt the equivalent measure within four months.

                        III.   Materiality threshold

                              5.

                              The measure is complemented by a materiality threshold of EUR 1 billion exposure to the residential mortgage lending market in Finland to steer the potential application of the de minimis principle by the reciprocating Member States.

                              6.

                              In line with Section 2.2.1 of Recommendation ESRB/2015/2, relevant authorities of the Member State concerned may exempt individual IRB credit institutions with non-material portfolios of retail mortgage loans secured by housing units in Finland below the materiality threshold of EUR 1 billion. In this case the relevant authorities should monitor the materiality of the exposures and are recommended to reciprocate when an IRB credit institution exceeds the threshold of EUR 1 billion.

                              7.

                              Where there are no IRB credit institutions authorised in other Member States concerned with branches located in Finland or providing financial services directly in Finland that have exposures of EUR 1 billion or above to the Finnish mortgage market, relevant authorities of the Member States concerned may decide not to reciprocate as provided by Section 2.2.1 of Recommendation ESRB/2015/2. In this case the relevant authorities should monitor the materiality of the exposures and are recommended to reciprocate when an IRB credit institution exceeds the threshold of EUR 1 billion.

                     Belgium

                        A risk weight add-on for retail exposures secured by residential immovable property located in Belgium, imposed on credit institutions authorised in Belgium using the IRB Approach and applied in accordance with Article 458(2)(d)(vi) of Regulation (EU) No 575/2013. The add-on is composed of two components:

                              (a)

                                    a flat risk weight add-on of 5 percentage points; and

                              (b)

                                    a proportionate risk weight add-on consisting of 33 per cent of the exposure-weighted average of the risk weights applied to the portfolio of retail exposures secured by residential immovable property located in Belgium.

                        I.   Description of the measure

                              1.

                              The Belgian measure, applied in accordance with Article 458(2)(d)(vi) of Regulation (EU) No 575/2013 and imposed on credit institutions authorised in Belgium using the IRB Approach, consists of a risk weight add-on for retail exposures secured by residential immovable property located in Belgium, which is composed of two components:

                                          (a)

                                          The first component consists of a 5 percentage point increase to the risk weight for retail exposures secured by residential immovable property located in Belgium obtained after computing the second part of the risk-weight add-on in accordance with point (b).

                                          (b)

                                          The second component consists of a risk-weight increase of 33 per cent of the exposure-weighted average of the risk-weights applied to the portfolio of retail exposures secured by residential immovable property located in Belgium. The exposure-weighted average is the average of the risk-weights of the individual loans calculated in accordance with Article 154 of Regulation (EU) No 575/2013, weighted by the relevant exposure value.

                        II.   Reciprocation

                              2.

                              In accordance with Article 458(5) of Regulation (EU) No 575/2013, relevant authorities of the Member States concerned are recommended to reciprocate the Belgian measure by applying it to branches located in Belgium of domestically authorised credit institutions using the IRB Approach within the deadline specified in sub-recommendation C(3).

                              3.

                              Relevant authorities are recommended to reciprocate the Belgian measure by applying it to domestically authorised credit institutions using the IRB Approach that have direct retail exposures secured by residential immovable property located in Belgium. In accordance with sub-recommendation C(2), the relevant authorities are recommended to apply the same measure as the one that has been implemented in Belgium by the activating authority within the deadline specified in sub-recommendation C(3).

                              4.

                              If the same macroprudential policy measure is not available in their jurisdiction, the relevant authorities are recommended to apply, following consultation with the ESRB, a macroprudential policy measure available in their jurisdiction that has the most equivalent effect to the above measure recommended for reciprocation, including adopting supervisory measures and powers laid down in Title VII, Chapter 2, Section IV of Directive 2013/36/EU. Relevant authorities are recommended to adopt the equivalent measure by no later than four months following the publication of this Recommendation in the Official Journal of the European Union.

                        III.   Materiality threshold

                              5.

                              The measure is complemented by an institution-specific materiality threshold of EUR 2 billion to steer the potential application of the de minimis principle by the relevant authorities reciprocating the measure.

                              6.

                              In line with Section 2.2.1 of Recommendation ESRB/2015/2, relevant authorities of the Member State concerned may exempt individual domestically authorised credit institutions using the IRB Approach having non-material retail exposures secured by residential immovable property in Belgium which are below the materiality threshold of EUR 2 billion. When applying the materiality threshold, the relevant authorities should monitor the materiality of exposures and are recommended to apply the Belgian measure to previously exempted individual domestically authorised credit institutions when the materiality threshold of EUR 2 billion is breached.

                              7.

                              Where there are no credit institutions authorised in the Member States concerned with branches located in Belgium or which have direct retail exposures secured by residential immovable property in Belgium, which use the IRB Approach and which have exposures of EUR 2 billion or above to the Belgian residential immovable property market, relevant authorities of the Member States concerned may, pursuant to Section 2.2.1 of Recommendation ESRB/2015/2, decide not to reciprocate the Belgian measure. In this case the relevant authorities should monitor the materiality of the exposures and are recommended to reciprocate the Belgian measure when a credit institution using the IRB Approach exceeds the threshold of EUR 2 billion.

                              8.

                              In line with Section 2.2.1 of Recommendation ESRB/2015/2, the materiality threshold of EUR 2 billion is a recommended maximum threshold level. Reciprocating relevant authorities may therefore instead of applying the recommended threshold set a lower threshold for their jurisdictions where appropriate, or reciprocate the measure without any materiality threshold.

                     France

                        A tightening of the large exposure limit provided for in Article 395(1) of Regulation (EU) No 575/2013, applicable to exposures to highly-indebted large non-financial corporations having their registered office in France to 5 per cent of eligible capital, applied in accordance with Article 458(2)(d)(ii) of Regulation (EU) No 575/2013 to global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) at the highest level of consolidation of their banking prudential perimeter.

                  I.   Description of the measure

                              1.

                              The French measure, applied in accordance with Article 458(2)(d)(ii) of Regulation (EU) No 575/2013 and imposed on G-SIIs and O-SIIs at the highest level of consolidation of their banking prudential perimeter (not at a sub-consolidated level), consists of a tightening of the large exposure limit to 5 per cent of their eligible capital, applicable to exposures to highly-indebted large non-financial corporations having their registered office in France.

                              2.

                              A non-financial corporation is defined as a natural or legal person under private law having its registered office in France, and which, at its level and at the highest level of consolidation, belongs to the non-financial corporations sector as defined in point 2.45 of Annex A to Regulation (EU) No 549/2013 of the European Parliament and of the Council(*).

                        (*) Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union (OJ L 174, 26.6.2013, p. 1).

                              3.

                              The measure applies to exposures to non-financial corporations having their registered office in France and to exposures to groups of connected non-financial corporations as follows:

                                          (a)

                                          For non-financial corporations which are part of a group of connected non-financial corporations having its registered office at the highest level of consolidation in France, the measure applies to the sum of the net exposures towards the group and all its connected entities within the meaning of point (39) of Article 4(1) of Regulation (EU) No 575/2013;

                                          (b)

                                          For non-financial corporations which are part of a group of connected non-financial corporations having its registered office at the highest level of consolidation outside France, the measure applies to the sum of:

                                                      (i)

                                                      the exposures to those non-financial corporations having their registered office in France;

                                                      (ii)

                                                      the exposures to the entities in France or abroad over which the non-financial corporations referred to in (i) have direct or indirect control within the meaning of point (39) of Article 4(1) of Regulation (EU) No 575/2013; and

                                                      (iii)

                                                      the exposures to the entities in France or abroad which are economically dependent on the non-financial corporations referred to in (i) within the meaning of point (39) of Article 4(1) of Regulation (EU) No 575/2013.

                                    Non-financial corporations which do not have their registered office in France and which are not a subsidiary or an economically dependent entity of, and which are not directly or indirectly controlled by, a non-financial corporation having its registered office in France, therefore fall outside the scope of the measure.
                              In accordance with Article 395(1) of Regulation (EU) No 575/2013, the measure is applicable after taking into account the effect of the credit risk mitigation techniques and exemptions in accordance with Articles 399 to 403 of Regulation (EU) No 575/2013.

                              4.

                              A G-SII or an O-SII must consider a non-financial corporation having its registered office in France as large if its original exposure to the non-financial corporation, or to the group of connected non-financial corporations within the meaning of paragraph 3, is equal to or larger than EUR 300 million. The original exposure value is calculated in accordance with Articles 389 and 390 of Regulation (EU) No 575/2013 before taking into account the effect of credit risk mitigation techniques and exemptions set out in Articles 399 to 403 of Regulation (EU) No 575/2013, as reported in accordance with Article 9 of Commission Implementing Regulation (EU) No 680/2014(**).

                        (**) Commission Implementing Regulation (EU) No 680/2014 of 16 April 2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council (OJ L 191, 28.6.2014, p. 1).

                              5.

                              A non-financial corporation is considered highly-indebted if it has a leverage ratio that is greater than 100 per cent and a financial charges coverage ratio that is below three, calculated at the highest level of group consolidation as follows:

                                          (a)

                                          The leverage ratio is the ratio between total debt net of cash and equity; and

                                          (b)

                                          The financial charges coverage ratio is the ratio between, on the one hand, the value added plus operating subsidies less: (i) payroll; (ii) operating taxes and duties; (iii) other net ordinary operating expenses excluding net interest and similar charges; and (iv) depreciation and amortisation, and, on the other hand, interest and similar charges.

                                    The ratios are calculated based on accounting aggregates defined in accordance with the applicable standards, as presented in the non-financial corporation’s financial statements, certified where appropriate by a chartered accountant.

                        II.   Reciprocation

                              6.

                              Relevant authorities are recommended to reciprocate the French measure by applying it to domestically authorised G-SIIs and O-SIIs at the highest level of consolidation within the jurisdiction of their banking prudential perimeter.

                              7.

                              If the same macroprudential policy measure is not available in their jurisdiction, in line with sub-recommendation C(2), the relevant authorities are recommended to apply, following consultation with the ESRB, a macroprudential policy measure available in their jurisdiction that has the most equivalent effect to the above measure recommended for reciprocation. The relevant authorities are recommended to adopt the equivalent measure by no later than six months following the publication of this Recommendation in the Official Journal of the European Union.

                        III.   Materiality threshold

                              8.

                              The measure is complemented by a combined materiality threshold to steer the potential application of the de minimis principle by the relevant authorities reciprocating the measure, which is composed of:

                                          (a)

                                          A threshold of EUR 2 billion for the total original exposures of domestically authorised G-SIIs and O-SIIs at the highest level of consolidation of the banking prudential perimeter to the French non-financial corporations sector;

                                          (b)

                                          A threshold of EUR 300 million applicable to domestically authorised G-SIIs and O-SIIs equalling or exceeding the threshold mentioned in (a) for:

                                                      (i)

                                                      a single original exposure to a non-financial corporation having its registered office in France;

                                                      (ii)

                                                      the sum of original exposures to a group of connected non-financial corporations, which has its registered office at the highest level of consolidation in France, calculated in accordance with paragraph 3(a);

                                                      (iii)

                                                      the sum of original exposures to non-financial corporations having their registered office in France which are part of a group of connected non-financial corporations having its registered office at the highest level of consolidation outside France as reported in templates C 28.00 and C 29.00 of Annex VIII to Implementing Regulation (EU) No 680/2014;

                                          (c)

                                          A threshold of 5 per cent of the G-SII’s or O-SII’s eligible capital at the highest level of consolidation, for exposures identified in (b) after taking into account the effect of the credit risk mitigation techniques and exemptions in accordance with Articles 399 to 403 of Regulation (EU) No 575/2013.

                                    The thresholds referred to in paragraphs (b) and (c) are to be applied irrespective of whether the relevant entity or non-financial corporation is highly-indebted or not.
                              The original exposure value referred to in paragraphs (a) and (b) is to be calculated in accordance with Articles 389 and 390 of Regulation (EU) No 575/2013 before taking into account the effect of credit risk mitigation techniques and exemptions set out in Articles 399 to 403 of Regulation (EU) No 575/2013 as reported in accordance with Article 9 of Implementing Regulation (EU) No 680/2014.

                              9.

                              In line with Section 2.2.1 of Recommendation ESRB/2015/2, the relevant authorities of the Member State concerned may exempt domestically authorised G-SIIs or O-SIIs at the highest level of consolidation of their banking prudential perimeter which do not breach the combined materiality threshold referred to in paragraph 8. When applying the materiality threshold, the relevant authorities should monitor the materiality of the exposures of domestically authorised G-SIIs and O-SIIs to the French non-financial corporations sector as well as the exposure concentration of domestically authorised G-SIIs and O-SIIs to large non-financial corporations having their registered office in France, and are recommended to apply the French measure to previously exempted domestically authorised G-SIIs or O-SIIs at the highest level of consolidation of their banking prudential perimeter when the combined materiality threshold referred to in paragraph 8 is breached. Relevant authorities are also encouraged to signal the systemic risks associated with the increased leverage of large non-financial corporations having their registered office in France to other market participants in their jurisdiction.

                              10.

                              Where there are no G-SIIs or O-SIIs at the highest level of consolidation of their banking prudential perimeter authorised in the Member States concerned and having exposures to the French non-financial corporations sector above the materiality threshold referred to in paragraph 8, the relevant authorities of the Member States concerned may, pursuant to Section 2.2.1 of Recommendation ESRB/2015/2, decide not to reciprocate the French measure. In this case the relevant authorities should monitor the materiality of the exposures of domestically authorised G-SIIs and O-SIIs to the French non-financial corporations sector as well as the exposure concentration of domestically authorised G-SIIs and O-SIIs to large non-financial corporations having their registered office in France, and are recommended to reciprocate the French measure when a G-SII or O-SII at the highest level of consolidation of its banking prudential perimeter exceeds the combined materiality threshold referred to in paragraph 8. Relevant authorities are also encouraged to signal the systemic risks associated with the increased leverage of large non-financial corporations having their registered office in France to other market participants in their jurisdiction.

                              11.

                              In line with Section 2.2.1 of Recommendation ESRB/2015/2, the combined materiality threshold referred to in paragraph 8 is a recommended maximum threshold level. Reciprocating relevant authorities may therefore instead of applying the recommended threshold set a lower threshold for their jurisdictions where appropriate, or reciprocate the measure without any materiality threshold.

                     Sweden

                        A credit institution-specific floor of 25 per cent for the exposure-weighted average of the risk weights applied to the portfolio of retail exposures to obligors residing in Sweden secured by immovable property in accordance with Article 458(2)(d)(vi) of Regulation (EU) No 575/2013 to credit institutions authorised in Sweden, using the IRB Approach for calculating regulatory capital requirements.

                  I.   Description of the measure

                              1.

                              The Swedish measure, applied in accordance with Article 458(2)(d)(vi) of Regulation (EU) No 575/2013 and imposed on credit institutions authorised in Sweden using the IRB Approach, consists of a credit institution-specific floor of 25 per cent for exposure-weighted average of the risk weights applied to the portfolio of retail exposures to obligors residing in Sweden secured by immovable property.

                              2.

                              The exposure-weighted average is the average of the risk weights of the individual exposures calculated in accordance with Article 154 of Regulation (EU) No 575/2013, weighted by the relevant exposure value.

                        II.   Reciprocation

                              3.

                              In accordance with Article 458(5) of Regulation (EU) No 575/2013, relevant authorities of the Member States concerned are recommended to reciprocate the Swedish measure by applying it to branches located in Sweden of domestically authorised credit institutions using the IRB Approach within the deadline specified in sub-recommendation C(3).

                              4.

                              Relevant authorities are recommended to reciprocate the Swedish measure by applying it to domestically authorised credit institutions using the IRB Approach that have direct retail exposures to obligors residing in Sweden secured by immovable property. In accordance with sub-recommendation C(2), the relevant authorities are recommended to apply the same measure as the one that has been implemented in Sweden by the activating authority within the deadline specified in sub-recommendation C(3).

                              5.

                              If the same macroprudential policy measure is not available in their jurisdiction, the relevant authorities are recommended to apply, following consultation with the ESRB, a macroprudential policy measure available in their jurisdiction that has the most equivalent effect to the above measure recommended for reciprocation. Relevant authorities are recommended to adopt the equivalent measure by no later than four months following the publication of this Recommendation in the Official Journal of the European Union.

                        III.   Materiality threshold

                              6.

                              The measure is complemented by an institution-specific materiality threshold of SEK 5 billion to steer the potential application of the de minimis principle by the relevant authorities reciprocating the measure.

                              7.

                              In line with Section 2.2.1 of Recommendation ESRB/2015/2, relevant authorities of the Member State concerned may exempt individual domestically authorised credit institutions using the IRB Approach having non-material retail exposures to obligors residing in Sweden secured by immovable property which are below the materiality threshold of SEK 5 billion. When applying the materiality threshold, the relevant authorities should monitor the materiality of exposures and are recommended to apply the Swedish measure to previously exempted individual domestically authorised credit institutions when the materiality threshold of SEK 5 billion is exceeded.

                              8.

                              Where there are no credit institutions authorised in the Member States concerned with branches located in Sweden or which have direct retail exposures to obligors residing in Sweden, secured by immovable property, which use the IRB Approach and which have retail exposures of SEK 5 billion or above to obligors residing in Sweden, secured by immovable property, relevant authorities of the Member States concerned may, pursuant to Section 2.2.1 of Recommendation ESRB/2015/2, decide not to reciprocate the Swedish measure. In this case the relevant authorities should monitor the materiality of the exposures and are recommended to reciprocate the Swedish measure when a credit institution using the IRB Approach exceeds the threshold of SEK 5 billion.

                              9.

                              In line with Section 2.2.1 of Recommendation ESRB/2015/2, the materiality threshold of SEK 5 billion is a recommended maximum threshold level. Reciprocating relevant authorities may therefore, instead of applying the recommended threshold, set a lower threshold for their jurisdictions where appropriate, or reciprocate the measure without any materiality threshold.

            ’