7.2.2.1 Article 92 of the CRR

261. Article 92 of the CRR contains the main own funds requirements for investment firms and credit institutions.1 When the CRR is viewed from a mathematical perspective, Article 92 of the CRR contains an important equation of the CRR framework:

262. To understand whether institutions comply with a capital requirement, one needs to know the amount of capital an institution upholds and the risk exposure of this institution. Article 92 of the CRR contains this equation. The first paragraph defines the capital requirement as 4.5% common equity tier 1, 6% tier 1 and 8% own funds or total capital. The second Paragraph of Article 92 describes in legal terms how an institution must apply the equation. The third Paragraph defines the way in which an institution must calculate its risk exposure. This risk exposure is calculated as the sum of the credit, market, operational and other risk exposures included in the CRR. Investment firms are subject to the requirements of Article 92, primarily because they are allowed to operate an MTF or OTF, place instruments on a firm commitment basis or trade on own account. This does not mean that Article 92 regulates the largest investment firms. Additional solvency requirements as set forth in the CRR framework are imposed only on those firms whose combination of permitted investment services and activities contains an inherent risk similar to that of credit institutions according to the European legislator.