EBA publishes final draft technical standards on how to calculate risk weighted exposure amounts for exposures towards collective investment undertakings

The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) specifying the methodology to apply to calculate the risk-weighted exposure amounts, in the context of the mandate-based approach when there are some missing inputs.

These final draft RTS will contribute to the calculation of own funds requirements for the exposures in the form of units or shares in CIUs under the Standardised Approach (SA) for credit risk. In particular, the final draft RTS provide clarification on the regulatory treatment for missing inputs when the underlying risk of derivatives is unknown, as well as for the computation of the exposure value for counterparty credit risk. The RTS also account for situations where the notional amount of a netting set needs to be computed or for when the identification of netting sets is not feasible.

Finally, these draft RTS explain what is considered as insufficient information versus missing inputs and clarify whether market measures provide sufficient information for the application of the MBA for exposures to CIUs.

Legal basis and background

These final draft RTS have been developed according to Article 132a(4) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR), which mandates the EBA to specify how institutions shall calculate the risk-weighted exposure amount in the context of the mandate-based approach where one or more of the inputs required for that calculation are not available.