Single Rulebook Q&A

Question ID: 2016_3057
Legal act : Regulation (EU) No 575/2013 (CRR) as amended
Topic : Credit risk
Article: 153
Paragraph: 2
Subparagraph:
Article/Paragraph : -
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
Type of submitter: Individual
Subject matter : Multiplier of 1.25 to the asset value correlation
Question:

In case of an exposure to a regulated financial sector entity which does not meet the requirements to be treated like a large financial sector entity (with total assets of less than 70 billion of euros), but which is owned by a regulated large financial sector entity which meets those requirements, does the multiplier of 1.25 to the asset value correlation apply for that exposure?

Background on the question:

For all exposures to large financial sector entities, the co-efficient of correlation of paragraph 1(iii) is multiplied by 1.25. For all exposures to unregulated financial entities, the coefficients of correlation set out in paragraph 1(iii) and paragraph 4, as relevant, are multiplied by 1.25.

Date of submission: 19/12/2016
Published as Final Q&A: 08/06/2018
EBA answer:

According to Article 153(2) of Regulation (EU) No 575/2013 (CRR) the co-efficient of correlation of paragraph 1(iii) is multiplied by 1.25 for all exposures to large financial sector entities, as defined in Article 142(1)(4) CRR.

According to Article 142(1)(4)(a) CRR, for a financial sector entity – as defined in Article 4(1)(27) CRR - to meet the definition of large financial sector entity, its total assets, calculated on an individual or consolidated basis, shall be greater than or equal to a EUR 70 billion threshold, using the most recent audited financial statement or consolidated financial statement in order to determine asset size.   Therefore, in case of exposures to a regulated financial sector entity for which its total assets, calculated on an individual or on a consolidated basis are greater or equal to 70 billion, the co-efficient of correlation is multiplied by 1.25.

The 1.25 multiplier according to Article 153(2) CRR does not apply to a regulated financial sector entity that itself does not qualify as a large financial sector entity, irrespective of it being owned by a large financial sector entity. Being a subsidiary of a large financial sector entity is not relevant for the classification as large financial sector entity, because Article 142(1)(4)(a) CRR refers for the EUR 70 billion threshold exclusively to the assets of the entity itself.

Status: Final Q&A
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