EBA publishes final guidance to assess breaches of the large exposure limits

15 September 2021

The European Banking Authority (EBA) published today its final Guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures to return to compliance. The Guidelines aim to support competent authorities in their assessment of the breaches of the large exposure limits set in the Capital Requirements Regulation (CRR), and ensure the Regulation is applied in a prudent and harmonised manner - while keeping the approach simple - which ultimately, leads to a level playing field across the Single Market.

In the exceptional case that an institution breaches the large exposure limits, the CRR requires the institution to report the value of the exposure without delay to the competent authority. Where the circumstances warrant it, the institution is granted a limited period of time to comply with such limits.

The purpose of these Guidelines is to provide guiding principles based on pre-defined criteria to help competent authorities decide on whether the exceptional circumstances leading to a breach of the large exposure limits would justify the decision to grant a limited period of time to the institution in order to comply with the limit.

The Guidelines also provide criteria for competent authorities to determine the appropriate period of time as well as the specific measures to be taken for an institution to return to compliance with the large exposure limits.

Legal basis, background and next steps

The EBA has developed the final Guidelines in accordance with Article 395(1) of Regulation (EU) No 575/2013 and Article 16 of its founding Regulation, which mandates the Authority to issue guidelines and recommendations addressed to competent authorities or financial institutions with a view to establishing consistent, efficient and effective supervisory practices within the European System of Financial Supervision, and to ensuring the common, uniform and consistent application of Union law.

The final guidelines were consulted for three months during which the EBA received feedback from stakeholders, leading to some minor amendments compared to the initial proposal.

The guidelines will apply from 1 January 2022.

 

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Franca Rosa Congiu

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