Response to discussion on the simplification and assessment of the credit risk framework
Q1. For the purpose of reporting under CRR Article 430a, which definition of loss should be used?
NA
Q2. Should the loss data (CRR Article 430a) be used for the assessment of RWs of real estate exposures under CRR Article 126(4) and CRR Article 465(11)?
NA
Q3. Which elements of the real estate framework should be further simplified?
NA
Q4. Which other clarifications do you consider necessary to apply the new ECAI framework?
NA
Q5. Should the consolidation of regulatory products for credit risk be a priority or should the regulatory stability be preferable instead? Have you identified any redundancies in IRB products?
NA
Q6. Do you consider that the integration of environmental and social risks into the credit risk framework could be further enhanced without undermining its simplicity? Which areas, if any, would you prioritise for further work or clarification?
NA
Q7. Which requirements should apply in relation to the measurement of the performance of continuous models (e.g. Back-testing)? How could testing requirements be facilitated and enhanced for continuous models that are compliant with CRR, Part three, Title II, Chapter 3, Section 6 (Requirements for the IRB approach)?
NA
Q8. Which requirements should apply in the application phase of continuous models (e.g. overrides)?
NA
Q9. Which challenges have you encountered in implementing the new CRR definition of facility?
NA
Q10. Should a consistent and single facility definition be applied across all risk parameters?
NA
Q11. Are adjustments proposed in the representativeness requirement for the CCF parameter also suited for PD and LGD risk parameters? Which amendments would be needed to accommodate PD and LGD specificities?
NA
Q12: Do you consider further simplification of the representativeness requirement, as proposed for the CCF parameter, as necessary for PD and LGD and if so, what kind of simplification?
NA
Q13. Should these simplifications be pursued? Do you have any preferred approaches with respect to these simplifications?
NA
Q14. Do you have any comments and suggestions with reference to the calibration of the fall back approaches?
NA
Q15. Do you see other potential simplification areas where the modelling burden is not commensurate to the gain in risk sensitivity?
NA
Q16. What do you perceive as challenges in your capacity to collect appropriate data, in particular in relation to indirect costs?
NA
Q17. Do you agree with the approach proposed by EBA? Do you see further measures as necessary?
The prudential regulatory framework of specialized credit institutions must be more proportionate to risks.
It is essential to consider the lower risk profile—due to the ownership of the assets financed—of leasing and factoring.
Focus on leasing
The lower risk profile of leasing is due to ownership by the lessor of the assets financed.
Businesses need their leased assets to run (vehicles, IT equipment etc.) therefore defaults are low. Leaseurope, the European federation of leasing has demonstrated[1] that during 2007-2011 crisis years, one-year average default rate for leasing was nearly half the median default rate of regular bank corporate exposures (1.9% compared to 3%). As leased assets are key working tools, defaults often return to a healthy status with no loss (around two thirds of all lease defaults return to health). As the owners, lessors recover much more from physical assets than other types of lenders by selling/re-leasing (up to 82% of exposure at default covered by asset sale on average, depending on asset type).
Despite these observations, current Capital Requirements Regulation (CRR) does not reflect the real risks of the leasing business. Depending on the approach used, capital requirements are between 5 and 8 times higher than necessary[2].
In 2026, there is a momentum for leasing prudential treatment in CRR.
In CRR3, the specific characteristics of lease financing have been recognized with a mandate given to the EBA to better analyze the risk parameters of lease exposures. Currently these parameters are inadequate: under the standardized approach, the risk of leasing exposure is subject to the same prudential treatment as that on traditional credit exposure. Under the IRB approach, CRR3 only grants a transitional adjustment on a temporary basis.
The EBA has started its work to conduct its mandate and launched a large data collection expected to end in June 2026. If EBA’s following report is conclusive, Article 495c of CRR3 provides for a delegated act by the European Commission to confirm a reduction in the risk weighting of leasing exposures.
Focus on factoring
The following targeted reforms would enhance proportionality under SA‑CR.
Review risk weights for non‑recourse purchased receivables (exposure to buyers / accounting debtors)
Under SA‑CR, reassess the current RW applied to exposures to buyers where receivables are purchased without recourse, explicitly recognising the short effective maturity and historically high recovery rates of trade receivables, by providing a discounted RW in case of exposures to purchased corporate receivables with maturity up to 90 days.
EUF, the EU federation of factoring, estimates based on EU‑wide data that the appropriate risk weight for purchased receivables is, on average, 28%, calculated using a top‑down approach and assuming a 90‑day maturity. Even a more conservative RW for purchased receivables from unrated debtors could offer a balanced compromise that would still recognise the specific risk profile of trade receivables within the prudential framework, while ensuring both sound capitalization of the underlying risk and the preservation of the IRB premium.
Allow a substitution approach for recourse transactions (exposure to clients)
Under SA‑CR, allow factors to use the buyer’s (accounting debtor’s) RW for exposures to clients in recourse purchases. This mirrors the IRB‑foundation logic, where purchased receivables are eligible as funded CRM, but implements it in a standard, low‑complexity manner suited to SA‑CR.
[1] Prudential treatment of leasing, A Proposal for Sustainable Growth in Europe. See : https://www.leaseurope.org/data-research/research/low-risk-leasing
[2] See Capital Requirements for Leasing: A Proposal Adjusting for Low Risk. A report prepared for Leaseurope by the University of Cologne, December 2017, actualised in May 2019.