Regulatory technical standards on specialised lending exposures

Adopted and published on the Official Journal

The RTS on specialised lending exposures aim to specify how institutions should take into account several factors when assigning risk weights to specialised lending exposures and how they should treat these factors. Specialised lending is a type of exposure towards an entity specifically created to finance or operate physical assets, where the primary source of income and repayment of the obligation lies directly with the assets being financed. The proposed RTS define four classes of specialised lending and is in line with the Basel framework.

Documents

Links

Regulatory Technical Standard published in the Official Journal

News

EBA consults on technical standards on specialised lending exposures

11 May 2015

The European Banking Authority (EBA) launched today a consultation on Regulatory Technical Standards (RTS) on specialised lending exposures. The proposed RTS aim to specify how institutions should take into account several factors when assigning risk weights to specialised lending exposures and how they should treat these factors. The consultation runs until 11 August 2015.

Specialised lending is a type of exposure towards an entity specifically created to finance or operate physical assets, where the primary source of income and repayment of the obligation lies directly with the assets being financed.

The proposed RTS define four classes of specialised lending: project finance, real estate, object finance, and commodities finance. For each of these four classes, the draft RTS specify a list of factors that institutions shall take into account and propose two options on how these factors should be combined in order to determine the risk weight assigned to the specialised lending exposure.

The approach followed in these RTS is in line with the Basel framework, which uses the so-called ‘supervisory slotting criteria' approach under which specialised lending exposures are classified into categories depending on the underlying credit risk.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 11 August 2015. All contributions received will be published following the end of the consultation, unless requested otherwise.

A public hearing will take place at the EBA premises on 06 July 2015 from 12:00 to 14:00 UK time.

Legal basis

These draft RTS have been developed on the basis of Article 153 (9) of Regulation (EU) No. 575/2013 (Capital Requirements Regulation – CRR), which mandates the EBA to specify how institutions shall take into account certain factors when assigning risk weights to specialised lending exposures.

Press Release

EBA agrees with the European Commission’s amendments to standards on risk weights to specialised lending exposures

17 April 2020

The European Banking Authority (EBA) published today an Opinion in response to the European Commission’s intention to amend the EBA’s final draft regulatory technical standards (RTS) on assigning risk weights to specialised lending exposures before endorsing them. The EBA is of the view that the proposed changes, despite their substantive nature, do not alter the draft RTS in a significant manner, as they still maintain a good balance between the flexibility and risk sensitivity required for the IRB approach and the need for a harmonised regulatory framework.

The EBA’s Opinion identifies three substantive changes introduced by European Commission. The first two changes allow a certain flexibility in relation to the incorporation of risk drivers. In particular, the first change introduces the possibility for institutions to consider a sub-factor or a sub-factor component as irrelevant a certain type of specialised lending exposures. The second change allows institutions to consider additional relevant information (an ‘additional risk driver’) for a type of specialised lending exposures, jointly with the sub-factor which most closely corresponds to that additional risk driver. The EBA is of the view that the flexibilities introduced through these two substantive changes only marginally reduce the harmonisation across institutions since they should be applied consistently for the same type of exposure, and duly justified and documented.

The third substantive change simplifies the rules on overlapping criteria at the level of the sub-factor or of the sub-factor components. The EBA is of the view that this change does not jeopardise significantly the risk sensitivity of the approach and has the merit of simplifying the RTS.

Legal basis and background

The EBA has delivered this Opinion in accordance with Article 10(1), subparagraph 6, of Regulation (EU) No 1093/2010, which requires the EBA to submit its response in the form of an opinion to amendments proposed by the European Commission.

The EBA had submitted its final draft RTS to the European Commission on 13 June 2016.

EBA publishes final draft technical standards on specialised lending exposures

13 June 2016

The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) specifying how institutions should take into account and treat several factors when assigning risk weights to specialised lending exposures. The purpose of these RTS is to harmonise the assignment of risk weights to specialised lending exposures for institutions that apply the so called ‘supervisory slotting criteria' approach. These final draft RTS will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in Europe.

These final draft RTS define four classes of specialised lending: project finance, real estate, object finance, and commodities finance and for each of these four classes, a set of assessment criteria is specified by means of a list of factors that institutions shall take into account. These factors are further detailed in sub-factors and some of those in sub-factor components. Institutions shall apply the approach set out in these draft RTS to combine the assignments of the factors to the categories in order to determine the final category and the risk weight to be attributed to the specialised lending exposure. This approach requires institutions to calculate the weighted average of the assignments of the factors to the categories, where institutions should determine the weights they assign to each factor, under certain strict conditions. The approach followed in these RTS is in line with the current Basel framework, which uses the so-called ‘supervisory slotting criteria' approach under which specialised lending exposures are classified into categories depending on the underlying credit risk. These RTS have also taken into account the recent Basel proposals on constraints on the use of internal model approaches.

Legal basis

These final draft RTS have been developed on the basis of Article 153 (9) of Regulation (EU) No. 575/2013 (Capital Requirements Regulation – CRR), which mandates the EBA to specify how institutions shall take into account certain factors when assigning risk weights to specialised lending exposures.

Consultation Papers

Consultation on RTS on specialised lending exposures (EBA/CP/2015/09)

Summary 11/05/2015

The approach followed in these RTS is in line with the Basel framework, which uses the so-called ‘supervisory slotting criteria’ approach under which specialised lending exposures are classified into categories depending on the underlying credit risk.

Consultation process

A public hearing will take place at the EBA premises on 06 July 2015 from 12:00 to 14:00 UK time.

Legal basis

Responses

Public Hearing

Note: A Public Hearing is related to this consultation but is not visible to public users since the date is past