Question ID:
2013_240
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Topic:
Transparency and Pillar 3
Article:
431
Paragraph:
4, 5
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
Article/Paragraph:
431
Disclose name of institution / entity:
No
Type of submitter:
Investment firm
Subject Matter:
How shall an institute explain a rating decision?
Question:

Article 431, paragraph 4 says that "institutions shall, if requested, explain their rating decisions to SMEs and other corporate applicants for loans, providing an explanation in writing when asked." Shall this be interpreted as institutions shall show the exact probability of default for the applicants or the applicants rating on the institutions internal rating scales or in any other way?

Background on the question:

Unclear meaning of the paragraph.

Date of submission:
13/09/2013
Published as Final Q&A:
06/12/2013
EBA Answer:

Article 431(4)(5) of Regulation (EU) No 575/2013 (CRR) requires institutions, if requested, to explain their rating decisions to SMEs and other corporate applicants for loans, providing an explanation in writing when asked. To this end, institutions should take a pragmatic, proportional and common sense approach when dealing with these requests, and provide information such as: the rating, the applied methodology, and, where relevant, information on probability of default or PD bands.

Status:
Final Q&A
Answer prepared by:
Answer prepared by the EBA.
Note to Q&A:

Update 26.03.2021: This Q&A has been updated in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).

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