How should institutions understand the "amount owed to the institution" under Article 501
(2)(c)(1) in case of off-balance sheet exposures to customers that haven’t yet been used? Is it the exposure value (as understood in Article 111) or the nominal value of such product (for example credit line)?
The question focuses on off-balance sheet products like credit lines with low CCFs (credit conversion factors). Depending on the amount taken into account (nominal value or exposure) the amount owed to institution from the customer or group of customers can change in the material way. Moreover, depending on the approach taken, this amount may exceed EUR 1,5m. Credit lines are popular products for SMEs; if the amount taken into account was nominal value and not the exposure, this regulation would have a smaller impact on the SME sector.
(2)(c)(1) of Regulation (EU) No. 575/2013 (CRR) refers to amounts "owed" to the institution. Therefore, in the case of a line of credit, only the drawn amount needs to be considered when checking if the EUR 1,5 million limit is complied with for the formula in the article.
Provided that all conditions of Article 501(1) and (2) of the CRR are met, the exposure as a whole including its undrawn part can qualify as exposure to an SME.
Update 26.03.2021: This Q&A has not yet been reviewed by the EBA in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).
Update 28.10.2021: This Q&A has been amended in light of the change(s) in Article 501 to Regulation (EU) No 575/2013 (CRR), applicable from 27.06.2020.