Question ID:
Legal Act:
Regulation (EU) No 575/2013 (CRR)
External Credit Assessment Institutions (ECAI)
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
not applicable
Disclose name of institution / entity:
Name of institution / submitter:
Bank of Aland Plc.
Country of incorporation / residence:
Type of submitter:
Credit institution
Subject Matter:
Use of ECAI credit assessments for the determination of risk weights

In Article 138 of Regulation (EU) No 575/2013 (CRR) it says that an institution may choose one or more ECAIs to derive risk weights for asset classes. Is there a possibility for institutions not to choose any ECAI at all for the exposure class ‘exposures to Institutions’, and solely rely on the Sovereign Method for the exposure class stated in Article 121? If not, is it possible to choose only one ECAI and use Sovereign Method for all the unrated exposures (i.e. unrated by your chosen ECAI)?

Background on the question:

The words 'may choose' and 'chosen ECAI' imply there is still no obligation to use external credit assessments for the institution's exposure class.

Date of submission:
Published as Final Q&A:
Final Answer:

Pursuant to Article 138 of Regulation (EU) No 575/2013 (CRR), an institution is free to nominate one or more ECAIs for the purpose of determining the risk weights to be assigned to assets and off-balance sheet items. Hence, an institution may choose not to nominate any ECAI at all, or to nominate one or more ECAIs with a view to use their credit assessments for all of its exposures for which the use of external credit assessments is allowed under the standardised approach or for particular classes of items.

Once one or more ECAIs are nominated, the institution cannot disregard the credit assessments issued by the nominated ECAIs. Article 138 CRR explicitly requires credit assessments not to be used selectively, whereas Article 121 CRR applies only when credit assessments by a nominated ECAI are not available. Should such credit assessments be available, the institution is obliged to use them and apply Article 120 CRR.

An institution also has the possibility to revoke the nomination of an ECAI under Article 138 CRR. Should there be concrete indications that such a revocation is triggered by an intention to reduce capital adequacy requirements, the institution is obliged to substantiate the revocation by way of explanation to the relevant competent authority. Consequently, institutions have flexibility as regards the nomination of ECAIs, but such flexibility does not allow a discretionary 'cherry-picking' of credit assessments if those are available from a nominated ECAI.



This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Internal Market and Services) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.

Final Q&A
Answer prepared by:
Answer prepared by the European Commission because it is a matter of interpretation of Union law.
Note to Q&A:

Update 26.03.2021: This Q&A has not yet been reviewed by the European Commission in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).