Question ID:
2014_1217
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Topic:
Credit risk
Article:
159
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)
Article/Paragraph:
n.a.
Disclose name of institution / entity:
Yes
Name of institution / submitter:
BSM GmbH
Country of incorporation / residence:
Germany
Type of submitter:
Consultancy firm
Subject Matter:
Inclusion of expected loss for equity exposures in calculation of Expected loss amount reducing CET1
Question:

Shall the expected loss amount for equity exposures under the IRB approach be offset against the specific and general credit risk adjustments of all risk positions?

If not, how shall they be treated? Does it has to be deducted from CET 1 in either case, also if there is a surplus increasing T2 according to Article 62 (d)?

Does this also mean that EL for equity exposures shall be reported in CA4 row 140 respective 155 or not?

Background on the question:

Articles 158 and 159 CRR describe the treatment of expected loss amounts. In particular Article 159 states: "Institutions shall subtract the expected loss amounts calculated in accordance with Article 158 (5), (6) and (10) from the general and specific credit risk adjustments and additional value adjustments [...]". The calculation EL for equity exposures is described in Article 158(8), so one could conclude that they do not have to be subtracted of the credit risk adjustments. The problem is that we do not understand how to report this fact in the CA templates. 

Date of submission:
20/05/2014
Published as Rejected Q&A
11/02/2022
Rationale for rejection:

Please note that as part of adjustments to the Single Rulebook Q&A process, agreed by the EBA and the European Commission, it has been decided to reject outstanding questions submitted before 1 January 2020, when the Q&A process was updated as part of the last ESAs Review. In particular, the question that you have submitted has now regrettably been rejected and will not be addressed.

If you believe your question would still benefit from clarification, you are invited to resubmit your question, adapting it to reflect any legislative, regulatory or other relevant developments that may have occurred since the initial date of submission. The EBA will aim to address resubmitted questions as a matter of priority. When considering to resubmit, you are kindly requested to observe the updated admissibility criteria agreed in the context of the adjustment of the Q&A process, available in the Additional background and guidance for asking questions. We hope for your understanding.

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Status:
Rejected question
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