1. Should invoice discount facilities always be classified as full risk items or may such facilities be classified as medium/low or low risk if they may be cancelled with immediate effect when the assumptions used for setting the limit change? 2. Should the nominal value of an invoice discount facility as an off-balance sheet item be calculated as the difference between the contractual limits of the total credit volumes of clients and the amounts that have been paid to clients for the discounted invoices not yet due for payment from customers?

In the event of invoice discount facilities it is the factoring company that may have recourse against the client and not the other way around. The amounts that have been paid to clients for the discounted invoices are included in the balance sheet and are therefore already subject to capital requirements. There is credit risk associated with invoice discount facilities, but the risk can be reduced if the factoring company has a contractual right to change the limits of the facilities with immediate effect when the assumptions used for setting the limit change. Accordingly, we ask both for a further explanation of the term "invoice discount facilities" and how such facilities may be classified as off-balance sheet items.

The undrawn amounts of invoice discount facilities are considered as undrawn credit facilities in Annex I and are therefore classified as medium, medium/low or low risk, as applicable. In particular, classification as "low risk " requires that the conditions in paragraph 4(a) of Annex I of Regulation (EU) No 575/2013 are met.

The nominal value of undrawn amounts of invoice discount facilities equals the currently undrawn amount that could be drawn by the client.

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