2014_883 Residual maturity of exposures with an undefined maturity

Question ID:: 2014_883
Legal Act:: Regulation (EU) No 575/2013 (CRR)
Topic:: Credit risk
Article:: 119
Paragraph:: 2
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:: Not applicable
Article/Paragraph:: Annex II
Disclose name of institution / entity:: Yes
Name of institution / submitter:: Banque Delubac & Cie
Country of incorporation / residence:: France
Type of submitter:: Credit institution
Subject Matter:: Residual maturity of exposures with an undefined maturity
Question:: Do exposures with an undefined maturity, such as deposits or time deposits which can be called by the depositor and must then be reimbursed with a delay shorter than three months, quality as such?
Background on the question:: Article 119 of regulation 575/2013/UE states that exposures to institutions of a residual maturity of three months or less denominated and funded in the national currency of the borrower shall be assigned a risk weight that is one category less favourable than the preferential risk weight, as described in Article 114(4) to (7), assigned to exposures to the central government in which the institution is incorporated.
Date of submission:: 26/02/2014
Published as Final Q&A:: 04/07/2014
Final Answer:: The remaining maturity is determined by the maximum remaining time that the obligor is permitted to take to fully discharge its contractual obligations. Identifying this maximum remaining time for exposures with an undefined maturity requires considering both the maximum period until a cancellation by the institution would become effective and the maximum period that the obligor is permitted to take, after cancellation has become effective, to fully discharge its contractual obligations. If the total of these two periods is three months or less, the condition of a residual maturity of three months or less is met. Besides the residual maturity, for application of Article 119(2) of the Regulation (EU) No. 575/2013, it is also required that the exposure be denominated and funded in the national currency of the borrower.
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 reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.