Question ID:
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Credit risk
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
Disclose name of institution / entity:
Name of institution / submitter:
Bank of England
Country of incorporation / residence:
United Kingdom
Type of submitter:
Competent authority
Subject Matter:
Appropriate risk weight for speculative immovable property financing

Does CRR Article 128 (1) provide that a 150% risk weight need not be applied to one or more exposures listed in CRR Article 128 (2) - including speculative immovable property financing - or that are identified in accordance with CRR Article 128 (3), on the basis that it would not be appropriate to apply that rate to such an exposure?

Background on the question:
CRR Article 128 (1) requires institutions to assign a 150% risk weight to exposures, including exposures in the form of shares or units in a CIU that are associated with particularly high risks, where appropriate.
CRR Article 128 (2) provides a non-exhaustive list of exposures that have been identified as exposures with particularly high risks and includes speculative immovable property financing as defined in CRR Article 4 (1) (79).
CRR Article 128 (3) identifies risk characteristics that institutions must consider when determining whether an exposure other than those listed in CRR Article 128 (2) qualifies as associated with particularly high risk.
It is not clear whether the inclusion of 'where appropriate' at the end of CRR Article 128 (1) is intended to allow institutions not to apply 150% risk weights, or to reflect the fact that 128 (2) is non-exhaustive and other exposure types not explicitly listed may also receive 150% risk weights.
Date of submission:
Published as Final Q&A:
Final Answer:
The 'where appropriate' wording in Article 128 (1) CRR is intended to reflect the fact that Article 128 (2) CRR is non-exhaustive and other exposure types associated with particularly high risks, but not explicitly listed in Article128 (2) CRR, should also receive a 150% risk weight. As a consequence, the 'where appropriate' in Article 128 (1) CRR cannot be understood as a qualitative criterion to allow the exposures listed in Article 128 (2) CRR to be assigned a lower risk weight than 150%.
This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Financial Stability, Financial services and Capital Markets Union) 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).