How to interpret ‘short term’ for letters of credit mentioned in Option g) ‘Issued short-term letters of credit and other medium-low risk off-balance sheet items’?

The type of facility is one of the following:

(a) Full risk (100%);

(b) Note issuance facility and revolving underwriting facility (Medium risk);

(c) Issued warranties and indemnities, guarantees, irrevocable stand-by letters of credit, documentary credit and other medium risk off-balance sheet items (Medium risk): This refers to warranties and indemnities (including tender, performance, customs and tax bonds), guarantees , irrevocable standby letters of credit not having the character of credit substitutes and other medium risk off-balance sheet items;

(d) Undrawn committed revolving credit facility (Medium- low risk): This refers to revolving lending commitments that are undrawn and that may not be cancelled unconditionally at any time without notice or that do not provide for automatic cancellation due to deterioration in a borrower’s creditworthiness;

(e) Undrawn committed term credit facility (Medium-low risk): This refers to term lending commitments that are undrawn and that may not be cancelled unconditionally at any time without notice or that do not provide for automatic cancellation due to deterioration in a borrower’s creditworthiness;

(f) Undrawn committed other credit facility (Medium-low risk): This refers to lending commitments, other than revolving and term, that are undrawn and that may not be cancelled unconditionally at any time without notice or that do not provide for automatic cancellation due to the deterioration in a borrower’s creditworthiness;

(g) Issued short-term letters of credit and other medium-low risk off-balance sheet items (Medium-low risk); (h) Undrawn uncommitted credit lines (Low risk): This refers to uncommitted lending facilities (advised and unadvised) that are undrawn and that may be cancelled unconditionally at any time without notice or that do provide for automatic cancellation due to deterioration in borrower’s creditworthiness;

(i) Undrawn purchase commitments for revolving purchased receivables and other low-risk off-balance sheet items (Low risk): Commitments that are able to be unconditionally cancelled or that effectively provide for automatic cancellation at any time by the institution without prior notice;

(j) Drawn credit facility;

(k) Not applicable.

In the absence of further specifications in Regulation (EU) 2016/2070 (ITS on Supervisory Benchmarking), Regulation (EU) No 575/2013 (CRR) or Directive 2013/36/EU (CRD), the term “short-term letters of credit” shall be interpreted according to the general meaning of the term used under the provisions of said Regulation or Directive, taking into account, where applicable, internal or market practices.

Update 26.03.2021: This Q&A has been updated in the light of the most recent amendments to the ITS 2016/2070 on Supervisory Benchmarking.