Does the permanent partial use exemption under Article 150(1)(d) of CRR encompass European organisations such as the European Commission? Does the permanent partial use exemption under Article 150(1)(d) of CRR encompass European organisations such as the European Commission?
Article 150(1)(d) CRR states: ”Where institutions have received the prior permission of the competent authorities, institutions permitted to use the IRB Approach in the calculation of risk-weighted exposure amounts and expected loss amounts for one or more exposure classes may apply the Standardised Approach for the following exposures: exposures to central governments and central banks of the Member States and their regional governments, local authorities, administrative bodies and public sector entities provided: there is no difference in risk between the exposures to that central government and central bank and those other exposures because of specific public arrangements; and exposures to the central government and central bank are assigned a 0 % risk weight under Article 114(2), (4) or (5);”
The supervised entity benefits from a permanent partial use (PPU) exemption under Article 150(1)(d) of CRR which applies to member states' administrations. The supervised entity does not benefit from any other PPU applying to the sovereign/international organization portfolio: the exposures under that category that do not fall under the aforementioned PPU are treated under the supervised entity IRB model. The size of the overall sovereign and international organization portfolio is considered significant for this entity. The supervised entity questions the possibility to include exposures toward the European Commission under this PPU (Article 150(1)(d)). This exposure is composed of bonds for a total exposure of approximately 1Bn€.
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