Question ID
2018_3947
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Supervisory reporting - COREP (incl. IP Losses)
Article
99
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
Article/Paragraph
n.a.
Name of institution / submitter
Bankdata
Country of incorporation / residence
Denmark
Type of submitter
Other
Subject matter
New risk weights for exposures to central governments or central banks not applicable in DPM 2.7 for C 07.00
Question

How should the new risk weights be applied when they are not currently available in the DPM 2.7?

Background on the question

Article 114 (5) CRR states

”Until 31 December 2017, the same risk weight shall be assigned in relation to exposures to the central governments or central banks of Member States denominated and funded in the domestic currency of any Member State as would be applied to such exposures denominated and funded in their domestic currency.”

Article 114 (6) CRR states

“For exposures indicated in paragraph 5:

(a) in 2018 the calculated risk weighted exposure amounts shall be 20 % of the risk weight assigned to these exposures in accordance with Article 114(2);

(b) in 2019 the calculated risk weighted exposure amounts shall be 50 % of the risk weight assigned to these exposures in accordance with Article 114(2);

(c) in 2020 and onwards the calculated risk weighted exposure amounts shall be 100 % of the risk weight assigned to these exposures in accordance with Article 114(2).”

 

Article 114 (6) litra a states that the risk weights for exposures to central governments or central banks in 2018 shall be 20% of the risk weights assigned to these exposures in accordance with article 114 (2). The implications are a risk weight of 30% for credit quality step equal to 6 (20%*150%=30%). However, in DPM 2.7 (Annex II, C07.00) there is no risk weight of 30% available. Likewise, article 114 (6 ) litra b states that the risk weight shall be 50% of the risk weight in article 114(2) in 2019. The implications are a risk weight of 25% for credit quality step equal to 3. However, there is no risk weight of 25% available.

Submission date
Final publishing date
Final answer

According to Article 114(6) of the CRR, the risk weights to be assigned to exposures to central governments or central banks according to Art. 114 (2) CRR will be amended for a transitional period in 2018 and 2019 by multiplying the relevant risk weight with 20 % in 2018 (i.e. the calculated risk weights are 0%, 4%, 10%, 20%, 30%) and with 50 % in 2019 (i.e. calculated risk weights are 0%, 10%, 25%, 50%, 75 %).

Due to the fact that rows 140 to 270 of template C 07.00 of Annex I to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) of the current breakdown of exposures by risk weights do not cover all calculated risk weights during the transitional period, exposures with risk weights of 25% (in 2019) and 30% (in 2018) shall be reported in row 280, notwithstanding the instructions on this row.

All other risk weights shall be reported in the respective rows of the calculated risk weights of the breakdown in rows 140 to 270 in template C 07.00. For example in 2018, the risk weight 4 % shall be reported in row 160.

The approach described above is also relevant for exposures of the exposure classes according to Article 112 lit. (b) and (c) of CRR, if they are treated as exposures to central government under Article 115 or Article 116 of the CRR.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.

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