What risk weight should be applied to non-preferred senior (NPS) debt, under the standardised approach for credit risk?

Non-preferred senior debt is a new asset class and it may have other names. We refer to non-preferred senior debt as the new asset class that many European institutions are expected to issue in order to fulfill their MREL requirements. The question is what risk weight should be applied according to the standardised approach for credit risk when institutions are buying these instruments.

Theoretically this new asset class could be risk weighted in four different ways:

1) as exposures to institutions according to CRR Articles 120-121

2) as equity exposures according to CRR Article 133

3) as items associated with particular high risk according to CRR Article 128

4) fully deductible similar to the rules set out in CRR Article 66(c) and CRR Article 70

Please note that as part of adjustments to the Single Rulebook Q&A process, agreed by the EBA and the European Commission, it has been decided to reject outstanding questions submitted before 1 January 2020, when the Q&A process was updated as part of the last ESAs Review. In particular, the question that you have submitted has now regrettably been rejected and will not be addressed.

If you believe your question would still benefit from clarification, you are invited to resubmit your question, adapting it to reflect any legislative, regulatory or other relevant developments that may have occurred since the initial date of submission. The EBA will aim to address resubmitted questions as a matter of priority. When considering to resubmit, you are kindly requested to observe the updated admissibility criteria agreed in the context of the adjustment of the Q&A process, available in the Additional background and guidance for asking questions. We hope for your understanding.

For further information please refer to the press release and the updated Q&A page.