Which method according to Article 254 CRR is to be used to calculate RWAs in relation to a securitisation position which is backed by an IRB pool composed by specialized lending exposures?

Regulation (EU) No. 2017/2401 defines the new methods (SEC-IRBA, SEC-SA, SEC-ERBA) to calculate risk-weighted exposure amounts in relation to a securitisation position. According to Article 258 para 1 lit a) CRR institutions shall use the SEC-IRBA to calculate RWAs in relation to a securitisation position where the position is backed by an IRB pool or a mixed pool, provided that, in the latter case, the institution is able to calculate KIRB in accordance with Section 3 on a minimum of 95 % of the underlying exposure amount. IRB pool is defined pursuant to Article 242 para 7 CRR as a pool of underlying exposures of a type in relation to which the institution has permission to use the IRB Approach and is able to calculate risk- weighted exposure amounts in accordance with Chapter 3 for all of these exposures. The institution has permission to apply slotting approach for specialized lending exposure and thus calculate RWAs according to Article 153 para 5 CRR. As this approach is covered in Chapter 3 CRR, the understanding is that the pool with underlying specialized lending exposures can be considered as the IRB pool. As a parameter for SEC-IRBA, the exposure-weighted average LGD of the pool of underlying exposures has to be determined, it is not clear if SEC-IRBA should be applied, as there is no LGD in the slotting approach. The same issue occurs if there is a mixed IRB pool that includes at least one specialized lending exposure. On the other hand side, applying SEC-SA would mean for the institution using IRB approach a new RWA calculation for the underlying specialized lending exposures according to Standardised approach (Chapter 2), as defined for KSA in Article 255 para 6 CRR. In addition, we also understand that it is not ruled out that the underlying pool is comprised by specialized lending exposures. What is ruled out according Article 2 para 1 lit. c) of Regulation (EU) No. 2017/2402 is that securitization creates exposures which possess characteristics of specialized lending exposures.

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.