Question ID:
2019_4898
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Topic:
Large exposures
Article:
395
Paragraph:
1
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
Article/Paragraph:
Article 395(1)
Disclose name of institution / entity:
No
Type of submitter:
Competent authority
Subject Matter:
Large exposures regime for exposures treated as the exposures to institutions in accordance with Article 119(5) of CRR
Question:

Shall the exposure, that for the purpose of calculating risk weighted assets for credit risk is treated as the exposure to institution in accordance with Article 119(5) of CRR, should also be treated as the exposure to institution when calculating limits for large exposures in accordance with Article 395 of CRR?

Background on the question:

In accordance with Article 395 of CRR, an institution shall not incur an exposure (after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403), to a client or group of connected clients the value of which exceeds 25 % of the institution's eligible capital or EUR 150 million, whichever the higher, where that client is an institution or where a group of connected clients includes one or more institutions (provided that the sum of exposure values, after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403, to all connected clients that are not institutions does not exceed 25 % of the institution's eligible capital). For the purpose of large exposures regime, exposures are defined as any asset or off-balance sheet item referred to in Part Three, Title II, Chapter 2, without applying the risk weights or degrees of risk. Assuming that, for instance, the institution has an exposure to financial institution, that according to Article 119(5) of CRR is treated as an exposure to institution for the purpose of calculating risk weighted assets for credit risk, it is still not entirely clear, if it should be treated as an exposure to institution when calculating limits for large exposures in accordance with Article 395 of CRR. In consequence, it remains unclear, which limits for large exposures should be applied by the institution in such a case. Provided, that all the other provisions of Article 395 of CRR are met, and the above-mentioned exposure is the only one taken into consideration when calculating limits to large exposures, it raises doubts, if the limit to large exposures should be: a) 25% of the institution’s eligible capital (if the exposure is not treated as an exposure to institution) or b) 25 % of its eligible capital or EUR 150 million, whichever the higher (if the exposure is treated as an exposure to institution).

Date of submission:
05/09/2019
Published as Rejected Q&A
11/02/2022
Rationale for rejection:

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.

Status:
Rejected question
Image CAPTCHA