Question ID
2013_94
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
124, 125, 126
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
N/A
Type of submitter
Credit institution
Subject matter
Applicable risk weights for agricultural properties.
Question

Should exposures fully secured by agricultural properties be assigned a risk weight of 100% according to article 124 or can they be considered as residential or commercial properties according to article 125 and 126 and, thus, have a lower risk weight?

Background on the question

Exposures fully secured by mortgages on immovable property shall, according to article 124, shall be assigned a risk weight of 100% unless the property is classified as residential or commercial. In article 4 (75) there is a definition of residential property but there is no corresponding definition of commercial property.

Submission date
Final publishing date
Final answer

Unless the residential purpose dominates the purpose of commercial exploitation of the property, agricultural and silvicultural and forest properties should be considered commercial properties.*

*As of 31/10/2013 this answer was corrected.

DISCLAIMER:

This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Internal Market and Services) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.

Status
Final Q&A
Answer prepared by
Answer prepared by the European Commission because it is a matter of interpretation of Union law.
Note to Q&A

Update 26.03.2021: This Q&A has not yet been reviewed by the European Commission in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).

Disclaimer

The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.