Question ID
2014_1697
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
Articles 114, 235, 495
Paragraph
235 (4), 495 (2)
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
1
Name of institution / submitter
Magyar Nemzeti Bank
Country of incorporation / residence
Hungary
Type of submitter
Competent authority
Subject matter
Risk weight of guarantees not in the domestic currency of the borrower
Question

What is the correct risk weight of a loan, which has been granted to a client in euro, and guaranteed by an EU central government also in euro, but the domestic currency of the borrower is not euro?

Background on the question

The risk weight of exposures to MS central governments is defined in Article 114 (4) as 0%. However, Article 235 (3) states that institutions may extend the treatment set out in Article 114(4) to exposures or parts of exposures guaranteed by the central government or central bank, where the guarantee is denominated in the domestic currency of the borrower and the exposure is funded in that currency. At the same time Article 495 (2) gives the possibility to use the same risk weight 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 until 31 December 2017 as would be applied to such exposures denominated and funded in their domestic currency. Our problem is that Article 495 refers only to 114 (4) and not to 235 (3). This suggests that the preferential treatment provided by Article 495 is only for exposures to MS central government and not to exposures guaranteed by MS central governments. This procedure would be illogical and does not reflect the real risk of the exposure.

Submission date
Rejected publishing date
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