Question ID
2014_847
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Supervisory reporting - COREP (incl. IP Losses)
Article
128
Paragraph
2
Subparagraph
(d)
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
Article/Paragraph
Annex II, Part 3.2.3 par. 62-64
Type of submitter
Competent authority
Subject matter
Classification of in default exposures that are at the same time is an Item Associated with Particular High Risk
Question

Following the decision tree, it is clear that "Items Associated with Particular High Risk" take precedence over "Exposures in Default". However, if for example we have a case of speculative immovable property financing that is in default where do we classify it? If we include the exposure in the Associated with Particular High Risk class, then during COREP review or other regulatory review exercises, it might not give the correct picture for the level of in default exposures that an institution has in its portfolio. Shall the in default items with particular high risk be classified in the "In default" exposure class?

Background on the question

During the AQR the in default references to the "in default exposure class" alone and it would mean incorrect classification of exposures.

Submission date
Final publishing date
Final answer

The sequential process to assign the original exposure pre conversion factors to the exposure classes of the standardised approach according to CRR described in paragraph 3.2.3 of the instructions (Annex II of Regulation (EU) No 680/2014 13 ITS on Supervisory Reporting of institutions (ITS)) shall be applied. As such, if an exposure is either listed in Article 128 (2) or meets the criteria set in Article 128 (3) of CRR, it shall be assigned to the exposure class "Items associated with particular high risk". Consequently, there should be no other allocation, even if the exposure is defaulted.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.

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.