- Question ID
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2015_1890
- Legal act
- Regulation (EU) No 575/2013 (CRR)
- Topic
- Credit risk
- Article
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116
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
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n/a
- Type of submitter
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Individual
- Subject matter
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Treatment of an asset resulting from obligatory payments to Deposit Guarantee Scheme in Risk Weighted Assets calculation (Standardised Approach).
- Question
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How should an asset resulting from prepayment of obligatory contribution to Deposit Guarantee Scheme be treated for the purpose of credit risk capital requirements calculation under the Standardised Approach?
Should it be recognised as ‘Other assets’ (prepayments to unknown counterparty) or as an exposure to the Deposit Guarantee Scheme?
Moreover, if the recognition as an exposure to the Deposit Guarantee Scheme is correct, is it possible to treat the Deposit Guarantee Scheme as a Public Sector Entity which can be treated under Article 116(4) CRR, and therefore assigned a 0% risk weight?
- Background on the question
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A Bank is obliged to pay its yearly contribution to obligatory Deposit Guarantee Scheme on March. According to the matching principle, the Bank recognises an asset resulting from prepayment of this contribution and gradually recognizes this amount as an expense during the year. The resulting asset has to be included in Risk Weighted Assets calculation.
It is not clear how should an asset resulting from prepayment of obligatory contribution to Deposit Guarantee Scheme be treated for the purpose of credit risk capital requirements calculation under Standardised Method.
As this type of asset bears no credit risk for the institution, it should not increase the amount of Risk Weighted Assets. This would require, that the prepayment is treated as an exposure to Deposit Guarantee Scheme and is assigned a 0% risk weight (due to treatment of DGS according to art. 116 point 4 CRR).
it is unclear if the proposed approach to recognition of such an asset is correct or whether there is an alternative way of recognising such an asset in RWA calculation.
- Submission date
- Rejected publishing date
-
- Rationale for rejection
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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.
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- Status
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Rejected question