Question ID
2017_3615
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
126
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
N/A
Type of submitter
Accounting firm
Subject matter
Interpretation of the term “commercial immovable property” especially “other commercial premises” for the application of the preferential risk weights for the risk weight assets purposes according to the Article 126 of the CRR.
Question

What is the definition of “other commercial premises” as commercial immovable property in Article 126 CRR for the purposes of application of preferential risk weights for the risk weight assets purposes, if all other conditions stipulated in the CRR are met?

Background on the question

From Article 126 CRR and EBA answers to the EBA Q&A 1214 and Q&A 94 is still not clear what types of other commercial premises is covered by the Article 126 of the CRR.
1) In general and according to EBA answer to Q&A 1214 concerning CRR any immovable property not meeting the definition of residential immovable property stated in Article 4 (1) (75) of the CRR may be considered commercial immovable property for CRR purposes.

2) According to EBA answer to Q&A 94: “Unless the residential purpose dominates the purpose of commercial exploitation of the property, agricultural and silvicultural properties should be considered commercial properties.”

3) According to EBA answer to Q&A 1214 and in accordance with Regulation (EU) 680/2014 Annex V, Part 2, point 41 (h) “Mortgage loans [Loans collateralized by immovable property]” include loans formally secured by immovable property collateral independently of their loan/collateral ratio (commonly referred as ‘loan-to-value’). Although these properties enter into the disclosure of financial information, it may not be applicable for the purpose of applying Article 125 or 126 of the CRR for the purpose of assigning a preferential risk weight.

4) According to EBA answer to Q&A 1214: “exposures secured by mortgages on immovable property (Article 124 CRR) are exposures secured by residential property or secured by "offices or other commercial premises" properties. In determining whether an exposure meets the description of "offices or other commercial premises" for the purposes of Article 126(1) of the CRR, consideration should be given to the dominant purpose of the property in question, which should be linked to an economic activity.

However, this does not mean that all commercial immovable property is necessarily recognised for the risk weights for exposures or any part of an exposure fully and completely secured by mortgages on commercial immovable property according to Article 126 of the CRR. Recognition of "commercial immovable property" for the risk weights applicable to exposures or any part of an exposure fully and completely secured by mortgages under Article 126 of the CRR is restricted by the conditions set out in Articles 126(1) and (2) CRR.”

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