Question ID
2018_3785
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
127
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) No 183/2014 - RTS for the calculation of specific and general credit risk adjustments
Article/Paragraph
Art. 1
Type of submitter
Deposit Guarantee scheme
Subject matter
Applicable treatment of fair value changes for the identification of the applicable RW to exposures in default under the Standardised Approach
Question

In the application of Article 127 CRR, should the credit risk adjustments embedded in the fair value be considered in the calculation of the percentage of the unsecured part of the exposure value represented by credit risk adjustments?

Background on the question

Article 1 of Commission Delegated Regulation 183/2014 indicates that the amounts required to be included in the calculation of general and specific credit risk adjustments should be equal to all amounts by which Common Equity Tier 1 capital has been reduced in order to reflect losses exclusively related to credit risk according to the applicable accounting framework and recognized as such in the profit or loss account, irrespective of whether they result from impairments, value adjustments or provisions for off-balance sheet items.

In this context, it is unclear whether value adjustments recorded according to the accounting framework for the valuation at fair value are recognized in the profit and loss account and consequently reduced the Common Equity Tier 1 capital.

With specific regard to exposures in default included in the standard portfolio, for the calculation of risk weights in accordance with Article 127 CRR, it would be worth clarifying whether the percentage of the unsecured part of the exposure value represented by credit risk adjustments would be calculated considering the credit risk adjustments included in the fair value calculation.

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