Question ID
2018_4012
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
123
Paragraph
n.a.
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
n.a.
Type of submitter
Credit institution
Subject matter
Retail Classification
Question

Retail classification if an obligor has exposure under both the STA and IRB approach. This question is relevant for banks that are partially using the SA and partially using the IRB approach and where the use of the different methods is on the basis of the product type i.e. mortgages are under IRB, other Retail loans under SA.

Article 123 allows for the exclusion of exposures fully and completely secured on residential property that have been assigned to the exposure class laid down in point (i) of Article 112 (exposures secured by mortgages on immovable property) when calculating the total amount owed the institution.

Background on the question

Retail classification if an obligor has exposure under both the STA and IRB approach. This question is relevant for banks that are partially using the SA and partially using the IRB approach and where the use of the different methods is on the basis of the product type i.e. mortgages are under IRB, other Retail loans under SA.

Article 123 allows for the exclusion of exposures fully and completely secured on residential property that have been assigned to the exposure class laid down in point (i) of Article 112 (exposures secured by mortgages on immovable property) when calculating the total amount owed the institution.

Submission date
Final publishing date
Final answer

For the calculation of the total amount owed by an obligor under Article 123(c) of Regulation (EU) No 575/2013 as amended by Regulation (EU) 2019/876 (CRR2) an institution should consider all exposures owed, even if part of the exposures to that obligor were to be treated under the IRB approach. However, for the exclusions, Article 123(c) CRR2 explicitly refers to exposures fully and completely secured on residential property collateral that have been assigned to the exposure class laid down in point (i) of Article 112 CRR2, which is an exposure class under the standardised approach for credit risk.

 

Consequently, exposures secured on residential property collateral classified under the IRB approach cannot be excluded when calculating the total amount owed under Article 123(c).

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.