According to Article 123(c) of Regulation (EU) No 575/2013 (CRR) the  total  amount  owed  to  the  institution  and  parent  undertakings   and   its   subsidiaries,   including   any   exposure   in default, by the obligor client or group of connected clients, but excluding 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, shall not, to the knowledge of the  institution, exceed EUR 1 million.

Guidelines EBA/GL/2016/07 about retail exposures (Standardised Approach) clarify that  institutions that use the Standardised Approach may apply the definition of default at the level of an individual credit facility for all exposures that meet the criteria specified in Article 123 of Regulation (EU) 575/2013, even where some of those exposures have been assigned to a different exposure class for the purpose of assigning a risk weight, such as exposures secured by mortgages on immovable property.

If for instance a private individual client has an exposure 1.2 million Euros represented by a loan which is secured on residential property, it would be assigned to the exposure class laid down in point (i) of Article 112 (Exposures secured by mortgages on immovable property). It is however unclear under what exposure class it would be considered according to the guidelines EBA/GL/2016/07 - retail or other?

Also, it is unclear what would be considered to determine default under Article 178 CRR in the following cases:

1) A private individual client has one exposure 1.2 million Euros represented by a loan, which is fully secured on residential property.

According to Article 123 CRR the exposure would meet the conditions under letter (a) and  (b) but about (c) it the  total  amount  owed  is 0. In that sense it can be argued that for the purpose of risk weighting the exposure is assigned to the exposure class "exposures  fully  and  completely  secured  by  mortgages  on  residential  property", and not as "retail exposure".

However, according to the Guidelines  EBA/GL/2016/07 it is unclear whether it is a retail exposure for the purpose of applying the default definition or - since the exposure value is 1.200.000 Euros - it cannot be "retail exposure" in terms of default.

2) A legal entity client (SME), credit line contract (only one), drawn amount 900.000 Euros (max 2 million Euros), fully secured on residential property.

According to Article 123, the conditions under letters (a) and (b) would be met; for letter (c) the total amount owed is 0. Then the exposure is assigned in terms of risk weights to exposure class "exposures  fully  and  completely  secured  by  mortgages  on  residential  property", and not as "retail exposure".

But it is unclear whether according to the Guidelines  EBA/GL/2016/07 this is a retail exposure or not.

3) A legal entity client (SME), credit line contract (only one), drawn amount 1.9 million Euros (max 2.000.000 Euros), fully secured on residential property.

According to Article 123 conditions under letter (a) and (b) would be met; for letter (c) the  total  amount  owed  total amount owed is 0. Then the exposure is assigned in terms of risk weights to exposure class "exposures  fully  and  completely  secured  by  mortgages  on  residential  property", and not as "retail exposure", but is unclear whether according to the Guidelines  EBA/GL/2016/07 this is a retail exposure or not.

4) A legal entity client (SME), credit line contract (only one), drawn amount 900.000 Euros (max 2 million Euros), fully secured on immovable property.

According to Article 123, regulation 575/2013 the conditions under letters (a) and (b) are met; for letter (c) the  total  amount  owed is 900,000. Exposure is assigned in terms of risk weights to exposure class "Exposures secured by mortgages on immovable property", and not as "retail exposure", but it is unclear whether according to the Guidelines EBA/GL/2016/07 this is a retail exposure.