What risk weight should be applied to non-preferred senior (NPS) debt, under the standardised approach for credit risk?
This is a follow up the question I submitted on October 1st 2018 with the reference no 2018_4306.
Non-preferred senior debt is a new asset class and it may have other names. We refer to of non-preferred senior debt as the new asset class that many European institutions are expected to issue in order to fulfill their MREL requirements. The question is what risk weight should be applied according to the standardised approach for credit risk when institutions are buying these instruments.
Theoretically this new asset class could be risk weighted in four different ways:
1) as exposures to institutions according to CRR Articles 120-121
2) as equity exposures according to CRR Article 133
3) as items associated with particular high risk according to CRR Article 128
4) fully deductible similar to the rules set out in CRR Article 66(c) and CRR Article 70
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