Is it possible to assign default according to the purpose of the loan (e.g only the exposure that was granted for renovation) and treat it as at facility level or not?
In case of one agreement for 2 purposes and 2 amounts granted, from the regulatory perspective can we treat such approach as default assignment at facility level or not?
Question related to understanding the default definition assignment on individual credit facility level. In CRR there is no detailed explanation/definition of individual credit facility provided. For example, when a bank is defining facility as the purpose of the loan. Several facilities/arrangements under the same contract may be opened at the initial date of a contract. As an example, there can be 2 purposes for/2 credit limits granted under one mortgage contract – for buying RE and renovating the RE. Bank in its IT systems assigns different codes to these 2 purposes, schedule of repayment could be the same or different. It is unclear whether it is possible to assign default according to the purpose of the loan (e.g only the exposure that was granted for renovation) and treat it as at facility level or not.
There is also an opportunity for the bank to sign 2 mortgage contract agreements and this would not be an issue, but the current and historical practice is that under one agreement 2 purposes with 2 amounts are granted.
It is unclear from the regulatory perspective if it is possible to treat such approach as default assignment at facility level or not.
An obligor can have several loan contracts (agreements) and each agreement can contain multiple facilities (arrangements). Arrangement is a loan account i.e. somewhat more granular than a contract (single contract may consist of several arrangements (loan accounts).
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