Where a loan is made to a non-financial corporate, and the loan is guaranteed by a financial counterparty such that the credit exposure on the loan is viewed by the firm as an exposure to the guarantor (financial counterparty), can the 10% RSF applicable under CRR Article 428v be applied to such a transaction?
Article 428ad(c) CRR requires that a Required Stable Funding (RSF) factor of 50% should be applied to monies due from transactions with a residual maturity of less than one year undertaken with non-financial corporates, retail customers and SMEs. CRR Article 428v requires that a 10% RSF should be applied to monies due from transactions with financial customers that have a residual maturity of less than six months other than those referred to in point (g) of Article 428r(1) and in point (b) of Article 428s(1).
CRR Article 428ad(c) requires that a RSF factor of 50% should be applied to monies due from transactions with a residual maturity of less than one year undertaken with non-financial corporates, retail customers and SMEs. However, in a number of such cases, a firm will provide a loan to a non-financial corporate only where the credit quality of the borrower is sufficient, or an eligible credit guarantee from another financial institution has being provided by the customer. In this case, the loan made is conditional upon the guarantee being received by the firm. In this case, it follows that the RSF applicable should reflect the guarantee received from the financial counterparty, as per CRR Article 428v.
With the exception of the assets referred to in Articles 10(1)(b),(c),(d) (g) and 11(1)(a)(b) of Delegated Regulation (EU) 2015/61 (LCR DR), the NSFR framework as laid down in Regulation (EU) No 575/2013 as amended by Regulation (EU) 2019/876 (CRR) does not allow categorizing loans in accordance with the guarantor, if applicable.
On this basis, monies due from loans provided to non-financial corporates, retail customers and SMEs that are not captured by the exception above should be treated as such even if the underlying loans are guaranteed by a financial customer. Therefore, any such exposures with a residual maturity less than one year would be subject to a required stable funding factor of 50% pursuant to Article 428ad(c)(v) CRR.