Question ID
2025_7434
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
124
Paragraph
1
Subparagraph
b
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
n/a
Name of institution / submitter
msg for banking ag
Country of incorporation / residence
Deutschland
Type of submitter
Consultancy firm
Subject matter
Can a receivable be identified as IPRE if a mortgage exists, but the securing property is not recognised as collateral?
Question

Art. 124 para. 1 stipulates that banks receive a risk weight of 150% for IPRE receivables that do not fulfil all the conditions set out in para. 3. The question is what constellation of conditions must be met for this case to realistically materialise.

An institution should normally be able to fulfil subsections a to d in para. 3. Paragraph 3 contains a reference to Article 208 and paragraph 1 of Article 229 in sub-item e. Article 229 paragraph 1 describes the property valuation and will not generally present institutions with insurmountable problems either.

Article 208 begins with the statement that a property is only recognised as collateral if the following paragraphs 2 to 5 are fulfilled. One hurdle could possibly be the monitoring of the property value in accordance with paragraph 3. However, it is also conceivable that an institution will generally refrain from recognising real estate collateral due to an insignificant share in the portfolio.

Can a receivable that is effectively secured by a mortgage be identified as an IRPE risk position without recognised real estate collateral, resulting in an RW of 150% under Art. 124 para. 1? Or does non-recognition also mean that the exposure is not to be regarded as collateralised (by a property) for the calculation of own funds and consequently receives the risk weight of an unsecured exposure?

Background on the question

According to article 125 para. 2 and art. 126 para. in countries that fulfill certrain criteria IPRE exposures are treated like non-IPRE. This also applies to the exposure amount exceeding the threshold of 55 % ETV, being treated as unsecured. However if art. 124 para. 1 prevents an IPRE exposure from being considered unsecured, because a mortgage exists, but the collateral is not recognised, the risk weight of such a claim would be 150 % (rather than unsecured e.g. 75 % or 100 %).

Submission date
Rejected publishing date
Rationale for rejection

This question has been rejected because EBA guidance or clarification is not needed with regard to the issue that it raises, as it is considered that the existing regulatory framework is sufficiently clear and unambiguous.

The Single Rule Book Q&A tool has been established to provide explanations and non-binding interpretations on questions relating to the practical application or implementation of the provisions of legislative acts referred to in Article 1(2) of the EBA’s founding Regulation, as well as associated delegated and implementing acts, and guidelines and recommendations, adopted under these legislative acts.

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Status
Rejected question