Question ID
2025_7453
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Large exposures
Article
395
Paragraph
1
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
N/A
Name of institution / submitter
Finansinspektionen
Country of incorporation / residence
Sweden
Type of submitter
Competent authority
Subject matter
Whether the derogation under Article 119 (5) of CRR can be applied in the context of Article 395(1) of CRR
Question

According to article 119 (5) of CRR, exposures to financial institutions shall be treated as exposures to institutions when calculating risk weighted assets for credit risk. Is article 119(5) applicable for the purpose of calculating large exposure limits in accordance with Article 395 of CRR? 

Background on the question

In accordance with Article 395 of CRR, an institution shall not incur an exposure to a client or group of connected clients the value of which exceeds 25 % of its Tier 1 capital or EUR 150 million, whichever the higher, where that client is an institution or where a group of connected clients includes one or more institutions (provided that the sum of exposure values, after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403, to all connected clients that are not institutions does not exceed 25 % of the institution's eligible capital).

For instance, the institution has an exposure to financial institution, that according to Article 119(5) of CRR is treated as an exposure to institution for the purpose of calculating risk weighted assets for credit risk, it is not clear whether it should be treated as an exposure to institution when calculating limits for large exposures in accordance with Article 395 of CRR. It raises doubts if the limit to large exposures should be 

a) 25% of the institution’s Tier 1 capital (if the exposure is not treated as an exposure to institution) or 

b) 25 % of its eligible capital or EUR 150 million, whichever the higher (if the exposure is treated as an exposure to institution).

Submission date
Rejected publishing date
Rationale for rejection

This question has been rejected because the issue it deals with is already explained or addressed in Article 395 of Regulation (EU) No 575/2013. In particular, no risk weight shall be applied when calculating Large Exposures - except credit risk mitigation techniques in Article 399 as well as Exceptions in Article 400.

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Status
Rejected question