List of Q&As

Article 395 CRR – Shadow entities large exposure limits

If a bank invests through a vehicle, incorporated under the applicable Securitisation Law, with separate compartments per investor and where the paid out of each Note is segregated per portfolio of loans, may each Note be deemed a separate shadow entity?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2015/20 - Guidelines on limits on exposures to shadow banking entities which carry out banking activities outside a regulated framework under Article 395(2) of CRR

ID: 2019_4501| Topic: Large exposures| Date of submission: 01/02/2019

Large Exposures treatment of Nostro Accounts used for correspondent banking

Do Nostro Accounts used for correspondent banking activities always meet the exclusion criteria specified under Article 390(6) CRR?To the extent that a low amount of exposure is always left in the same accounts, as a buffer to avoid going overdrawn as a result of the correspondent banking activity, would this be eligible for the exclusions as well? If yes, under which circumstances?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2019_4805| Topic: Large exposures| Date of submission: 25/06/2019

Large exposures - treatment of connected clients principle on exposures to other group entities outside prudential scope of consolidation

What treatment is envisaged in the context of connected clients for multiple exposures to multiple entities that are part of the same economic group, but are not included in the scope of prudential consolidation? Are these considered to be an exposure to the same (connected) client?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2018_3665| Topic: Large exposures| Date of submission: 12/01/2018

Connected Clients and Control Relationship

Is the relation between a company and its directors as they are indicated in the company’s structure (irrespective of their number and irrespective if they are executive or non-executive directors) an indicator of control? Would it thus lead to identify a "single risk" and therefore to the creation of a group of connected clients? ?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2016_2923| Topic: Large exposures| Date of submission: 04/10/2016

Groups of connected clients when a client is connected through various criteria (interconnection through control and / or economic interconnection)

As defined in Article 4(1)(39) of Regulation (EU) No 575/2013 (CRR), clients can be included into ‘groups of connected clients’ through criteria of control (Article 4(1)(39)(a)) or economic interconnection (Article 4(1)(39)(b)). What is the correct treatment of exposure to a client in case when the client is connected with other natural or legal persons through criteria of control and / or economic interconnection? Should the institution include and report all those clients connected with particular client as one ‘group of connected clients’ regardless of criteria of connection (control vs. economic interconnection) or should the institution include and report particular client in two (or more) groups where one group includes clients that are connected with particular client through criteria of control and the other separate group (or more groups) is formed of clients that are connected with particular client through criteria of economic interconnection?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2014_1443| Topic: Large exposures| Date of submission: 26/08/2014

Definition of "institution" for large exposure purposes

Should EC implementing decision on the equivalence of the supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures according to Regulation (EC) No. 575/2013 be used to determine equivalence for LE purposes?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2014_1692| Topic: Large exposures| Date of submission: 19/12/2014

“Direct” control

In the example stipulated in the background section, does Central Government A - even if it does not hold the voting rights over company B1 directly by itself - exercise "direct" control over B1 within the meaning of Article 4 (1) (39) last subparagraph CRR?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2015_1974| Topic: Large exposures| Date of submission: 29/04/2015

Level 1 assets and Large Exposures exemptions

Please can you confirm that debt securities with a 0% risk weight under Part Three, Title II, Chapter 2 that are reported as level 1 assets in accordance with Article 10 point 1(e)(ii) of the Delegated Act specifying the LCR should also be exempted from the Large Exposure Limits defined in Article 395(1) of Regulation (EU) No 575/2013 under the exemptions in Article 400 point 2(d)(e)?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2015_2040| Topic: Large exposures| Date of submission: 09/06/2015

Large exposure reporting – Criteria for reducing the value of an exposure secured by commercial immovable property

Is Article 194(3)(b) relevant for accepting or rejecting commercial immovable property to reduce the value of an exposure secured by commercial immovable property according to the Article 402(2) when an institution uses the standardised approach for calculating credit risk capital requirements?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)

ID: 2014_1659| Topic: Large exposures| Date of submission: 03/12/2014

Treatment of stock futures under Article 390(3) and Article 327(1)

Does a short position on an equity future contract net off against a long position in its underlying equity, considering that the underlying security and the equity are identical, deliverable, quoted on an official exchange and cleared through the corresponding CCP?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2015_1873| Topic: Large exposures| Date of submission: 05/03/2015

Large AFS exposures and accounting for OCI unrealised gains

The question is regarding the ‘’exposures’’ definition (article 389 of CRR IV) and how to deal with assets on the Available For Sale (AFS) accounting portfolio (and hence valued at fair value through Other Comprehensive Income (OCI)) during the transitional period to a ‘’fully-loaded CRR IV’’. More specifically: If the 2014 transitional arrangements include 0% (exclude 100%) of OCI-unrealised gains from CET1 capital (and thus from ‘’eligible capital’’), would it be admissible for the sake of ‘’numerator-denominator consistency’’ to deduct those OCI-unrealised gains from the ‘’exposure’’ value, under the large exposures framework? Considering the above, what would be the approach for the following year (2015) with a transitional arrangement of 20% inclusion (80% exclusion) of OCI-unrealised gains? What would the treatment for OCI-unrealised losses be? How would this issue be dealt with in the capital requirements framework under the standardised approach for credit risk?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2015_1716| Topic: Large exposures| Date of submission: 09/01/2015

Exemptions from the application of Article 395(1)

Could exposures of an institution fully guaranteed by its parent undertaking - considering the substitution approach under Article 403(1)(a) of Regulation (EU) No 575/2013 (CRR) – be exempted from the large exposures provisions and in this way from the application of Article 395(1)? Furthermore, may the guarantees provided by the parent institutions from another Member State be handled in Article 403 of the CRR as a third party guarantee?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2014_1592| Topic: Large exposures| Date of submission: 04/11/2014

Interaction of Article 227 of the CRR (0% volatility adjustment under FCCM) and Article 401(3) (stress test of realisable value of collateral)

Our question concerns the application of Article 227 of the CRR (0% volatility adjustment under FCCM) and the interaction with the collateral stress test described in Article 401(3). The latter requires collateral values to be stressed, and the impact on Article 395(1) to be determined. It follows that the own funds requirement for large exposures in the trading book (calculated under Article 397 of the CRR) is adjusted upwards to take account of the stressed collateral values. Where the criteria set out in Article 227 of the CRR are met and 0% volatility adjustment is applied to repo/reverse repo transactions, is this exposure value taken as the base case for comparison with the stressed collateral impact calculated under Article 401(3)? Or are these two articles to be read in the reverse order, such that 0% volatility haircuts per Article 227 are also applied in the collateral stress test (Article 401(3))?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2014_1573| Topic: Large exposures| Date of submission: 24/10/2014

On-balance sheet netting and exemption from the Large Exposures limits

Are on-balance sheet (OBS) netting agreements, where there are maturity mismatches between loans and deposits, eligible the exemption from the large exposures regime as laid down in Article 400 of Regulation (EU) No 575/2013 (CRR)?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2014_1508| Topic: Large exposures| Date of submission: 01/10/2014

On-balance sheet netting and exemption from the Large Exposures limits - question 1

Are on-balance sheet (OBS) netting agreements, where both legs are denominated in different currencies, exempted from the application of Article 395(1) of Regulation (EU) No 575/2013 (CRR)??

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2014_1505| Topic: Large exposures| Date of submission: 01/10/2014

The use of the Collateral Simple and Comprehensive Methods under the Large Exposure regime

Does the phrase "where it is permitted to use" referred to in the third sub-paragraph of Article 403(1) of Regulation (EU) No 575/2013 (CRR) intend to prescribe that the treatment for collateralised exposures specified under Article 403(1)(b) is available for: • those institutions which are allowed to use both the Financial Collateral Simple and Comprehensive Methods?; or • collateral types which are eligible for both methods?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2014_793| Topic: Large exposures| Date of submission: 29/01/2014

Reporting of the 10 largest exposures to institutions and the 10 largest exposures to unregulated financial institutions

The issue is that the term and definitions for "institution" and "unregulated financial entity" are not complementary and thus could cover the same counterparts. Could EBA confirm that they don't want to have the same entities reported in the 2 groups ("institutions" and "unregulated financial entities") and clarify both terms?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_211| Topic: Large exposures| Date of submission: 04/09/2013

Large exposures - excluding exposures if fully deducted from own funds

May a credit institution exclude exposures from large exposure calculations which are fully covered by own funds (i.e. full deduction of own funds for this large exposure amount) and which are not used otherwise (e.g. for minimum capital requirements)?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2014_787| Topic: Large exposures| Date of submission: 28/01/2014

Large exposures - major trading currencies in overnight transactions

How are the major trading currencies to be determined under Article 400(2)(f) of the CRR? Clarification is needed on what is to be considered a major trading currency under Article 400(2)(f).

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2014_837| Topic: Large exposures| Date of submission: 11/02/2014

Large exposure reporting – reporting of central government and natural or legal persons controlled by the central government or interconnected with it

As large exposure reporting is based on a client data – how should an institution report exposure to the central government for large exposure purposes? Should it report the total exposure to the central government (and treat it as a single entity) or should it report exposures to all the entities which form the central government? What about in the case of group of connected clients which includes the central government and entities controlled/otherwise interconnected with it? As defined in Article 4(39) of Regulation (EU) No 575/2013 (CRR), central government can be included in "n" groups of connected clients. What is the correct reporting in such a case?

Legal act: Regulation (EU) No 575/2013 (CRR) as amended

COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)

ID: 2013_681| Topic: Large exposures| Date of submission: 19/12/2013