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List of Q&A's

Definition of independent valuer referred to in Article 229(1) of Regulation (EU) No 575/2013 (CRR)

1. What is a definition of independent valuer referred to in Article 229(1)? 2. Whether the definition of independent valuer referred to in Article 229(1) is specified in Article 208(3)(b)? 3. Whether independent valuer is defined as a person who possesses the necessary qualifications, ability and experience to execute a valuation and who is independent from the credit decision process? 4. Whether the Regulation (EU) No 575/2013 (CRR) imposes additional obligations than those indicated in Article 208(3)(b) on a person who execute valuation as independent valuer? 5. Whether an independent valuer referred to in Article 229(1) may be an employee of the bank? 6. Whether CRR excludes the possibility of valuing the property for the purposes of Article 229(1) by employees of the bank?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_1056
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 03/10/2014

Treatment of recognised exchanges (non-third country vs. third country)

Are exchanges, explicitly exchanges according to Article 4(1)(72) of Regulation (EU) No 575/2013 (CRR), also treated like institutions?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_677
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 03/10/2014

Relevance of Issuers Rating for Article 120 of Regulation (EU) No 575/2013 (CRR)

Does Article 120 of Regulation (EU) No 575/2013 (CRR) refer to claims only, where there is an issue-related rating existing, or does it also cover claims, where no rating exists for the issue, but for the issuer?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_652
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 03/10/2014

Under the large exposure regime Article 390 (6)(e) of CRR provides an exemption for deduction of items according to article 36, 56 and 66. These deducted items must not be considered in the large exposure regime.

Is it correct that deducted equity exposures do not need to be reported in the solvency regime as well (=same procedure as in Large Exposure regime) or do they have to be reported in asset class “equity exposures” with a risk weight of 0%?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_482
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 19/09/2014

Non Credit Obligation Assets

Paragraph 5 of article 148 of CRR, states "An institution that is permitted to use the IRB Approach for any exposure class shall use the IRB Approach for the equity exposure class laid down in point (e) of Article 147(2), except where that institution is permitted to apply the Standardised Approach for equity exposures pursuant to Article 150 and for the other non credit-obligation assets exposure class laid down in point (g) of Article 147(2)." It is not clear whether an institution with an IRB Approach permission should treat "non customer assets" e.g. fixed assets, cash etc under the IRB approach (reported as Non Credit Obligation) or under the standardised approach (reported as Other Assets)

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_810
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 12/09/2014

Bestimmung der Forderungsklasse von Zentralbanken mit Gesellschaftsform Aktiengesellschaft (EN: Determination of the exposure class for central banks that take the form of a public limited company)

In welche KSA- und IRBA- Forderungsklasse sind die Aktien von (EU- Zentralbanken z.B. Griechenland) einzustufen? EN Translation: In which CRSA and IRBA exposure class are the shares of EU central banks (e.g. Greece) to be classified?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_586
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 29/08/2014

Items associated with particular high risk secured with eligible real estate

How do we treat the exposures that would have been otherwise categorised as "Items associated with particular high risk" and which at the same time are secures with mortgages on immovable property? a) Ignore the collateral which opposes the spirit of Regulation (EU) No 575/2013 (CRR) and Credit risk mitigation (CRM) i.e. CRM is recognised when it decreases the Credit risk? b) Recognise them in the exposure class "Secured with mortgages on immovable property"? Additionally, if these items are also in default, should they be recognised in the "In default" exposure class? c) Recognise them in the exposure class "Items associated with particular high risk" and apply the lower RW that are associated with the exposures secures with mortgages on immovable property?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_215
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 14/08/2014

Eligible collateral for the purpose of credit risk mitigation

Are American Depository Receipt (ADR) and Global Depository Receipt (GDR) considered as equity for the purpose of credit risk mitigation?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_1073
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 25/07/2014

Highly leveraged obligors

How to define/identify 'highly leveraged obligors' under Article 180(1)(a)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_430
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 25/07/2014

Inclusion of additional value adjustments in the IRB treatment of expected loss

In CRR article 159 we read the following: "Institutions shall subtract the expected loss amounts calculated in accordance with Article 158 (5), (6) and (10) from the general and specific credit risk adjustments and additional value adjustments in accordance with Articles 34 and 110 and other own funds reductions related to these exposures." Due to the wording and the grammatical structure of the above sentence we are having doubts as to which amounts should actually be used in the IRB treatment of expected losses.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_950
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 11/07/2014

Residual maturity of exposures with an undefined maturity

Do exposures with an undefined maturity, such as deposits or time deposits which can be called by the depositor and must then be reimbursed with a delay shorter than three months, quality as such?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_883
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Effect on the capital requirement of a guarantee where the right to call is linked to default versus another where it is linked to realised loss

Let’s take a portfolio level guarantee that is callable once losses from the exposures covered have been realised (and NOT when exposures DEFAULT); realised losses decrease the notional of the guarantee. As it can take years till losses get realised after the default event, while losses are still unrealised (but defaults have happened) the full notional is used to cover the whole portfolio. Our question is whether such a guarantee is eligible to be taken into account as unfunded credit protection and thus decrease the capital requirement of the sub-portfolio it cover?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_803
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Treatment of SME-supporting factor in the case of secured exposures.

I. How should the SME-supporting factor be treated relating to secured exposures? a) Including all collaterals, i.e. also for guarantees. Thus risk weighted assets of inflow in asset class sovereigns or institutes will also be reduced? b) Only for those collaterals which cause no risk transfer (meaning which are intered directly in the RWA formula)? c) Only for the non-secured part of the exposure?II. General question when the SMR supporting factor can be used: a) To our understanding a risk transfer is only allowed in the case that the risk transfer is leading to a reduction of the RWA. Taking this into account it should always be compared “the total SME exposure with the supporting factor and without a risk transfer” to “the exposure with the SME supporting factor (only for the non-secured part) and the risk transfer without the supporting factor”. b) To consider the above mentioned point under II. a) it seems that banks under the IRB-A approach are by tendency favored as there is no risk transfer (e.g.in cases of a guarantee by a government) but the effect of the collateral is considered in the total LGD of the exposure.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_565
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Calculation of retail exposures under Article 123(c) of Regulation (EU) No 575/2013 (CRR)

Does expression from point (c) of the first subparagraph of Article 123 of Regulation (EU) 575/2013 (CRR) “the total amount owed to the institution and parent undertakings and its subsidiaries” refer to exposure value as of Article 111 1. net exposure value (after deduction specific credit risk adjustments and additional adjustments) of an asset and of an off-balance sheet? Should the exposure value (the sum of current replacement cost and potential future credit exposure) of derivative instruments be included in calculation of total amount owed to the institution, laid down in point (c) of Article 123? Should the total amount owed to the institution and parent undertakings and its subsidiaries as of Article 123 (c) include: - An off-balance sheet item = 50 000 EUR? - Credit risk adjustments = -10 000 EUR? - Value of derivative instrument? If so, should both current replacement cost and potential future credit exposure be included?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_707
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 27/06/2014

Retail exposure class and risk weight for exposure value of derivative instruments

Should the credit risk exposures and counterparty credit risk exposures for the same customer be classified as retail exposures if the criteria from Article 123 points (a) to (c) of Regulation (EU) No 575/2013 (CRR) are met and they are classified neither as exposures in default nor as exposures secured by mortgages on immovable property? Are there any restrictions in assigning derivative instrument to the retail exposures class and to use one of the preferential risk weights of 75% except criteria from Article 123?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_704
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 27/06/2014

Bestimmung der Forderungsklasse für börslich gehandelte Optionen, Warrants und Futures / Determination of the exposure class for exchange-traded options, warrants and futures

Warrants, wie auch Options und Futures beinhalten sowohl ein Adress-Ausfallsrisiko, als auch ein ein individuelles Risiko (über die Entwicklung des Basiswertes bzw. dessen Emittenten). Nach welchen Kriterien soll CRR zufolge die Bestimmung der Forderungsklasse erfolgen? EN TRANSLATION: Warrants, like options and futures, entail both a counterparty credit risk and an individual risk (through the development of the underlying and its issuer). On the basis of what criteria, according to CRR, is the exposure class to be determined?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_546
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 20/06/2014

Definition of counterparty for the purpose of applying on-balance sheet netting

1) What is the definition of a counterparty in the context of using on-balance sheet netting (OBSN) of mutual claims between the bank and the counterparty as eligible credit risk mitigation form? 2) In other words, to be eligible for OBSN should the netting of loans and deposits always be with one legal entity or can they be across legally connected entities (for example parent-subsidiaries)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_538
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 06/06/2014

Conversion of the total amount owed to institution from national currency to EUR

Which exchange rate should the institution use to convert the amount owed to institution (mentioned in Article 501 point 1)? Should it be converted to EUR each day with exchange rate from this day or should the exchange rate be fixed, for example from the day when the product was sold?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_417
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 28/05/2014