Single Rulebook Q&A

Question ID: 2017_3394
Legal act : Regulation (EU) No 575/2013 (CRR)
Topic : Supervisory reporting
Article: 99
Article/Paragraph : Annex I, C 09.02, r140, c105-110
COM Delegated or Implementing Acts/EBA RTS/EBA ITS/EBA GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)
Name of institution: CREDIT AGRICOLE
Country of incorporation / residence: FRANCE
Subject matter : New EBA Validation rule (taxonomy 2.6) v4786_m about the comparison between the risk weighted exposure amount and the exposure value for Equity in CR GB IRB

According to the validation rule v4786_m, c105 shall be greater than or equal to c110 in all rows and all sheets in C 09.02, i.e. the exposure value (c105) has to be higher than the risk weighted exposure amount (c110).

However, in accordance with Article 155 paragraph 2 of the CRR, the risks weights are equal to 190% for private equity exposures in sufficiently diversified portfolios, 290% for exchange traded equity exposures and 370% for all other equity exposures.

For the row 140 ‘Equity’ in template C 09.02, as these rates are higher than 100%, the exposure value can be less than the risk weighted exposure amount and the rule cannot be respected.

Could you please exclude the rows 140 ‘Equity’ and 150 ‘Total Exposures’ from the rule?

Background on the question:

New validation rules of taxonomy 2.6 are added in June 2017.

Date of submission: 17/07/2017
Published as Final Q&A: 08/12/2017
EBA answer:

Article 155 of Regulation (EU) No 575/2013 (CRR) provides for three methods to calculate risk weighted exposure amounts for equity exposures under IRB models. The one described in the question is the simple risk weight approach (paragraph 2). This approach systematically leads to an application of risk weights higher than 100%.

On the other hand, risk weights lower than 100% can be obtained according to the other two approaches.

Whether or not the validation rule v4786_m holds depends on what method(s) is / are applied and which proportion of exposures is treated according to each method. This will be taken into consideration in a revision of the scope of application of v4786_m.

In a similar manner, Article 153 (5) CRR envisages the systematic application of risk weights higher than 100% for specialised lending exposures under certain circumstances. This will also be taken into consideration in a revision of v4786_m.

However, row 150 of template C 09.02 of Annex I to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting), presenting total exposures, will be kept within the scope of v4786_m.

Status: Final Q&A
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