Question ID:
2015_2376
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Topic:
Credit risk
Article:
126, 154, 164
Paragraph:
1, 3, 4
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
Article/Paragraph:
-
Disclose name of institution / entity:
No
Type of submitter:
Individual
Subject Matter:
Exposure secured by immovable property vs. secured by mortgages on immovable property
Question:

CRR requires the treatment of exposures secured by mortgages on residential property under the Standardised Approach (Article 124, 125, 126).
Also CRR requires the treatment of exposures secured by immovable property collateral (Article 154(3)), and exposures secured by residential / commercial property (Article 164(4)), both under the IRB approach.

(Regardless of the residential/commercial distinction), does the different formulation:
- “mortgage on immovable property” (Article 124),
- “exposure secured by immovable property collateral” (Article 154(3)),
- “exposures secured by [residential / commercial] property” Article 164(4))

refer to different kind of exposures?

Q&A 1214 suggests that the scope is the same for all the three articles above.
If however they are not the same, what sort of exposures are part of each group (and not part of another)? 

Background on the question:

The identification of a potential mismatch is important for institutions currently under SA but considering the application for the AIRB approach.

Date of submission:
06/10/2015
Published as Final Q&A:
06/01/2017
EBA Answer:

The term “exposures secured by immovable property” incorporates “exposures secured by mortgages on immovable property”  and, as a generic term, could also include exposures secured  by other mechanisms, different from mortgages  but economically equivalent and recognised as collateral on immovable property under the Member-States’ pertinent legislation setting out the conditions for the establishment of those rights.

“Residential property” is defined by Article 4(1)(75) of Regulation (EU) No 575/2013 (CRR). The types of commercial properties for which under the standardised approach a specific risk weight applies to exposures fully and completely secured by this type of commercial property, are specified by points (a) and (b) of Article 126(1) CRR.

Status:
Final Q&A
Answer prepared by:
Answer prepared by the EBA.
Note to Q&A:

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.

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