Response to consultation on amendments to RTS on credit risk adjustments in the context of the calculation of the Risk Weight
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treatment between IRB and KSA. However, the example given in the consultation paper does not seem
plausible to us and does not correspond to the accounting regulations according to IFRS for so-called
"POCI assets" (= “Purchased or Originated Credit-Impaired Financial Assets“).
1. POCIs are recognised at fair value and without any loan loss provisions (phase 2). This means
that the specific credit risk adjustment (SCRA) of 1 in the example in phase 2 is not plausible.
2. For the revaluation (phase 3), it should be noted that POCIs are not valued at FVPL after
addition. A revaluation is carried out via the expected credit loss and the risk provision. In the
example, a revaluation of +30 is assumed with an unchanged credit loss. We, therefore, consider
the example to be very questionable and not very helpful for the user.
The question arises as to whether the EBA’s proposal is based on incorrect assumptions in terms of
accounting (at least concerning IFRS).
As paragraph 6 of Article 1 of the Commission Delegated Regulation (EU) No 183/2014 introduces a
change compared to paragraph 1 we would propose to insert in paragraph 6 at the beginning: “By way of
derogation from paragraph 1 [to calculate the sum of specific credit risk adjustments…”].
Question 1: Do you agree with the proposed amendment to Commission Delegated Regulation (EU) No 183/2014?
In principle, we welcome the initiative to change the RTS, intended to eliminate an apparent unequaltreatment between IRB and KSA. However, the example given in the consultation paper does not seem
plausible to us and does not correspond to the accounting regulations according to IFRS for so-called
"POCI assets" (= “Purchased or Originated Credit-Impaired Financial Assets“).
1. POCIs are recognised at fair value and without any loan loss provisions (phase 2). This means
that the specific credit risk adjustment (SCRA) of 1 in the example in phase 2 is not plausible.
2. For the revaluation (phase 3), it should be noted that POCIs are not valued at FVPL after
addition. A revaluation is carried out via the expected credit loss and the risk provision. In the
example, a revaluation of +30 is assumed with an unchanged credit loss. We, therefore, consider
the example to be very questionable and not very helpful for the user.
The question arises as to whether the EBA’s proposal is based on incorrect assumptions in terms of
accounting (at least concerning IFRS).
As paragraph 6 of Article 1 of the Commission Delegated Regulation (EU) No 183/2014 introduces a
change compared to paragraph 1 we would propose to insert in paragraph 6 at the beginning: “By way of
derogation from paragraph 1 [to calculate the sum of specific credit risk adjustments…”].