Question ID
2014_1217
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
159
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
Article/Paragraph
n.a.
Name of institution / submitter
BSM GmbH
Country of incorporation / residence
Germany
Type of submitter
Consultancy firm
Subject matter
Inclusion of expected loss for equity exposures in calculation of Expected loss amount reducing CET1
Question

Shall the expected loss amount for equity exposures under the IRB approach be offset against the specific and general credit risk adjustments of all risk positions?

If not, how shall they be treated? Does it has to be deducted from CET 1 in either case, also if there is a surplus increasing T2 according to Article 62 (d)?

Does this also mean that EL for equity exposures shall be reported in CA4 row 140 respective 155 or not?

Background on the question

Articles 158 and 159 CRR describe the treatment of expected loss amounts. In particular Article 159 states: "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 [...]". The calculation EL for equity exposures is described in Article 158(8), so one could conclude that they do not have to be subtracted of the credit risk adjustments. The problem is that we do not understand how to report this fact in the CA templates. 

Submission date
Rejected publishing date
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Status
Rejected question