Response to consultation on RTS on specialised lending exposures

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Question 2: What would be the preferred approach for the combination of the factors into a final assignment to a category? What are the advantages and drawback of either approach? Are both options equally clear or should further guidance be provided? Are there other approaches that could be used to harmonise how the different factors are combined into a final assignment for the risk weight?

Slotting is already a highly prescriptive risk weighting methodology and it is hard to understand why the EBA feels the need to impose further prescription in how SLEs are assigned to particular slotting categories. Real estate lending exposures are highly diverse and the weight of each slotting sub-factor can differ dramatically from one exposure to another for good reasons.

Accordingly, we would recommend that the EBA retains the small measure of flexibility that slotting currently allows firms when it comes to appropriately weighting different slotting factors and sub-factors. Institutions should be encouraged to use reasoned and documented judgment rather than having a mechanistic approach imposed on them.

If the EBA is nevertheless determined to choose either Option 1 or Option 2, our preference would be for Option 2 because it is more sensitive and better able to accommodate the diversity of IPRE than Option 1. Option 2 should be improved by removing (or at least substantially reducing) the proposed 10% minimum weighting for any factor.

Question 3: Do you agree with the classification of specialised lending and the descriptions given?

No comments

Question 4: Do you agree with these documentation requirements for each specialised lending exposure for which risk weights are assigned according to this Regulation?

No comments

Question 5: Do you have any suggestions or comments on the assessment criteria for project finance?

No comments

Question 6: Do you have any suggestions or comments on the assessment criteria for real estate?

No comments

Question 7: Do you have any suggestions or comments on the assessment criteria for object finance?

No comments

Question 8: Do you have any suggestions or comments on the assessment criteria for commodities finance?

No comments

Question 9: Do you have any suggestions or comments on the Impact Assessment?

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Name of organisation

British Property Federation