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?

The MPS Group adopts essentially the approach in option 2. In our opinion, this option is better because it takes account, with appropriate weights, of all relevant information and therefore is more representative of the risk profile of the transaction. The second, also if more conservative, is based only on one category without considering the relevance of that source.
Furthermore, we believe that it could be adopted a minimum threshold below 10% in order to weigh significantly categories evaluated as very important.

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

The original maturity for SL can significantly vary (in our experience from 5 to 40 years, with an average around 15). In our opinion, the fixed level of remaining maturity used to assign the risk weights is too conservative for longer maturity.
It may be adopted a relative level to weigh in the same way the different original maturity. That level may be individuated considering properly that after a significant share of repayment the risk typically decreases (i.e. remaining maturity>60% ).

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

For real estate, in some case, the company can have both income generated by the assets being financed and income deriving from other activities. The MPS Group has defined an identification process to collect information necessary to evaluate the preponderance of the real estate activity on the overall activity of the company. Specific criteria are used in order to intercept correctly SL exposure.

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

For object finance, in some case, the company can have both income generated by the assets being financed and income deriving from other activities. The MPS Group has defined an identification process to collect information necessary to evaluate the preponderance of the real estate activity on the overall activity of the company. Specific criteria are used in order to intercept correctly SL exposure.

Name of organisation

Gruppo MPS