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Q&As refer to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.

Please note that the Q&As related to the supervisory benchmarking exercises have been moved to the dedicated handbook page. You can submit Q&As on this topic here.

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List of Q&A's

Treatment of loans for LBO financing according to the GLs on high risk items

How should loans which constitute leveraged buyout (LBO) financing be treated according to the Guidelines on  specification of types of exposures to be associated with high risk? Should information, that a loan is collateralised by shares in an unlisted company, have decisive impact on its treatment as potentially being "debt exposure with economic substance similar to non-debt exposure" according to the paragraph 2 of section 4.1 of the Guidelines? 

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2019/01 - Guidelines on specification of types of exposures to be associated with high risk under Article 128(3) of CRR
  • ID: 2019_4952
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 30/07/2021

Use of short-term credit assessments with Article 120(2) CRR

May short-term issuer or issue ratings be used to assign risk weights in the general preferential treatment for short term exposures of article 120(2) CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4942
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 17/12/2021

Use of short-term issuer credit assessments with Article 131

May short-term issuer ratings be used to assign risk weights in the context of article 131?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4941
  • Topic: Credit risk
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Prudential backstop (Regulation 2019/630) and interaction with RWA calculation

Is the prudential backstop deficit under Article 151(1) taken into consideration for the calculation of risk-weighted assets on exposures treated under the advanced IRB approach?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4938
  • Topic: Credit risk
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Residential Reverse mortgages RWA

Could you clarify the regulatory RWA treatment for residential reverse mortgages exposure? Are those exposures subject to the standardised approach for RWA calculation?Is the regulatory treatment linked to the level of loan to value (LTV) the same as residential mortgages?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4934
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 11/02/2022

Appropriate Risk Weight for purchased defaulted assets

Does the entering into force of the Regulation (EU) 2019/630 of the European Parliament and of the Council of 17 April 2019 (the “Prudential Backstop Regulation”) affect the determination of which risk weight that should be applied according to Article 127 CRR when an entity subject to CRR purchases non-performing loans booked at purchase price (net book value, “NBV”), which is significantly below the loans’ gross book value (“GBV”)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4909
  • Topic: Credit risk
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

USA public sector entities risk weight

USA is listed by the EBA as applying supervisory and regulatory arrangements at least equivalent to those applied in the Union. However the competent authorities of this country does not require the use of ECAI ratings to assess risk weights of exposures to public sector entities. Should we nevertheless consider that this competent authority treat exposures to public sector entities in accordance with paragraph 1 or 2 of article 116, and so should we risk weight these exposures in accordance to paragraph 1 or 2?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4889
  • Topic: Credit risk
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Unlikeliness to pay (UTP) - exit from NP status

Can a customer exit non-performing status immediately (provided of course no other UTP criteria are applicable), or does a period of 12 months need always to pass before the customer can exit?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2018/06 - Guidelines on management of non-performing and forborne exposures
  • ID: 2019_4867
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 15/01/2021

Range of application of the LGD regulatory floor for the calculation of own funds requirements at individual and consolidated levels

Shall the LGD regulatory floor be applied at the territory level of the Member state to exposures secured by property located in the territory of that Member state (Article 164(7) CRR) for the calculation of own funds requirements at any level, i.e. individual and/or consolidated level?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4859
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 18/02/2022

LGD adjustment for massive disposals.

Article 500, first paragraph, point (c) of the Regulation (EU) 2013/575 as amended by Regulation (EU) 2019/876 provides for a 20% threshold to qualify disposal operation as “massive”. This question seeks clarification on how to compute the threshold.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4824
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 12/03/2021

Interpretation of the term "all observed defaults" in Article 500 of Regulation (EU) No 575/2013 as amended

Both Article 181(1)(a) and Article 500(1)(c) of Regulation (EU) No 575/2013 as amended contain the expression “all observed defaults”. Is that expression meant to be interpreted in the same way in the context of both articles to include both completed and incomplete recovery processes? It is our understanding of Article 181(1)(a) that no observed defaults should be excluded. This understanding is further supported by paragraph 163 of EBA/GL/2017/16, which states that for the purpose of LGD quantification, “institutions should not exclude any defaults in the historical observation period that fall within the scope of application of the LGD model”. Should this view also be extended to the calculation of the threshold under Article 500(1)(c) of Regulation (EU) No 575/2013 as amended, and can it be in particular be deduced that neither completed nor incomplete recovery processes can be excluded?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4820
  • Topic: Credit risk
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Adjustment for massive disposals

Regarding the interpretation of Article 500(1) of the Regulation (EU) 2019/876 amending Regulation (EU) No 575/2013 (hereafter “Regulation (EU) No 575/2013 as amended”), do we understand it correctly that:“the average estimated LGDs for comparable exposures in default that have not been finally liquidated” should be derived by applying the estimation method for incomplete recovery processes, which is required under Article 181(1)(a) Regulation (EU) No 575/2013 and further explained in paragraphs 158 and 159 of EBA/GL/2017/16, to the disposed assets as of the date just before the disposal;“the average realised LGDs including on the basis of the losses realised due to the massive disposals” should be the average observed LGD for all disposed exposures based on the economic loss of each exposure, taking into account the disposal price as well as material discount effects and material direct and indirect costs associated with collecting on the instrument in line with Article 5(2) of Regulation (EU) No 575/2013the adjustment based on Article 500 for all disposed exposures cannot lead to an estimate of average losses for the disposed assets that is lower than the estimated LGD calculated under point (a) above?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4819
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 12/03/2021

NPE calculations of NPE workout options

Should the NPV calculations that paragraph 143 of the EBA Guidelines on management of non-performing and forborne exposures describes be performed with a risk adjusted discount rate, i.e. the original effective interest rate should not be used for these calculations?

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2018/06 - Guidelines on management of non-performing and forborne exposures
  • ID: 2019_4814
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 09/04/2021

Interaction of voluntary capital deduction (CRR art 3) with required coverage of non-performing exposures (art 47c), exposure value for credit risk (art 111) and treatment of expected loss amounts (art 159)

Can voluntary CET1 reductions taken following CRR article 3 qualify as 'other own funds reductions' referred to in articles 47c, 111 and 159?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4801
  • Topic: Credit risk
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Definition of private equity exposures in articles 155(2) and 155(3)

Do “private equity exposures in sufficiently diversified portfolios” eligible to a Risk Weight (RW) of 190% in simple risk weight approach in article 155(2) and a PD of 65% in the PD/LGD approach in article 155(3) refer to any non-listed equity instrument and/or shares in a CIU or units in a CIU for which the underlying exposures are non-listed equity instruments, provided that they are part of a sufficiently diversified portfolio?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4774
  • Topic: Credit risk
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Clarification about the definition of default for retail exposures

It is unclear how to determine what should be considered as retail exposures for the purpose of the definition of default for retail exposures.What kind of exposures should be considered to determine default under Article 178 CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2016/07 - Guidelines on the application of the definition of default under Article 178 CRR
  • ID: 2019_4757
  • Topic: Credit risk
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Recognition criteria for off-balance sheet items for exposure value calculation

If based on the applicable accounting framework (IFRS-EU) it is concluded that there is no contingent liability that should be disclosed for accounting purposes, is it then still possible that an off-balance sheet item exists, which should be recognised for exposure value calculation per Articles 111 CRR or 166 CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4751
  • Topic: Credit risk
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022