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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.

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List of Q&A's

Standardised Method

If the derivative exposure is guaranteed, can the weight be determined based on guarantor’s rating instead of counterparty’s rating, i.e. do we use the counterparty’s credit rating or the guarantor’s rating?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_464
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 16/05/2014

Highly leveraged obligors

How to define/identify 'highly leveraged obligors' under Article 180(1)(a)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_430
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 25/07/2014

Conversion of the total amount owed to institution from national currency to EUR

Which exchange rate should the institution use to convert the amount owed to institution (mentioned in Article 501 point 1)? Should it be converted to EUR each day with exchange rate from this day or should the exchange rate be fixed, for example from the day when the product was sold?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_417
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 28/05/2014

The meaning of the "amount owed to the institution"

How should institutions understand the "amount owed to the institution" under Article 501(2)(c)(1) in case of off-balance sheet exposures to customers that haven’t yet been used? Is it the exposure value (as understood in Article 111) or the nominal value of such product (for example credit line)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_416
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 31/01/2014

Unfunded credit protection; adjusting PD or LGD; coefficient of correlation large financial sector entities or unregulated entities

1. Under Article 161(3) of CRR, can unfunded credit protection be recognised by adjusting PD or LGD, but not both? 2. If the institution has a subordinated exposure to an obligor, and a guarantee is recognised by adjusting the PD under Article 161(3), is it allowed to also adjust the LGD for the subordinated exposure and use a LGD associated with a senior claim on the obligor or guarantor, if the guarantee would represent a senior claim on the guarantor (compare with Article 236(1)). 3. (a) If an institution is recognising unfunded credit protection by adjusting or substituting the PD under Article 161(3) for an exposure for which article 153(2) is not applicable, should it also adjust the coefficient of correlation from the obligor to the guarantor, including applying the multiplier of 1.25, in case unfunded credit protection has been received from a large financial sector entity as defined in Article 142(1)(4), or unregulated financial entity as defined in Article 142(1)(5). (b) If an institution is recognising unfunded credit protection by adjusting or substituting the PD under Article 161(3) for an exposure for which article 153(2) is applicable, should it also adjust the coefficient of correlation (multiplied by 1.25), in case unfunded credit protection has not been received from a large financial sector entity as defined in Article 142(1)(4), or unregulated financial entity as defined in Article 142(1)(5), but, for example, from a large corporate or sovereign. 4. (a) If an institution is recognising unfunded credit protection by adjusting the LGD under Article 161(3) for an exposure for which Article 153(2) is not applicable, should it also adjust the coefficient of correlation, including applying the multiplier of 1.25, in case unfunded credit protection has been received from a large financial sector entity as defined in Article 142(1)(4), or unregulated financial entity as defined in Article 142(1)(5). (b) If an institution is recognising unfunded credit protection by adjusting the LGD under Article 161(3) for an exposure for which Article 153(2) is applicable, should it also adjust the coefficient of correlation (multiplied by 1.25), in case unfunded credit protection has not been received from a large financial sector entity as defined in Article 142(1)(4), or unregulated financial entity as defined in Article 142(1)(5) , but, for example, from a large corporate or sovereign.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_415
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 26/02/2016

Conditions taken into account to use the factor 0,7619

Should an institution stop using the factor 0.7619 as soon as the amount owed to the SME enterprise exceeds 1.5m EUR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_414
  • Topic: Credit risk
  • Date of submission:

Capital charge for credit derivatives in the banking book in the position of protection seller

In Regulation (EU) No 575/2013 (CRR) we assume that for credit derivatives in the banking book in the position of protection seller the present capital charge is calculated only for credit risk with respect to the underlying and no extra capital charge for counterparty credit risk after CRR is needed. Do you agree?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
  • ID: 2013_387
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 08/11/2013

Definition of Investments in Private Equity

Do investments in private equity referred to under Article 128(2)(c) of Regulation (EU) No. 575/2013 only relate to investments in CIU?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_374
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 17/10/2014

Applicability of the transitional period under Article 124(3) of Regulation (EU) No. 575/2013

According to Article 124(3) of Regulation (EU) No. 575/2013 (CRR), institutions should have a 6-month transitional period to apply higher risk weights set by the competent or designated authorities to exposures secured by mortgages on immovable property.Should this transitional period also apply if the national authority decides under CRR to set risk weights at the same level and to the same extent, i.e. for the same kind of exposures that are currently set under CRD (so in fact such decision would not result in a higher capital requirements for banks in comparison to current national legislation)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_361
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 31/01/2014

Discounts on balance sheet exposures purchased when not in default

In Regulation (EU) No 575/2013 (CRR) Article 159 it states: "......Discounts on balance sheet exposures purchased when in default in accordance with Article 166(1) shall be treated in the same manner as specific credit risk adjustments." In respect of this how should one treat discounts on purchased exposures that were not in default at the time of purchase and discounts that were not calculated on single exposure level, but instead calculated on a whole portfolio of exposures which are not in default.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_354
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 11/04/2014

Definition of SME

SMEs are defined by turnover alone (EUR 50 million according to OJ L 124, 20.05.2003). Our question concerns when turnover is recorded. Is it (i) at inception of the loan or (ii) on an on-going basis? We would also like to know what level of documentation/proof is required, if any.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_343
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 31/01/2014

Artikel 115 (3) Zuordnung von Religiongemeinschaften zu Forderungsklasse/ Attribution of religious communities to an exposure class

Was ist mit der Aussage im 3. Satz gemeint: In diesem Fall gilt Absatz 2 nicht..." ? English translation: What does the statement ‘In this case, paragraph 2 shall not apply…’ in Article 115(3) mean?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_327
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 08/11/2013

Use of Core Market Participants Rule

This question regards the use of the Core Market Participants rule (Article 227 of Regulation (EU) No 575/2013 (CRR)) in the context of Master Netting Agreements with Own Estimates of Volatility (Article 220). The rule detailed under Article 227 of CRR specifically excludes only the Internal Models Approach for Master Netting Agreements (Article 221), and is consistent with the Basel II text (June 2006) in which paragraph 170 excludes the same approach in paragraphs 178-181. However, paragraph 177 of the June 2006 text provides for repo-style transactions under master netting agreements to have haircuts calculated in accordance with paragraphs 147-172, inclusive of the core market participant rules. This is in contrast to the CRR, where article 220(1) is only inclusive of the volatility adjustments detailed in Articles 223-226, thereby excluding the core market participant rule. The question is whether this exclusion in the final CRR was intentional or an oversight.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_269
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 08/11/2013

Calculation of capital requirements for SME under Article 501 of CRR

How should the capital requirements be calculated for SME exposures according to Article 501 of Regulation (EU) No 575/2013 (CRR)? In essence we are asking if the risk weighted assets for qualifying SMEs should be reduced or only the capital requirements for qualifying SMEs.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_257
  • Topic: Credit risk
  • Date of submission:

Off-balance sheet items and definition of default

Please confirm that indeed the off-balance sheet part of a facility (e.g. undrawn amount) or any other off-balance sheet items e.g. acceptances, guarantees, etc should not be categorised in the "in default" exposure class even if the customer is classified as "in default".

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_239
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 06/12/2013

Deviations between the definition of SA exposure value for securitisation exposures and for other exposure classes

The exposure value for all other exposure classes corresponds to the accounting value after SCRA, Prudent Valuation and other own funds reductions that relate to the asset item (Article 111(1) Regulation (EU) No 575/2013). The exposure value for securitisation exposures corresponds to the accounting value after SCRA based on article 110 CRR, without taking into account Prudent Valuation or other own funds reductions related to the asset item. Is this deviation intended?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_230
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 28/11/2014

Items associated with particular high risk secured with eligible real estate

How do we treat the exposures that would have been otherwise categorised as "Items associated with particular high risk" and which at the same time are secures with mortgages on immovable property? a) Ignore the collateral which opposes the spirit of Regulation (EU) No 575/2013 (CRR) and Credit risk mitigation (CRM) i.e. CRM is recognised when it decreases the Credit risk? b) Recognise them in the exposure class "Secured with mortgages on immovable property"? Additionally, if these items are also in default, should they be recognised in the "In default" exposure class? c) Recognise them in the exposure class "Items associated with particular high risk" and apply the lower RW that are associated with the exposures secures with mortgages on immovable property?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_215
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 14/08/2014

IRB Approach

Regarding the IRB approach for the calculation of capital requirements for preventing credit risk, where should the weighting formula be applied? Is it contract by contract, or is it a weighted average of the probability of default (PD) and loss given default (LGD) for each pool and then apply the risk weight formula to this mean?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_144
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013

IRB exposure value - Recognition of specific credit risk adjustment for positions measured at fair-value (e.g. IFRS category FVO, HfT and AfS)

Which is the exposure value according to Article 166 (1) of Regulation (EU) No. 575/2013 (CRR) for IRB positions measured at fair value (to p+l or OCI) in the relevant accounting standard, when a separation of credit risk and market risk related fair value changes (e.g. revaluation reserve) for these positions is not possible and therefore not used to cover expected loss in accordance with Article 159 of the CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_101
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 14/03/2014