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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.

List of Q&A's

Treatment of leasing residual values under the standardized approach for credit risk

May the ‘’1/t*100%* residual value” formula introduced by CRR article 134.7 for the risk-weighted exposure amounts be applied to all leasing residual values? 

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Calculation of loss rates for income producing real estate (IPRE) under the standardized approach for credit risk under the CRR III (Regulation (EU) 2024/1619)

What is the correct calculation of loss rates for the purposes of Articles 125 para. 2 subpara. 3 and 126 para. 2 subpara. 3 CRR (as amended by regulation (EU) 2024/1623, ie. CRR III)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Treatment of bridge financing in the calculation of the risk weight (RW*)

As the objective of Article 132c (1) CRR, as amended by Regulation (EU) 2019/876 – CRR2, is to “calculate the risk-weighted exposure amount for their off-balance-sheet items with the potential to be converted into exposures (…)”, should the calculation of RW* actually exclude short-term liabilities (e.g. bridge financing)? 

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Can the Article 122a adjustment be combined with the Article 501 SME-adjustment?

The Article 122a paragraph 3  letter c subletter ii CRR says, that if all the criteria are met, there can be a factor of 80 % applied. But it can't be combined with the 75 % adjustment of Artikle 501a. But can it be combined with the adjustment for SMEs due to Article 501?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

CRR3 - ETV calculation

With the CRR3 application, can you please confirm us the way to calculate the ETV ratio?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Simultaniously use of the SME and infrastructure factor

Please see the existing question, which was not answered yet: 2020_5551

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement

application of credit conversion factor in accordance with article 235

How shall institution calculate risk-weighted exposure amounts for off-balance-sheet exposures with unfunded credit protection, to which those institutions apply the standardized approach? How shall credit conversion factor be applied to the formula specified in article 235 before the application of risk weight?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2021/451 – ITS on supervisory reporting of institutions (repealed)

Scope of Subordinated Debt Exposures under Art. 128 (1)(c)

Which bonds can be considered "subordinated debt" under Art. 128 (c)? Only senior non-preferred bonds? Senior Non-Preferred Bonds and Senior Preferred Bonds (which meet the criteria under Art. 72b(3)? Senior Non-Preferred Bonds and Senior Preferred Bonds (that meet the criteria set out in Art. 72b(3) and are recognized as eligible liabilities by the resolution authority)? Senior Non-Preferred Bonds and Senior Preferred Bonds issued by G-SII entities (which meet the criteria set out in Art. 72b(3) and are recognised by the resolution authority as eligible liabilities)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Financial Sector Entity qualification for entity that assumes a loan in order to acquire an aircraft asset which then enters into a financial leasing agreement with an airline / aircraft operator

Should an entity that assumes a loan in order to acquire an aircraft asset which then enters into a financial leasing agreement with an airline / aircraft operator be treated as object finance / specialised lending or does it in addition need to be viewed as an exposure to a financial institution (and therefore a financial sector entity (FSE)) given the entity enters into a finance leasing arrangement that is an activity set out in point 3 of Annex I of Directive 2013/36/EU?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Unrated short term claim/exposure

As per CRR Article 120(para 3, subpara c), it states: "If there is a short-term assessment and such an assessment determines a less favourable risk weight than the use of the general preferential treatment for short-term exposures, as specified in paragraph 2, then the general preferential treatment for short-term exposures shall not be used and all unrated short-term claims shall be assigned the same risk weight as that applied by the specific short-term assessment." Question: What is meant by unrated short-term claims as per this paragraph? If there is a general issuer rating available, will the exposures with residual maturity of less than 3 months be classed as Unrated and not eligible for preferential risk weight treatment as per CRR Article 120 (2)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Draft ITS on Supervisory Reporting of Institutions

Risk weight for Exposures in default

What risk weight should be applied to in default exposures, under the standardised approach for credit risk? 

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Determination of exposure value cap for netting sets subject to a margin agreement.

The final answer to EBA Q&A 2023_6962 states that when capping the exposure value of a margined netting set at the exposure value of the same netting set not subject to any form of margin agreement “The term NICA, included in the formula set out in Article 275(1) and defined in Article 272(12a), does not include the variation margin posted or received.”   We believe that this is an incorrect reading and could lead to significant under estimation of RWAs whenever the institution is posting significant excess collateral to its client. This can happen particularly when trades with a large MTM unwind at maturity and the collateral balance is exchange back only on T+1 basis.   Take the following example scenario. If calculating the EAD per the margined methodology the variation margin posted to the client offsets some of the MTM of the derivatives and the add-on is fully added to EAD as the multiplier remains 1.    However under the unmargined methodology if I disregard the posted collateral then the negative current replacement cost works to significantly offset the add-on and can actually result in an EAD below the EAD incurred on only the actual replacement cost/current exposure (in this example 140).   Example Scenario       MTM of Derivatives -50 Variation Margin posted to client 150 Replacement Cost (Margined) 100 Add-on (pre multiplier) 100 Multiplier 1 EAD per margined methodology 280     MTM of Derivatives -50 Variation Margin posted to client (ignored as not NICA) 0 Replacement Cost (Unmargined ignoring VM posted) 0 Add-on (pre multiplier) 100 Multiplier 0.78 EAD per unmargined methodology 109     Final capped EAD to unmargined 109   Our understanding is that the wording in Article 274(3) which says “the exposure value of a netting set that is subject to a contractual margin agreement shall be capped at the exposure value of the same netting set not subject to any form of margin agreement” instead of meaning that there is no variation margin and hence this should be completely removed in the unmargined cap calculation should actually be read in conjunction with Article 272(12a) to define that in the absence of a margin agreement there can be nothing classed as “variation margin” and therefore all collateral is part of NICA – “NICA means the sum of the volatility-adjusted value of net collateral received or posted, as applicable, to the netting set other than variation margin”.   If we follow the previous Q&A answer then we will see significant reductions in RWA which we feel are unwarranted vs the counterparty risk for netting sets which exhibit the same portfolio dynamic as in the example above. The purpose of the cap is only to ignore exposure from large threshold amounts and not to avoid exposure from large amounts of posted collateral which are still owed back 

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Counting of days past due in factoring arrangements.

As for non-recourse factoring, is it correct to start the counting of days past due based on the payment schedule defined or implied in the contractual terms with the client (i.e., the party from which the factor purchases the receivables)?

  • 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

Interaction of the risk drivers employed to define the structure of the PD model and the requirement to avoid the excessive cyclicality of own funds requirements.

Is considering the requirement of CRR Article 170 4(c) to incorporate the ‘delinquency’ risk driver in the structure of rating systems possible, to avoid a potential excessive cyclicality of own funds requirements via the use of appropriate calibration techniques in line with the Entity’s chosen calibration philosophy?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2017/16 - Guidelines on PD estimation, LGD estimation and the treatment of defaulted exposures

Interpretation of ‘ The degree of correlation between the value of the assets relied upon for protection and the credit quality of the obligor shall not be too high.’

In Article 194, Quote Institutions may recognise funded credit protection in the calculation of the effect of credit risk mitigation only where the lending institution has the right to liquidate or retain, in a timely manner, the assets from which the protection derives in the event of the default, insolvency or bankruptcy — or other credit event set out in the transaction documentation — of the obligor and, where applicable, of the custodian holding the collateral. The degree of correlation between the value of the assets relied upon for protection and the credit quality of the obligor shall not be too high. Unquote My question is about the aforementioned correlation. If a obligor’s major asset is a very valuable mine asset, and the mine asset is collateralized by a bank as security for a loan, is it eligible for the bank to consider the value of the mine asset for calculating the ‘risk-weighted asset’? The value of the mine asset is valued by independent & renowned evalution agency and it meets with all other regulatory requirements for eligible collateral.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2016/09 - Guidelines on corrections to modified duration for debt instruments under Article 340(3) CRR

Unrated short term claim/exposure

As per CRR Article 120(para 3, subpara c), it states: "If there is a short-term assessment and such an assessment determines a less favourable risk weight than the use of the general preferential treatment for short-term exposures, as specified in paragraph 2, then the general preferential treatment for short-term exposures shall not be used and all unrated short-term claims shall be assigned the same risk weight as that applied by the specific short-term assessment." Question: 1. Is the term claim and exposure used interchangeably and mean the same?                   2. What is meant by unrated short term claim in this paragraph? If there is a general issuer rating available for the counterparty, but no issue specific rating for the exposure to the counterparty, will the exposures with residual maturity of less than 3 months be classed as Unrated and not eligible for preferential risk weight treatment as per CRR Article 120 (2)?                   3. Also, for ex- if the bank has trading book exposure to this institution for exposure less than 3 months. But this institution has issued short term debt, but the bank has no exposure to it, in that case which rating will be used to risk weight the exposure in the trading book. Will it be the issuer rating or short term debt rating the institution has issued which the bank has no exposure?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Draft ITS on Supervisory Reporting of Institutions

Definition of 'explicit guarantee arrangements' for the purpose of classification of non-commercial undertakings as public sector entities

What conditions should be met by a given agreement in order to qualify as an 'explicit guarantee arrangement'? Shall the ‘explicit guarantee arrangements’ for the purpose of definition of public sector entities also be ‘guarantees’ eligible as unfunded credit protection or not? How much should the guarantee cover?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Fair-valued assets and liabilities excluded because of partial impact on CET1 – Prudential Filters

Template C32.01 Prudent valuation. Fair-Valued assets and liabilities requires the Prudential filters Fair-valued assets and liabilities excluded because of partial impact on CET1 (col 0050) to be reported in accordance with Article 4(2) of Delegated Regulation (EU) 2016/101 due to the transitional application of the prudential filters referred to in Articles 467 and 468 of Regulation (EU) No 575/2013. Since Articles 467 and 468 of Regulation (EU) No 575/2013 are related to COVID transitional fix items, should the institution report 0 in this column until the guidance is updated?   Additionally, validation v6566 related to this template, states that values reported for Fair-valued assets and liabilities excluded because of partial impact on CET1 – Prudential Filters (c0050) have to be equal to or higher than 0. Could you please confirm if this validation is applicable in all the contra liability balances?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Collateral Valuation

My question is in respect to the need for independence of valuers. Should a Bank' procedure allow customers to propose valuers subject to acceptance of the Bank and fulfilment of the independence criteria mentioned in the guidelines, would the Bank be considered as fulfilling the need for independence of valuer?

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2020/06 - Guidelines on loan origination and monitoring