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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

Effect on the capital requirement of a guarantee where the right to call is linked to default versus another where it is linked to realised loss

Let’s take a portfolio level guarantee that is callable once losses from the exposures covered have been realised (and NOT when exposures DEFAULT); realised losses decrease the notional of the guarantee. As it can take years till losses get realised after the default event, while losses are still unrealised (but defaults have happened) the full notional is used to cover the whole portfolio. Our question is whether such a guarantee is eligible to be taken into account as unfunded credit protection and thus decrease the capital requirement of the sub-portfolio it cover?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_803
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Maturity used in IRB RWA calculations

Is there an error in this paragraph? It currently says "....shall calculate M for each of these exposures as set out in points (a) to (e)....."; should this read "as set out in points (a) to (f)" in order to be consistent with the previous version of the legislation. Based on the current wording the effect of this is to exclude the possibility of banks using a residual maturity ".....M shall be the maximum remaining time (in years) that the obligor is permitted to take to fully discharge its contractual obligations,......"

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_762
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 23/10/2015

Application of the Basel I floor (Article 500) and the SME factor (Article 501) // Aplicación del límite mínimo de Basilea I (art. 500) y del factor reductor de PyME (art. 501)

When the Basel I requirements are compared to the requirements of Regulation (EU) No 575/2013, should the application of the SME factor specified in Article 501 be considered? Or, pursuant to Article 500(4), should only Part Three, Title II, Chapter 3 be considered and, therefore, not the application of Article 501? ¿Cuando se comparan los requerimientos de Basilea I con los requerimientos según el Reglamento (UE) No 575/2013 se debe considerar la aplicación del factor reductor de PyME especificado en el artículo 501? ¿O por el contrario y según el párrafo 4 del artículo 501 sólo se debe contemplar el capítulo 3 del título II de la parte tercera y por tanto no se contempla la aplicación del artículo 501?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_744
  • Topic: Credit risk
  • Date of submission:

Calculation of retail exposures under Article 123(c) of Regulation (EU) No 575/2013 (CRR)

Does expression from point (c) of the first subparagraph of Article 123 of Regulation (EU) 575/2013 (CRR) “the total amount owed to the institution and parent undertakings and its subsidiaries” refer to exposure value as of Article 111 1. net exposure value (after deduction specific credit risk adjustments and additional adjustments) of an asset and of an off-balance sheet? Should the exposure value (the sum of current replacement cost and potential future credit exposure) of derivative instruments be included in calculation of total amount owed to the institution, laid down in point (c) of Article 123? Should the total amount owed to the institution and parent undertakings and its subsidiaries as of Article 123 (c) include: - An off-balance sheet item = 50 000 EUR? - Credit risk adjustments = -10 000 EUR? - Value of derivative instrument? If so, should both current replacement cost and potential future credit exposure be included?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_707
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 27/06/2014

Retail exposure class and risk weight for exposure value of derivative instruments

Should the credit risk exposures and counterparty credit risk exposures for the same customer be classified as retail exposures if the criteria from Article 123 points (a) to (c) of Regulation (EU) No 575/2013 (CRR) are met and they are classified neither as exposures in default nor as exposures secured by mortgages on immovable property? Are there any restrictions in assigning derivative instrument to the retail exposures class and to use one of the preferential risk weights of 75% except criteria from Article 123?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_704
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 27/06/2014

Maturity under Article 162 of Regularion (EU) No 575/2013

Under the provisions of Article 162(2)(a) of Regulation (EU) No 575/2013 (CRR), how should an instrument with a scheduled cash flow, where the institution may opt for prolonging the contract for another period, be treated?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_687
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 21/11/2014

Maturity (M) for short-term credit line contracts which are continuously rolled over.

This query regards the setting of the maturity parameter (M) for corporate exposures when applying the IRB approach. In this respect, we are referring to facilities subject to Article 162(2)(f) of Regulation (EU) No 575/2013 (CRR): “(f) for any other instrument than those mentioned in this paragraph or when an institution is not in a position to calculate M as set out in (a), M shall be the maximum remaining time (in years) that the obligor is permitted to take to fully discharge its contractual obligations, where M shall be at least 1 year;” Consider exposures where the credit contract stipulates a short-term contractual maturity (say 1 year). If an institution typically rolls over such facilities, possibly after rigorous, annual credit processes so that the de-facto maturity is greater than the contractual, should the institution then be allowed to apply the contract length as maturity?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_686
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 21/11/2014

Treatment of recognised exchanges (non-third country vs. third country)

Are exchanges, explicitly exchanges according to Article 4(1)(72) of Regulation (EU) No 575/2013 (CRR), also treated like institutions?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_677
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 03/10/2014

Application of Article 199(6)(c) and (d) in the event that the credit institution has not liquidated any such collateral in the past

In the event that a credit institution has not liquidated the collateral referred to in Article 199(6) in the past, is it sufficient to demonstrate the availability of processes and data collection/analyses tool which enables the institution to show that the realised proceeds from the collateral are not below 70% of the collateral value in more than 10% of all liquidations for a given type of collateral in case collateral is liquidated?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_669
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 11/04/2014

Relevance of Issuers Rating for Article 120 of Regulation (EU) No 575/2013 (CRR)

Does Article 120 of Regulation (EU) No 575/2013 (CRR) refer to claims only, where there is an issue-related rating existing, or does it also cover claims, where no rating exists for the issue, but for the issuer?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_652
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 03/10/2014

Bestimmung der Forderungsklasse von Zentralbanken mit Gesellschaftsform Aktiengesellschaft (EN: Determination of the exposure class for central banks that take the form of a public limited company)

In welche KSA- und IRBA- Forderungsklasse sind die Aktien von (EU- Zentralbanken z.B. Griechenland) einzustufen? EN Translation: In which CRSA and IRBA exposure class are the shares of EU central banks (e.g. Greece) to be classified?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_586
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 29/08/2014

Specific credit risk adjustments on exposures in default

Taking into account Annex I of the own funds template (worksheet 4, line 100 and 145) it’s clear that IRB Excess (+) or shortfall (-) of defaulted and non-defaulted exposures has to be reported separately. What is not exactly clear is the fact if an IRB Excess for the non-defaulted exposure can for example be taken into account for the defaulted portfolio or not.

  • 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_573
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 16/01/2015

Treatment of SME-supporting factor in the case of secured exposures.

I. How should the SME-supporting factor be treated relating to secured exposures? a) Including all collaterals, i.e. also for guarantees. Thus risk weighted assets of inflow in asset class sovereigns or institutes will also be reduced? b) Only for those collaterals which cause no risk transfer (meaning which are intered directly in the RWA formula)? c) Only for the non-secured part of the exposure?II. General question when the SMR supporting factor can be used: a) To our understanding a risk transfer is only allowed in the case that the risk transfer is leading to a reduction of the RWA. Taking this into account it should always be compared “the total SME exposure with the supporting factor and without a risk transfer” to “the exposure with the SME supporting factor (only for the non-secured part) and the risk transfer without the supporting factor”. b) To consider the above mentioned point under II. a) it seems that banks under the IRB-A approach are by tendency favored as there is no risk transfer (e.g.in cases of a guarantee by a government) but the effect of the collateral is considered in the total LGD of the exposure.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_565
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Bestimmung der Forderungsklasse für börslich gehandelte Optionen, Warrants und Futures / Determination of the exposure class for exchange-traded options, warrants and futures

Warrants, wie auch Options und Futures beinhalten sowohl ein Adress-Ausfallsrisiko, als auch ein ein individuelles Risiko (über die Entwicklung des Basiswertes bzw. dessen Emittenten). Nach welchen Kriterien soll CRR zufolge die Bestimmung der Forderungsklasse erfolgen? EN TRANSLATION: Warrants, like options and futures, entail both a counterparty credit risk and an individual risk (through the development of the underlying and its issuer). On the basis of what criteria, according to CRR, is the exposure class to be determined?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_546
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 20/06/2014

Definition of counterparty for the purpose of applying on-balance sheet netting

1) What is the definition of a counterparty in the context of using on-balance sheet netting (OBSN) of mutual claims between the bank and the counterparty as eligible credit risk mitigation form? 2) In other words, to be eligible for OBSN should the netting of loans and deposits always be with one legal entity or can they be across legally connected entities (for example parent-subsidiaries)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_538
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 06/06/2014

Credit Risk – treatment of Russian credit institutions

1. Please advise whether Russian Credit Institutions are to be treated as an "Institution" or ‘Corporate client’, considering Article 107, paragraph 3 definition:"For the purposes of this Regulation, exposures to third- country investment firms and exposures to third country credit institutions and exposures to third country clearing houses and exchanges shall be treated as exposures to an institution only if the third country applies prudential and supervisory requirements to that entity that are at least equivalent to those applied in the Union."2. Does definition of an "Institution" in Article 107(3) definition only refer to the capital requirement for credit risk?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_529
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 10/02/2017

Definition of unregulated financial sector entities

In applying the 1.25 co-efficient specified under Article 153(2) of Regulation (EU) No 575/2013, what is that definition of "unregulated financial sector entities"?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_516
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 14/11/2014

Definition of exposure class "Exposures in default" under SA approach

Are all exposures of the defaulted obligor taken into account when assigning exposures into the exposure class "Exposures in default" or just individual exposure(s) of that obligor that is (are) in default, since the definition of "Exposures in default" has changed (default definition according to the IRB approach)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_511
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 30/04/2014

Specific collective provisions allocation

In line with question 2013_201, how do we allocate any specific (to particular portfolios) collective provisions to various asset classes? a) do we follow the rules applied when calculating the specific collective provisions by the relevant department?; or b) can we allocate them to past-due exposures first and then to the all other exposures?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 183/2014 - RTS for the calculation of specific and general credit risk adjustments
  • ID: 2013_499
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 16/05/2014