- Question ID
-
2017_3296
- Legal act
- Regulation (EU) No 575/2013 (CRR)
- Topic
- Credit risk
- Article
-
161
- Paragraph
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1
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
-
na
- Type of submitter
-
Individual
- Subject matter
-
Definition of subordinated exposures
- Question
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What is the definition for subordinated exposures within the context of article 161?
- Background on the question
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Article 161 prescribes an unsecured LGD of 75% for subordinated exposures under Foundation IRB as opposed to 45% for senior exposures, but subordinated exposures are not specifically defined in the CRR. There are several possible definitions that are used by various functions in banks and there is a need to understand which one is the appropriate one to use within the context of CRR. One definition in use focuses on legal or contractual subordination i.e. whether the exposure is pari passu with other loans of the same borrowing entity. Another definition focuses on structural subordination i.e. whether the borrowing entity will have access to any asset if lending to a holding company. As a result, lending to holding companies would be deemed to be subordinated to lending to downstream operating companies even if the holding company has full control over the operating company.
- Submission date
- Rejected publishing date
-
- Rationale for rejection
-
Please note that as part of adjustments to the Single Rulebook Q&A process, agreed by the EBA and the European Commission, it has been decided to reject outstanding questions submitted before 1 January 2020, when the Q&A process was updated as part of the last ESAs Review. In particular, the question that you have submitted has now regrettably been rejected and will not be addressed.
If you believe your question would still benefit from clarification, you are invited to resubmit your question, adapting it to reflect any legislative, regulatory or other relevant developments that may have occurred since the initial date of submission. The EBA will aim to address resubmitted questions as a matter of priority. When considering to resubmit, you are kindly requested to observe the updated admissibility criteria agreed in the context of the adjustment of the Q&A process, available in the Additional background and guidance for asking questions. We hope for your understanding.
For further information please refer to the press release and the updated Q&A page.
- Status
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Rejected question