Question ID
2019_4916
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Accounting and auditing
Article
473a
Paragraph
3, 4
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Not applicable
Type of submitter
Credit institution
Subject matter
Application of Articles 473a(3) and 473a(4) CRR (Practical application of Article 473a to exposures for which the approach to calculate RWAs changes after the day of initial application of IFRS 9
Question

If an institution, for purposes of calculating credit risk RWAs, is migrating to the Standardised approach as of the reporting date, and formerly was under the IRB approach on the date of initial application of IFRS 9: :

- should exposures relating to the reporting date (described under Article 473a(3)(a)) be included in the calculation concerning exposures which are subject to the Standardised approach (i.e. shall exposures included be those subject to the Standardised approach on that date)?

- Should exposures relating to the date of initial application of IFRS 9 (described under Article 473a(3)(b)) be included in the calculation concerning exposures which are subject to the IRB approach (i.e. shall exposures included be those subject to the IRB approach on that date)?

Background on the question

Under Article 473a(3), it is clearly specified that institutions shall calculate the difference between the amounts under points (a) and (b) separately for exposures that are subject to the Standardised approach and for exposures that are subject to the IRB approach.

Moreover, under Article 473a(4), it is specified that if the amount under point (a) does not exceed the amount under point (b), then institutions shall set the amount A4,SA and / or A4,IRB to zero (whichever applicable, if any). In case an institution is changing the risk-weighing approach for certain exposures (e.g., from IRB to Standardised), confirmation is required that, for the calculation of amounts A4,SA and A4,IRB (per Article 473a stipulations), these migrating exposures should form part of (a) the Standardised approach calculation perimeter for the amount concerning the reporting date and (b) the IRB approach calculation perimeter for the amount concerning the date of initial application of IFRS 9.

This question is relevant for the calculation of own funds and RWAs, and consequently the calculation and reporting of CET1 ratio, during the transitional period of application of IFRS 9 for institutions that change the risk-weighing approach for part of their portfolios after the date of initial application of IFRS 9 and which have opted to make use of the “dynamic approach” for IFRS 9 transitional adjustments.

Submission date
Rejected publishing date
Rationale for rejection

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Status
Rejected question