Question ID
2024_7247
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
124
Paragraph
6
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
not applicable
Type of submitter
Credit institution
Subject matter
Calculation of the Exposure-to-Value
Question

How should be calculated the Exposure-to-Value (ETV) where a loan is secured by a combination of several liens on multiple properties (both residential and commercial) ?

Background on the question

Should one single ETV be calculated where the "V" is the sum of the values of all properties (both residential and commercial). Use case 1

or

Should several ETV be calculated separately for the various liens where "V" will be composed of one single property (residential or commercial). Use case 2.

Example:

Loan of 1700

Mortgage 1

Residential property A value: 3000

Nominal of the lien: 2500

Mortgage 2

Commercial property B value: 1000

Nominal of the lien: 950

 

Use case 1

Should one single ETV be calculated as follows:

ETV = min (sum(2500; 950);1700)/ (3000+1000) = 0.43

This leads to 30% RW for residential and 70% RW for commercial.

 

Use case 2

Should two separate ETV be calculated as follows

ETV residential: min (1700;2500)/3000 = 0.57 this leads to 35% RWA as per 125 (2)

ETV commercial : min (1700;950)/1000 = 0.95 --> this leads to 110% RWA as per 126 (2)

 

Submission date
Rejected publishing date
Rationale for rejection

This question has been rejected because it is considered that EBA guidance or clarification is not needed with regard to the issue that it raises. This can be the case where it is considered that the existing regulatory framework is sufficiently clear and unambiguous, or where the Q&A may pre-empt policy work currently in progress on Level 2 and 3 measures mandated under the most recent amendments of CRR and CRD.

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Status
Rejected question