- Question ID
-
2025_7391
- Legal act
- Regulation (EU) No 575/2013 (CRR)
- Topic
- Market risk
- Article
-
325ah
- Paragraph
-
1
- Subparagraph
-
Table 4
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
-
Not applicable
- Type of submitter
-
Credit institution
- Subject matter
-
Multilateral development banks classification for the purpose of article 325ah
- Question
-
Buckets 2 and 11 of Table 4 in Article 325ah refer to the category of multilateral development banks (MDBs) and international organisations (IORGs) referred to in Article 117(2) or Article 118 of CRR. At the same time, paragraph 2 of the same article 325ah, requires the use of a classification that is commonly used in the market for grouping issuers by sector, in order to assign a risk exposure to a sector.
Assuming that such a market wide accepted classification would show a certain counterparty as an MDB, as long as this specific counterparty is not listed in the above listed articles mentioned for buckets 2 and 11 of Table 4 in Article 325ah (as a one to one match) , then this counterparty would need to be assigned to a different bucket, likely 4 or 13.
Can there be a departure from the specific list of MDBs and IORGs, as referred to in Article 117(2) or Article 118 of CRR, for the purpose of Table 4 in Article 325ah of CRR?
- Background on the question
-
In the case of the Islamic Development Bank (IsDB or the Parent), the issuance of debt is not made directly by the MDB itself, but through a dedicated SPV issuer that is fully guaranteed by the Parent, the IsDB. This set-up is due to the way Islamic finance works, requiring asset-based financing. This is visible in the latest investors prospectus publish in June 2024, which details in page 24 the structure and participants to such issuances:
Provided that Article 117(2) lists the IsDB and is not clear as to whether this refers to the IsDB Group or just the IsDB as a legal entity, one could assume that if a one to one match is not achieved, than the required condition for the use of bucket 2 and 11 is not met. At the same time, considering that the IsDB would not issue debt on its-own, but always use a dedicated SPV for this purpose, taking this stricter approach will never allow a match of such issuances to the exact names listed in Article 117(2) and would hence lead to a higher level bucket classification and hence to a bigger risk weight % requirement.
- Submission date
- Status
-
Question under review
- Answer prepared by
-
Answer prepared by the EBA.
