Question ID
2025_7419
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
Article 127
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Draft ITS on Supervisory Reporting of Institutions
Article/Paragraph
3.2.3.
Type of submitter
Credit institution
Subject matter
Clarification on Risk Weight Assignment for ADC Exposures in Default
Question

Could you please clarify what risk weight should be applied to ADC exposures that are in default?

Background on the question

According to CRR, ADC exposures should generally be assigned a 150% risk weight, unless they qualify for treatment under Article 126a(2), in which case a 100% risk weight may apply.

However, based on the ITS decision tree, when an exposure is in default, it is assigned to the exposure class “in default”, and the risk weight is determined by evaluating how sufficiently the exposure is secured and whether there are specific credit risk adjustments or deductions under Article 36(1).

In some cases, even for ADC exposures in default, where there is sufficient collateral coverage and applicable deductions, the calculated risk weight could result in 100%, effectively resulting in a more favourable treatment than the standard 150%.

We would appreciate your clarification on whether such an outcome is acceptable, and what risk weight should be applied in the case of defaulted ADC exposures.

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. For example, this can be the case where it is considered that the existing regulatory framework is sufficiently clear and unambiguous, or where different practices may be possible but it is not currently necessary to harmonise these further through the Q&A process.

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Status
Rejected question