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Q&As refer to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.

Please note that the Q&As related to the supervisory benchmarking exercises have been moved to the dedicated handbook page. You can submit Q&As on this topic here.

List of Q&A's

Determination of client for large exposures purposes regarding exposures constituted by non recourse financing of leasing-SPEs

1. Can a financing transaction where the institution contractually agrees to abstain from recourse to its legal obligor to the extent that payment obligations of a third party (the lessee) to the institution’s legal obligor (the lessor) are not fulfilled, i.e. where the institution takes over the credit risk stemming from its obligors´claims against a third party, be regarded as “other transaction where there is an exposures to underlying assets” within the meaning of Article 390(7) of Regulation (EU) No 575/2013 (CRR)?2. Is it admissible to regard the structure of such a transaction as not constituting an additional exposure to the leasing-SPE or any other third party within the meaning of Article 390(7) CRR in connection with Article 7(1) of Regulation (EU) No. 1187/2014 , where a. the payment flows from the underlying asset to the investing institution are separated from the leasing-SPE, in a way that the exposures to the lessee are managed by the leasing-SPE, but the payments are made by the lessee directly to an account of the leasing-SPE kept at the institution on which the institution has a lien according to its general terms and conditions of business, and b. the SPE is bankruptcy remote, in particular according to the documented and detailed information available to the institution, the bankruptcy of the parent company should only have a negligible influence on the leasing-SPE?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Risk weight of guarantees not in the domestic currency of the borrower

What is the correct risk weight of a loan, which has been granted to a client in euro, and guaranteed by an EU central government also in euro, but the domestic currency of the borrower is not euro?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Assignment of irrevocable standby letters of credit and guarantees, which neither have the character of credit substitutes nor are related to trade finance, to the relevant risk category according to Annex I of the CRR.

Are irrevocable standby letters of credit and guarantees, which neither have the character of credit substitutes nor are related to trade finance, assigned to the risk category ‘medium risk’ according to Annex I?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Calculation and reporting of own funds requirement for Market risk: Foreign exchange risk

According to article 351 of CRR the own funds requirement for foreign exchange risk shall be the sum of its overall net foreign-exchange position and its net gold position in the reporting currency, multiplied by 8 % while in article 352 (4) of CRR the net foreign exchange position is calculated as follow: “ Net short and long positions in each currency other than the reporting currency and the net long or short position in gold shall be converted at spot rates into the reporting currency. They shall then be summed separately to form the total of the net short positions and the total of the net long positions respectively. The higher of these two totals shall be the institution's overall net foreign-exchange position.” It seems that according to article 351 the institution should calculate two different Positions subject to capital charge: the first one for exposures in foreign exchange currencies and the second one for gold and calculate as a consequence two different own fund requirement - according to Eba template design. While according to calculation described in article 352 it seems that the institution should calculate only one Position subject to capital charge that considers foreign exchange currencies and gold too; as a consequence in order to fill in the EBA templates that requires all information splitted in different rows, the institution should provide a breakdown of the total value previously calculated according to a proportion. In this case how should the institution calculate this proportion? According to this different approaches it is possible to obtain two different results (in terms of total own fund requirement), here below an example: Article 351: Net long positions Net short positions MAX – position subject to capital charge Foreign exchange currencies 70 50 70 Gold 60 60 Total 130 Article 352 (4): Net long positions Net short positions MAX – position subject to capital charge Foreign exchange currencies 70 50 Gold 60 Total 70 110 110 According to the first approach the institution will obtain a higher Position subject capital charge. Which approach shall we use?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Covered bonds issued by non-EEA member states

In the context of two identical covered bonds, the first issued by a French bank and qualifying for covered bond status, and the second issued by a Canadian bank identical in all other respects, can the latter one be treated as a covered bond under the third country equivalence decision or can covered bonds only be issued by credit institutions having their registered office located in a Member State?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Applicable exposure class for exposures to institutions based in a third country that does not apply prudential supervisory and regulatory requirements

For those institutions based in a third country that does not apply prudential supervisory and regulatory requirements at least equivalent to those applied in the Union, should the exposure class to these institutions be disclosed as an exposure to corporate or exposure to institution? 

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Requirements for financial collateral (Covered Bonds)

Article 207(2)(2) states that "Securities issued by the obligor, or any related group entity, shall not qualify as eligible collateral. This notwithstanding, the obligor's own issues of covered bonds falling within the terms of Article 129 qualify as eligible collateral when they are posted as collateral for a repurchase transaction, provided that they comply with the condition set out in the first subparagraph". Whereas the first sentence includes securities issued by "any related group entity", the second sentence which acts as the carve out, omits such securities. Is this an intended ommission?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Consolidated Risk Retention

Pursuant to Article 405(2) of Regulation (EU) No 575/2013, can the retention requirements under Article 405(1) be satisfied on an EU consolidated basis where the securitisation is of exposures from one entity instead of several entities?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Treatment of an asset resulting from obligatory payments to Deposit Guarantee Scheme in Risk Weighted Assets calculation (Standardised Approach).

How should an asset resulting from prepayment of obligatory contribution to Deposit Guarantee Scheme be treated for the purpose of credit risk capital requirements calculation under the Standardised Approach?Should it be recognised as ‘Other assets’ (prepayments to unknown counterparty) or as an exposure to the Deposit Guarantee Scheme?Moreover, if the recognition as an exposure to the Deposit Guarantee Scheme is correct, is it possible to treat the Deposit Guarantee Scheme as a Public Sector Entity which can be treated under Article 116(4) CRR, and therefore assigned a 0% risk weight?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Definition of Aggregate Liabilities

Does the term ‘Aggregate Liabilities’ referred to in Article 415(2)(a), refers solely to ‘Liabilities’ or does it refer to ‘Liabilities and Equity’?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement

Undrawn credit facility from central bank as inflow

Can you please confirm that any undrawn credit facility from a central bank counts as a liquidity inflow within the meaning of Article 32 of the LCR delegated act with a 100% inflow rate according to paragraph 2 of Article 32 of the delegated act, provided that there is no double counting with liquid assets and is not taken into account under Article 34 of the delegated act?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement

Application of different Phase-In Rates for the Deduction of Deferred Tax Assets that Rely on Future Profitability

Article 478(2) of the CRR provides a discretion to competent authorities to apply a slower phase-in rate for the Deduction of Deferred Tax Assets that rely on Future Profitability for DTAs that existed prior to 1 January 2014. A 10% per annum phase in rate is applied for the DTAs that existed prior to 1 January 2014 while all other DTAs that were created post 1 January 2014 are subject to the normal phase in rates of 20% per annum. Clarification is required on how the different phase-in rates should be applied if the amount of DTAs (that rely on Future Profitability) in existence reduces below the initial amount recognised, due not to progressive deduction under the transition rules but rather due to usage against profit ? For example: Assume on 31 December 2014, the DTA balance is 100 which is made up of 60 that existed pre 1 January 2014 and 40 that existed post 1 January 2014. Assume that on 31 March 2015, the DTA balance reduces to 80 due to usage against profits. Should the DTA balance that existed pre 1 January 2014 be adjusted by the negative balances due to the DTA usage against profits i.e. should the slower phase-in rates be applied to the balance of 40?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 241/2014 - RTS for Own Funds requirements for institutions

Treatment of assets held at a central bank to provide intra-day collateral for supporting payment flows in a direct payment system for the calculation of end-of-day and reporting of assets available for High Quality Liquid Assets (HQLA)

Are assets held in an account opened at a central bank for the purposes of providing intra-day collateral for the purposes of supporting payment flows in a direct payment system, to be treated as “unencumbered” for the purposes of end-of-day calculating and reporting of assets available for High Quality Liquid Assets (HQLA) under Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement?Where assets are held in an account opened at a central bank for the purposes of providing intra-day collateral in connection with the provision of funding for settlement activity, at end of the day should such assets be treated as “unencumbered” for the purposes of calculating and reporting assets available for HQLA? And are in this context the provisions of Article 7(2)(a) of DR (EU) 2015/61 applicable?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement

Liquid assets under CRR/LCR

The primary question is how to consider the relation between CRR and LCR, i.e. shall the liquid assets under LCR be interpreted in accordance with the liquid assets definition under CRR? Provided that the answer is positive, how does this affect a see-through of a CIU that only partially consists of assets that are liquid under CRR? Under said circumstances, is there a risk that the non-liquid assets will contaminate the CIU as a whole, or is it possible that the share of the assets that is liquid can be covered by the LCR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement

Use of the rating based approach’s IRBA securitizations scaling factor 1.06 in the cases of 1.250 % risk weight securitizations’ capital deduction

Shall the rating based approach’s IRBA securitizations scaling factor 1.06 also be applied in the cases of 1.250 % risk weight securitizations’ capital deduction?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Own funds for foreign branches

Consider, for example, a branch in the EU or EEA that belongs to an institution that is located outside the EU and EEA. According to the general requirements of Article 47 (1) CRD IV that were transposed by the relevant member state, the branch may have to meet separate CRR own funds requirements. To this end, the institution allocates own funds to the branch. Does the branch have to include its own funds in the overall net foreign-exchange position according to Article 352 (4) CRR, if they are denominated in a currency other than the local currency of the member state where the branch is located?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Ready access to bonds giving natural hedging to the banking book

Can HQLA assets whose sale would result in a breach of internal limits for IRRBB be considered as free and readily accessible under Article 8 of Commission Delegated Regulation (EU) 2015/61?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement

Provisions as part of the own funds

Can provisions that are made against loss events in the past (i.e. previous accounting periods) be used as a capital substitute to cover future losses? Are these provisions available with a high degree of certainty?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Countercyclical capital buffer (CCB) relevant exposures

Should sovereign and institutions exposures in default (under Article 112.j of Regulation (EU) No 575/2013) and exposures to institutions with a short-term credit assessment (under Article 112.n of Regulation (EU) No 575/2013) be excluded from the relevant exposures required for CCB purposes?

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable