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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.

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List of Q&A's

Assets controlled by a liquidity management function

Would only those assets which are directly controlled by the liquidity management function fall within the definition of liquid asset holdings (subject to meeting the other conditions) under Regulation (EU) No 575/2013 (CRR), or do those assets which are not directly controlled by the liquidity management function also qualify?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_280
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 24/01/2014

Tap issues

Article 484 and 486 of Regulation (EU) No. 575/2013 (CRR) provide for the grandfathering treatment of Tier 2 instruments that do not meet the criteria of Articles 62 and 63. Article 63 provides that callable Tier 2 should have a first call date not before five years after the date of issuance or raising (except Article 78(4)). When an institution has issued before 31/12/2011 a callable (non step) Lower Tier 2 bond with a first call date at year 5 and then has made a tap on that issue (i.e. increased the amount of the original issue a year later, for example), what is the grandfathering treatment of the amounts raised through the tap? Is it the same as the original bond (i.e. fully eligible) or should the tap be considered non fully eligible Tier 2 because, as of the tap date, the first call was before year 5, in which case the tap should be included in the amortized stock according to Article 86.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_238
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 24/01/2014

Eligibility of Tier 2 after contractual change if already in amortisation phase

This is a follow up question to 2013_16, where it is stated that "A material change in the terms and conditions of a pre-existing instrument shall be considered in the same way as the issuance of a new instrument, meaning that the changes shall aim at ensuring a full eligibility...". Does this principle apply only to changes that would lead to inclusion in grandfathering or also to instruments which after a contractual change (removal of call rights) would be fully eligible but already are within the last 5 years of their maturity and therefore recognized according to amortization rules?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_174
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 24/01/2014

Grandfathering of own funds instruments

Based on the answer to question 2013_16, if a step-up Tier 2 bond’s terms were changed so that all call options were removed – before the entry in force of the Regulation (EU) No 575/2013 (CRR) – could it be considered as fully eligible in Tier 2 capital assuming that the capital instrument meets the other conditions laid down in Article 63 of the Regulation?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_61
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 24/01/2014

Meaning of Article 79 (b) of Directive 2013/36/EU (CRD)

What should standardised banks do in order to live up to CRD Article 79 (b)? Should standardised banks make their own assessment of the risk weights assigned to unrated counterparts? I.e. If a banking counterpart (institution) in a 0 % risk weight country is unrated and therefore assigned a risk weight of 20 % according to Article 121of Regulation (EU) No 575/2013 (CRR), but an internal assessment shows that other comparable counterparts with a rating get assigned a 50 % risk weight according to Article 120 of CRR, what should the calculating institution do? Should the calculating institution overwrite the 20% with 50 % or should the calculating institution add the difference in risk weighted assets under Pillar II?

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_249
  • Topic: Supervisory review and evaluation (SREP) and Pillar 2
  • Date of submission:
  • Published as final Q&A: 20/12/2013

Inclusion of incurred (IFRS) CVA in the IRB Provision shortfall calculation

Can the incurred CVA charge related to IRB exposures be treated as an eligible provision for the purposes of calculating the own funds reduction for IRB provision shortfall (per Article 159 of Regulation (EU) No 575/2013 (CRR))?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_245
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 20/12/2013

Article 416 - Reporting on liquid assets

Can assets issued by credit institutions, investment firms, insurance undertakings, etc. (reference to Article 416(2)) qualify for reporting as liquid assets if these are guaranteed by one of the parties mentioned in article 416(1)(c)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_222
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 20/12/2013

Level of application of the new FINREP framework

Can a competent authority impose FINREP at a solo level. Moreover, would a competent authority be free to add to or delete information from a specific template?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
  • ID: 2013_197
  • Topic: Supervisory reporting - FINREP (incl. FB&NPE)
  • Date of submission:
  • Published as final Q&A: 20/12/2013

Possibility to increase the frequency of reporting with regard to information covered by Draft ITS on Supervisory Reporting.

Article 104(1)(j) of Directive 2013/36/EU (CRD) provides for competent authorities to have inter alia the power to impose additional or more frequent reporting requirements, including reporting on capital and liquidity positions. The draft Implementing Technical Standard on reporting (ITS on reporting) submitted by EBA to the European Commission on 26 July 2013 includes strict provisions regarding format and frequency of reporting. In light of this does the competent authority have the power to impose more frequent reporting requirements relating to information that to some extent is covered by parts of Draft ITS on reporting (for instance the tables CA1, CA2) .

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
  • ID: 2013_175
  • Topic: Supervisory reporting - Other
  • Date of submission:
  • Published as final Q&A: 20/12/2013

Treatment of non-grandfathered amount of bonds

1. As of January 1, 2014, if an innovative Tier 1 security has more than 5 years to the first call date (e.g., a first call in 2020), does the non-grandfathered amount of bonds (i.e. 100%-80% = 20% in 2014) have any regulatory value? Could this be Tier 2 until 2015, given it will have at least 5 years to the first call date as per Article 63 Regulation (EU) No 575/2013 (CRR)? 2. In a similar vein, can the non-grandfathered part of non-innovative Tier 1 with no incentive to redeem count as Tier 2, either pre- or post-first call date?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_47
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 20/12/2013

Treatment of existing Tier 1 and Tier 2 instruments

This question is a supplement to Question 2013_46. For Tier 1 or Tier 2 instruments with an incentive to redeem and quarterly/semi-annual/annual calls beyond the first call date, would these instruments qualify as Tier 2 capital if the issuer gave an undertaking to its regulator and the market that it would not exercise its call option for at least 5 years after the first call date? This would save the issuer the time and expense of having to modify the actual instrument documentation but would achieve a similar outcome in terms of its capital position/quality.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_105
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 13/12/2013

How shall an institute explain a rating decision?

Article 431, paragraph 4 says that "institutions shall, if requested, explain their rating decisions to SMEs and other corporate applicants for loans, providing an explanation in writing when asked." Shall this be interpreted as institutions shall show the exact probability of default for the applicants or the applicants rating on the institutions internal rating scales or in any other way?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_240
  • Topic: Transparency and Pillar 3
  • Date of submission:
  • Published as final Q&A: 06/12/2013

Off-balance sheet items and definition of default

Please confirm that indeed the off-balance sheet part of a facility (e.g. undrawn amount) or any other off-balance sheet items e.g. acceptances, guarantees, etc should not be categorised in the "in default" exposure class even if the customer is classified as "in default".

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_239
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 06/12/2013

Inclusion of year-end profit in Common Equity Tier1 Capital as of the end of first quarter of the following year.

Can the year-end profit (reduced by the expected burdens and dividends), after verification by persons independent of the institution that are responsible for the auditing of the accounts of that institution, be included in Common Equity Tier1 Capital of the institution as of the end of first quarter of the following year without the prior permission of the competent authority in the situation in which the General Meeting of Shareholders approves the financial statements with the year-end profit (and approves the dividend in the amount reducing the year-end profit in the calculation) before the issuing date of the first quarter financial statements, but after the date of first quarter reporting period?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_208
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 06/12/2013

Possibility to remove a Tier 1's call options to make the securities Tier 2 compliant

Based on the answer to question 2013_16, if a step-up Tier 1 bond’s terms were changed (which had a call date in, say, 2016) so that all call options were removed, this could not prolong its grandfathering as Tier 1, if that were the sole rationale for removing the calls. However, if a removal of calls is to make the Tier 1 bonds count as eligible Tier 2 (as there is no call feature), then could they be reclassified as Tier 2?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_49
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 06/12/2013

Uncollateralised stock borrowing (unsecured) Transactions

How should uncollateralised (unsecured) stock borrowing due with 30 days be reported? Such transactions will have an impact on the liquidity position of the institution: 1) If the securities borrowed qualify under Article 416(1) as liquid assets 2) If the securities borrowed do not qualify under Article 416 but have been re-pledged and used to raise funding for the institution with a maturity beyond 30 days 3) If the securities borrowed have been used to cover institution shorts.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_159
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013

IRB Approach

Regarding the IRB approach for the calculation of capital requirements for preventing credit risk, where should the weighting formula be applied? Is it contract by contract, or is it a weighted average of the probability of default (PD) and loss given default (LGD) for each pool and then apply the risk weight formula to this mean?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_144
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Transfer Restrictions

There is no definition within the Regulation of 'Transfer Restrictions' referred to in article 417(b) with regards to excess liquid assets in third countries

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_136
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Cash in CIUs and its impact on CIUs being treated as liquid assets

According to Article 416(5) of Regulation (EU) No 575/2013 (CRR) CIUs may be treated as liquid assets provided that, among other things, they only invest in liquid assets as referred to in Article 416(1). Typically CIUs hold cash to a certain extent (e.g. 1-10 %) in order to secure their liquidity. However, would it lead the shares or units in the CIU being ineligible for liquid assets if the CIU deposited the cash at another bank, because credit institutions are not included in Article 416(1)? Alternatively would the CIU have to hold the cash directly at the ECB (or inside a bank safe in cash) for being eligible?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_132
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013