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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.

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List of Q&A's

Classification of Churches and Religious Communities

Will the exposures of churches and religious communities that do not fall under Articles 115 (3), 127, and 128 be classified as Corporates (Article 122) or Retail (Article 123)? Additionally, can these be classified as SMEs?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2015_2227
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 11/03/2016

Unfunded credit protection; adjusting PD or LGD; coefficient of correlation large financial sector entities or unregulated entities

1. Under Article 161(3) of CRR, can unfunded credit protection be recognised by adjusting PD or LGD, but not both? 2. If the institution has a subordinated exposure to an obligor, and a guarantee is recognised by adjusting the PD under Article 161(3), is it allowed to also adjust the LGD for the subordinated exposure and use a LGD associated with a senior claim on the obligor or guarantor, if the guarantee would represent a senior claim on the guarantor (compare with Article 236(1)). 3. (a) If an institution is recognising unfunded credit protection by adjusting or substituting the PD under Article 161(3) for an exposure for which article 153(2) is not applicable, should it also adjust the coefficient of correlation from the obligor to the guarantor, including applying the multiplier of 1.25, in case unfunded credit protection has been received from a large financial sector entity as defined in Article 142(1)(4), or unregulated financial entity as defined in Article 142(1)(5). (b) If an institution is recognising unfunded credit protection by adjusting or substituting the PD under Article 161(3) for an exposure for which article 153(2) is applicable, should it also adjust the coefficient of correlation (multiplied by 1.25), in case unfunded credit protection has not been received from a large financial sector entity as defined in Article 142(1)(4), or unregulated financial entity as defined in Article 142(1)(5), but, for example, from a large corporate or sovereign. 4. (a) If an institution is recognising unfunded credit protection by adjusting the LGD under Article 161(3) for an exposure for which Article 153(2) is not applicable, should it also adjust the coefficient of correlation, including applying the multiplier of 1.25, in case unfunded credit protection has been received from a large financial sector entity as defined in Article 142(1)(4), or unregulated financial entity as defined in Article 142(1)(5). (b) If an institution is recognising unfunded credit protection by adjusting the LGD under Article 161(3) for an exposure for which Article 153(2) is applicable, should it also adjust the coefficient of correlation (multiplied by 1.25), in case unfunded credit protection has not been received from a large financial sector entity as defined in Article 142(1)(4), or unregulated financial entity as defined in Article 142(1)(5) , but, for example, from a large corporate or sovereign.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_415
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 26/02/2016

Eligibility of religious communities or churches

Are churches or religious communities eligible protection providers under all approaches and thus included in the list of providers of Article 201 with reference to paragraph 1(b)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2015_1908
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 11/12/2015

Risk weight for exposures to unrated institutions

Does Article 121 allow unrated institutions to be assigned government ratings only in the case of a government guarantee for the deposits of that bank? Additionally, does Article 121(3) apply to unrated institutions as well? Does it say that if we have a cash balance in an unrated bank we should assign a risk weight of 20%?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2015_1869
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 11/12/2015

Application of the top-down approach based on EL calibration (article 160 al.2) - purchased receivables

Do these methods apply for other non-retail purchased receivables (i.e. institutions and sovereigns) ? For example, can an institution PD’s be calibrated using these top down approach based on EL calibration ?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2015_2023
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 27/11/2015

Credit risk - standardised approach

Can cash equivalents be assigned a Risk weight of 0%? What is the definition of an equivalent cash item?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2015_2001
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 13/11/2015

Maturity used in IRB RWA calculations

Is there an error in this paragraph? It currently says "....shall calculate M for each of these exposures as set out in points (a) to (e)....."; should this read "as set out in points (a) to (f)" in order to be consistent with the previous version of the legislation. Based on the current wording the effect of this is to exclude the possibility of banks using a residual maturity ".....M shall be the maximum remaining time (in years) that the obligor is permitted to take to fully discharge its contractual obligations,......"

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_762
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 23/10/2015

SME supporting factor

Can you please confirm whether the SME supporting factor can be applied to derivative exposure and Repo exposure?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_1050
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 02/10/2015

QRRE loss rate

What is meant by loss rate in this context?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2015_1933
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 25/09/2015

PD substitution and eligibility of guarantors

Article 202(d) of Regulation (EU) No 575/2013 (CRR) suggests that where risk weighted exposure amounts are calculated under the IRB Approach, a guarantor must have an internal rating in order to be eligible as a guarantor for PD substitution. Can a guarantor, which is rated by an ECAI, and otherwise meets all eligibility requirements but is treated under the Standardised Approach by the institution, be used for PD substitution? How can a guarantee be recognised in this situation?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_1381
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 04/09/2015

Credit Risk Mitigation

Can an institution legally "ring fence" cash it has to mitigate an exposure to a counterparty (using it as financial collateral)? The institution does not wish to notify the counterparty. The CRR is not clear on whether financial collateral used to mitigate an exposure must come from the counterparty or not.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2015_1776
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 10/07/2015

Recognition of additional credit protection in the regulatory LGD

It is not clear whether an institution with an IRB Approach permission (Foundation Approach; PD models only) should notify the competent authorities in accordance with Article 143 if they want to recognise additional credit protection in the regulatory LGD in accordance with Article 161(1).

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 529/2014 - RTS on materiality of extensions and changes in the advanced approaches (IRB and AMA)
  • ID: 2015_1792
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 19/06/2015

When should an external rating be considered as a primary factor determining an internal rating assignment

Concerning the practical application of the RTS on materiality: When should an external rating be considered as a 'primary factor' determining an internal rating assignment, and by what measure is the relative importance of the different variables comprising an internal model for credit risk to be evaluated?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 529/2014 - RTS on materiality of extensions and changes in the advanced approaches (IRB and AMA)
  • ID: 2015_1859
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 19/06/2015

Exposure to third country institutions and investment firms

What is the treatment for credit risk purposes of an exposure to an investment firm which is established in that third country and which is subject to the supervisory and regulatory requirements applicable to credit institutions in that country?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2015_1968
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 30/04/2015

Definition of the exposure portfolio for which permanent partial use of standardised approach can be applied for by a credit institution using the IRB approach

Can an IRB credit institution have the standardised approach applied to type of clients to whom the IRB approach is being used? I.e. if the standardised approach is approved for a specific portfolio of exposures, can this portfolio be defined by the type of client only or may it also be defined by the type of business?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_1678
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 10/04/2015

Leasing: Residual value risk

In the calculation of the exposure value for residual value risk of leased assets, is the "residual value" that has to be multiplied with 1/t (a) the residual value on the date of calculation / the reporting date or (b) the estimated residual value at the end of the lease term?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_1241
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 06/03/2015

Specific credit risk adjustments on exposures in default

Taking into account Annex I of the own funds template (worksheet 4, line 100 and 145) it’s clear that IRB Excess (+) or shortfall (-) of defaulted and non-defaulted exposures has to be reported separately. What is not exactly clear is the fact if an IRB Excess for the non-defaulted exposure can for example be taken into account for the defaulted portfolio or not.

  • 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_573
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 16/01/2015

Inclusion of partial write-offs in credit risk adjustments

Are partial write-offs of loans in the banking book, accounted at amortised cost, to be included in the determination of specific and general credit risk adjustments set out in Article 110(4).

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 183/2014 - RTS for the calculation of specific and general credit risk adjustments
  • ID: 2014_1064
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 19/12/2014

Reglamento 575/2013 exposiciones garantizadas hipotecas sobre bienes inmuebles/ Exposures secured by mortgages on immovable property

La parte de la exposición que supere el valor hipotecario dice que le será asignada la ponderación de riesgo aplicable a las exposiciones no garantizadas de la contraparte implicada. Si la contraparte es minorista, cómo puede ser que la parte de la exposición que supere el valor hipotecario vaya ponderada al 75% y la parte que va entre el 80% y el 100% del valor hipotecario vaya ponderada al 100%? ENGLISH TRANSLATION: In Article 124 of Regulation (EU) No 575/2013 (CRR) it says that the part of the exposure which exceeds the mortgage value shall be assigned the risk weight applicable to the unsecured exposures of the counterparty involved. If the counterparty is retail, can you explain how the part of the exposure which exceeds the mortgage value shall have a weight of 75% and the part which goes from 80% through 100% of the mortgage value shall have a weight of 100%?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_936
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 12/12/2014