Question ID
2013_686
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
162
Paragraph
2
Subparagraph
(f)
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Not applicable
Name of institution / submitter
Danish Financial Supervisory Authority
Country of incorporation / residence
Denmark
Type of submitter
Competent authority
Subject matter
Maturity (M) for short-term credit line contracts which are continuously rolled over.
Question

This query regards the setting of the maturity parameter (M) for corporate exposures when applying the IRB approach. In this respect, we are referring to facilities subject to Article 162(2)(f) of Regulation (EU) No 575/2013 (CRR): “(f) for any other instrument than those mentioned in this paragraph or when an institution is not in a position to calculate M as set out in (a), M shall be the maximum remaining time (in years) that the obligor is permitted to take to fully discharge its contractual obligations, where M shall be at least 1 year;” Consider exposures where the credit contract stipulates a short-term contractual maturity (say 1 year). If an institution typically rolls over such facilities, possibly after rigorous, annual credit processes so that the de-facto maturity is greater than the contractual, should the institution then be allowed to apply the contract length as maturity?

Background on the question

We currently allow institutions to use the contractual length for creditworthy customers while we require institutions to apply the maximum 5 year maturity for less creditworthy customers. However, the application of a 5 year maturity for less creditworthy customers is so far a Pillar 2 requirement. We are considering if it should be a Pillar 1 requirement.

Submission date
Final publishing date
Final answer

No, Article 162(2)(f) of Regulation (EU) No 575/2013 is clear in requiring that "M shall be the maximum remaining time (in years) that the obligor is permitted to take to fully discharge its contractual obligations, where M shall be at least one year". This leaves no room for requiring institutions to determine M differently. 

See further Q&A 2013 687.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.
Note to Q&A

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.

Disclaimer

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