Question ID
2020_5223
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
501
Paragraph
1
Subparagraph
formula in paragraph 1
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Not applicable
Name of institution / submitter
FIN-FSA (Finanssivalvonta)
Country of incorporation / residence
Finland
Type of submitter
Competent authority
Subject matter
Definition of the parameter E* in the formula regarding the Adjustment of risk-weighted non-defaulted SME exposures.
Question
We believe there is a need of clarification in the definition of the parameter E* in the formula of the article 501 in order to insure that the result of the formula is valid in all cases.
Background on the question
Institutions shall adjust the risk-weighted exposure amounts for non-defaulted exposures to an SME (RWEA), which are calculated in accordance with Chapter 2 or 3 of Title II of Part Three, as applicable, in accordance with the formula described in Article 501,1. The formula has a parameter E* = the total amount owed to the institution, its subsidiaries, its parent undertakings and other subsidiaries of those parent undertakings, including any exposure in default, but excluding claims or contingent claims secured on residential property collateral, by the SME or the group of connected clients of the SME. If the total amount owed to the institution, its subsidiaries, its parent undertakings and other subsidiaries of those parent undertakings, including any exposure in default is the same as claims or contingent claims secured on residential property collateral, by the SME or the group of connected clients of the SME, the value of E* is 0. That leads to the fact that both the numerator and the denominator in the formula described in Article 501 equals 0, and consequently, if E* = 0, it causes an error in the formula (0 / 0).
Submission date
Rejected publishing date
Rationale for rejection

This question has been rejected because the issue it raises is not material.

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Status
Rejected question