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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

Residual maturity of exposures with an undefined maturity

Do exposures with an undefined maturity, such as deposits or time deposits which can be called by the depositor and must then be reimbursed with a delay shorter than three months, quality as such?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_883
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Effect on the capital requirement of a guarantee where the right to call is linked to default versus another where it is linked to realised loss

Let’s take a portfolio level guarantee that is callable once losses from the exposures covered have been realised (and NOT when exposures DEFAULT); realised losses decrease the notional of the guarantee. As it can take years till losses get realised after the default event, while losses are still unrealised (but defaults have happened) the full notional is used to cover the whole portfolio. Our question is whether such a guarantee is eligible to be taken into account as unfunded credit protection and thus decrease the capital requirement of the sub-portfolio it cover?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_803
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Treatment of SME-supporting factor in the case of secured exposures.

I. How should the SME-supporting factor be treated relating to secured exposures? a) Including all collaterals, i.e. also for guarantees. Thus risk weighted assets of inflow in asset class sovereigns or institutes will also be reduced? b) Only for those collaterals which cause no risk transfer (meaning which are intered directly in the RWA formula)? c) Only for the non-secured part of the exposure?II. General question when the SMR supporting factor can be used: a) To our understanding a risk transfer is only allowed in the case that the risk transfer is leading to a reduction of the RWA. Taking this into account it should always be compared “the total SME exposure with the supporting factor and without a risk transfer” to “the exposure with the SME supporting factor (only for the non-secured part) and the risk transfer without the supporting factor”. b) To consider the above mentioned point under II. a) it seems that banks under the IRB-A approach are by tendency favored as there is no risk transfer (e.g.in cases of a guarantee by a government) but the effect of the collateral is considered in the total LGD of the exposure.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_565
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Calculation of retail exposures under Article 123(c) of Regulation (EU) No 575/2013 (CRR)

Does expression from point (c) of the first subparagraph of Article 123 of Regulation (EU) 575/2013 (CRR) “the total amount owed to the institution and parent undertakings and its subsidiaries” refer to exposure value as of Article 111 1. net exposure value (after deduction specific credit risk adjustments and additional adjustments) of an asset and of an off-balance sheet? Should the exposure value (the sum of current replacement cost and potential future credit exposure) of derivative instruments be included in calculation of total amount owed to the institution, laid down in point (c) of Article 123? Should the total amount owed to the institution and parent undertakings and its subsidiaries as of Article 123 (c) include: - An off-balance sheet item = 50 000 EUR? - Credit risk adjustments = -10 000 EUR? - Value of derivative instrument? If so, should both current replacement cost and potential future credit exposure be included?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_707
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 27/06/2014

Retail exposure class and risk weight for exposure value of derivative instruments

Should the credit risk exposures and counterparty credit risk exposures for the same customer be classified as retail exposures if the criteria from Article 123 points (a) to (c) of Regulation (EU) No 575/2013 (CRR) are met and they are classified neither as exposures in default nor as exposures secured by mortgages on immovable property? Are there any restrictions in assigning derivative instrument to the retail exposures class and to use one of the preferential risk weights of 75% except criteria from Article 123?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_704
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 27/06/2014

Bestimmung der Forderungsklasse für börslich gehandelte Optionen, Warrants und Futures / Determination of the exposure class for exchange-traded options, warrants and futures

Warrants, wie auch Options und Futures beinhalten sowohl ein Adress-Ausfallsrisiko, als auch ein ein individuelles Risiko (über die Entwicklung des Basiswertes bzw. dessen Emittenten). Nach welchen Kriterien soll CRR zufolge die Bestimmung der Forderungsklasse erfolgen? EN TRANSLATION: Warrants, like options and futures, entail both a counterparty credit risk and an individual risk (through the development of the underlying and its issuer). On the basis of what criteria, according to CRR, is the exposure class to be determined?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_546
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 20/06/2014

Definition of counterparty for the purpose of applying on-balance sheet netting

1) What is the definition of a counterparty in the context of using on-balance sheet netting (OBSN) of mutual claims between the bank and the counterparty as eligible credit risk mitigation form? 2) In other words, to be eligible for OBSN should the netting of loans and deposits always be with one legal entity or can they be across legally connected entities (for example parent-subsidiaries)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_538
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 06/06/2014

Conversion of the total amount owed to institution from national currency to EUR

Which exchange rate should the institution use to convert the amount owed to institution (mentioned in Article 501 point 1)? Should it be converted to EUR each day with exchange rate from this day or should the exchange rate be fixed, for example from the day when the product was sold?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_417
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 28/05/2014

Specific collective provisions allocation

In line with question 2013_201, how do we allocate any specific (to particular portfolios) collective provisions to various asset classes? a) do we follow the rules applied when calculating the specific collective provisions by the relevant department?; or b) can we allocate them to past-due exposures first and then to the all other exposures?

  • 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: 2013_499
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 16/05/2014

Standardised Method

If the derivative exposure is guaranteed, can the weight be determined based on guarantor’s rating instead of counterparty’s rating, i.e. do we use the counterparty’s credit rating or the guarantor’s rating?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_464
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 16/05/2014

Definition of exposure class "Exposures in default" under SA approach

Are all exposures of the defaulted obligor taken into account when assigning exposures into the exposure class "Exposures in default" or just individual exposure(s) of that obligor that is (are) in default, since the definition of "Exposures in default" has changed (default definition according to the IRB approach)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_511
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 30/04/2014

Alternative calculation of own funds requirement for exposures to a Qualifying Central Counterparty (QCCP)

In the formula given in Article 310 of Regulation (EU) No 575/2013 (CRR) the trade exposure is referenced. According to article 306(1)(c) CRR and Article 306(2) CRR exemptions for the calculation of trade exposure exist, e.g. trade exposure can be set to zero under certain circumstance given in Article 306 CRR. Do these exemptions also hold when using Article 310 CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_69
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 16/04/2014

Application of Article 199(6)(c) and (d) in the event that the credit institution has not liquidated any such collateral in the past

In the event that a credit institution has not liquidated the collateral referred to in Article 199(6) in the past, is it sufficient to demonstrate the availability of processes and data collection/analyses tool which enables the institution to show that the realised proceeds from the collateral are not below 70% of the collateral value in more than 10% of all liquidations for a given type of collateral in case collateral is liquidated?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_669
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 11/04/2014

Discounts on balance sheet exposures purchased when not in default

In Regulation (EU) No 575/2013 (CRR) Article 159 it states: "......Discounts on balance sheet exposures purchased when in default in accordance with Article 166(1) shall be treated in the same manner as specific credit risk adjustments." In respect of this how should one treat discounts on purchased exposures that were not in default at the time of purchase and discounts that were not calculated on single exposure level, but instead calculated on a whole portfolio of exposures which are not in default.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_354
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 11/04/2014

IRB exposure value - Recognition of specific credit risk adjustment for positions measured at fair-value (e.g. IFRS category FVO, HfT and AfS)

Which is the exposure value according to Article 166 (1) of Regulation (EU) No. 575/2013 (CRR) for IRB positions measured at fair value (to p+l or OCI) in the relevant accounting standard, when a separation of credit risk and market risk related fair value changes (e.g. revaluation reserve) for these positions is not possible and therefore not used to cover expected loss in accordance with Article 159 of the CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_101
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 14/03/2014

The meaning of the "amount owed to the institution"

How should institutions understand the "amount owed to the institution" under Article 501(2)(c)(1) in case of off-balance sheet exposures to customers that haven’t yet been used? Is it the exposure value (as understood in Article 111) or the nominal value of such product (for example credit line)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_416
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 31/01/2014

Applicability of the transitional period under Article 124(3) of Regulation (EU) No. 575/2013

According to Article 124(3) of Regulation (EU) No. 575/2013 (CRR), institutions should have a 6-month transitional period to apply higher risk weights set by the competent or designated authorities to exposures secured by mortgages on immovable property.Should this transitional period also apply if the national authority decides under CRR to set risk weights at the same level and to the same extent, i.e. for the same kind of exposures that are currently set under CRD (so in fact such decision would not result in a higher capital requirements for banks in comparison to current national legislation)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_361
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 31/01/2014

Definition of SME

SMEs are defined by turnover alone (EUR 50 million according to OJ L 124, 20.05.2003). Our question concerns when turnover is recorded. Is it (i) at inception of the loan or (ii) on an on-going basis? We would also like to know what level of documentation/proof is required, if any.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_343
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 31/01/2014