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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

Materiality threshold and calculation method for materiality ratio for the purpose of application of Article 150(1)(c) for types of exposures that are immaterial in terms of size and perceived risk profile

A) Can you please clarify whether the 10%/5% threshold to define materiality for “exposure classes” are valid also as for “types of exposures”? In case not, can you please specify which thresholds should be considered for the abovementioned purpose?B) As for the materiality ratio to be compared against the thresholds can you please clarify how it should be computed with reference to the following points:1. Should the numerator include only the exposures for which the application for PPU is being sought under Article 150 (1) (c) by excluding exposures for which PPU has already been granted pursuant other points of Art 150 (1) and exposures not to be included in the calculation of RWA for equity exposure pursuant to Art. 155 (1) (i.e. Equity exposures risk weighted at 250% in accordance with Art. 48 (4) of Reg. EU 575/2013 and those deducted from CET1 in accordance with Part Two of Reg. EU 575/2013)?2. Should the ratio be computed only at solo level or both at solo and consolidated level, in case an application is limited to only one Legal Entity (LE) of a Large Group?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4489
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 21/05/2021

Maturity of instruments subject to a cash flow schedule

Should an institution that has received the permission of the competent authority to use own LGDs for exposures to corporates, apply the formula in Article 162(2)(a) CRR, for both fixed interest rate and variable interest rate loans, where no change of the cash flow timing is applicable?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2018_4410
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 21/05/2021

Calculation method for materiality ratio to be compared against the 10%/5% threshold for the purpose of application of Article 150(1)(c) for equity exposure class (Permanent Partial Use)

How should a credit institution - with the prior permission to apply the standardised approach permanent partial use (PPU) ex Article 150 CRR for equity exposures - calculate the  threshold as per Article 150(2) CRR?How is the materiality ratio computed? In particular:Should the numerator include only the exposures for which the application for PPU is being sought under Article 150(1)(c) CRR by excluding exposures for which PPU has already been granted pursuant other points of Article 150(1) and exposures not to be included in the calculation of RWA for equity exposure pursuant to Article 155(1) (i.e. Equity exposures risk weighted at 250% in accordance with Article 48(4) of Reg. EU 575/2013 and those deducted from CET1 in accordance with Part Two of Reg. EU 575/2013)?Should the ratio be computed only at solo level or both at solo and consolidated level, in case an application is limited to only one Legal Entity (LE) of a Large Group? 

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2018_4390
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 21/05/2021

Classification of a commitment to make under certain conditions an indemnity payment for a customer

Does a commitment to make under certain conditions an indemnity payment on behalf of a customer constitute an “off-balance sheet item other than those mentioned in (Article 166) paragraphs 1 to 8” according to Article 166(10) CRR?If so, does it constitute a medium/ low risk item according to Article 166(10)(c) CRR, specifically as one of the “other items also carrying medium/low risk and as communicated to EBA” according to Annex I, No. 3(b)(ii) CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2018_3918
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 21/05/2021

Meaning of “portfolio” within “sufficiently diversified portfolios” in Article 155(2)

How should the term “portfolio” be understood in the context of the 190% risk weight for private equity exposures in “sufficiently diversified portfolios” in Article 155(2) of the CRR? Does it refer to the whole institution’s portfolio of private equity? Or to any of the “portfolios” that an institution has identified for internal risk management purposes instead?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4472
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 07/05/2021

Unfunded credit risk mitigation for specialised lending exposures

How should RWA be calculated for unfunded credit risk mitigation when the protected exposure is a specialised lending exposure in respect of which an institution is not able to estimate PDs and used the risk weights in Article 153(5) CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2017_3295
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 07/05/2021

Obligations stemming from "non-credit products"

To what extent do fees stemming from “non-credit products” fall under the notion of para 73 (a) of the EBA Guidelines on PD estimation, LGD estimation and the treatment of defaulted exposures?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2017/16 - Guidelines on PD estimation, LGD estimation and the treatment of defaulted exposures
  • ID: 2018_4301
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 07/05/2021

NPE calculations of NPE workout options

Should the NPV calculations that paragraph 143 of the EBA Guidelines on management of non-performing and forborne exposures describes be performed with a risk adjusted discount rate, i.e. the original effective interest rate should not be used for these calculations?

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2018/06 - Guidelines on management of non-performing and forborne exposures
  • ID: 2019_4814
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 09/04/2021

LGD adjustment for massive disposals.

Article 500, first paragraph, point (c) of the Regulation (EU) 2013/575 as amended by Regulation (EU) 2019/876 provides for a 20% threshold to qualify disposal operation as “massive”. This question seeks clarification on how to compute the threshold.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4824
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 12/03/2021

Adjustment for massive disposals

Regarding the interpretation of Article 500(1) of the Regulation (EU) 2019/876 amending Regulation (EU) No 575/2013 (hereafter “Regulation (EU) No 575/2013 as amended”), do we understand it correctly that:“the average estimated LGDs for comparable exposures in default that have not been finally liquidated” should be derived by applying the estimation method for incomplete recovery processes, which is required under Article 181(1)(a) Regulation (EU) No 575/2013 and further explained in paragraphs 158 and 159 of EBA/GL/2017/16, to the disposed assets as of the date just before the disposal;“the average realised LGDs including on the basis of the losses realised due to the massive disposals” should be the average observed LGD for all disposed exposures based on the economic loss of each exposure, taking into account the disposal price as well as material discount effects and material direct and indirect costs associated with collecting on the instrument in line with Article 5(2) of Regulation (EU) No 575/2013the adjustment based on Article 500 for all disposed exposures cannot lead to an estimate of average losses for the disposed assets that is lower than the estimated LGD calculated under point (a) above?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4819
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 12/03/2021

Aggregated first loss under credit insurance

Is the requirement in Article 213(1)(b) CRR met in case of a credit insurance whose contractual terms provide that the institution shall bear a first loss, which is calculated at aggregate level with regard to several different exposures?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2018_4184
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 26/02/2021

Calculation of past due days on material credit obligations

For the purpose of the definition of default, should days when material credit obligation was past due, but repaid later on, be included in the calculation of 90 (180) consecutive days according to Article 178 of CRR, paragraph 1, point (b)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4504
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 12/02/2021

Technical past due situation - Factoring

How should the situation in terms of technical default be treated when there are two past due purchased receivables (each individually material) and one of them is repaid by the obligor while the second one is still due?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2016/07 - Guidelines on the application of the definition of default under Article 178 CRR
  • ID: 2019_4505
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 12/02/2021

Unlikeliness to pay (UTP) - exit from NP status

Can a customer exit non-performing status immediately (provided of course no other UTP criteria are applicable), or does a period of 12 months need always to pass before the customer can exit?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2018/06 - Guidelines on management of non-performing and forborne exposures
  • ID: 2019_4867
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 15/01/2021

Criteria for rating transfer

Can “clear policies” referred to in paragraph 62 – such as recognising the relationship between a subsidiary and its consolidating parent or recognising any other form of control as defined in Article 4(1)(37) of Regulation (EU) No 575/2013 – which lack the features of a material contractual support – be considered as “appropriate guarantee", thereby supporting  the rating transfer?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2017/16 - Guidelines on PD estimation, LGD estimation and the treatment of defaulted exposures
  • ID: 2019_4745
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 11/12/2020

Use of rating before or after transfer in the calculation of the one-year default rates

In a situation where a parent institution (good rating) has issued a full encompassing guarantee for a subsidiary - bad rating, thus supporting the subsidiary before a default event, and preventing (or reducing the risk of) a default – would this constitute a substitution effect due to a credit risk mitigation under paragraph 74 of EBA Guidelines EBA/GL/2017/16?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2017/16 - Guidelines on PD estimation, LGD estimation and the treatment of defaulted exposures
  • ID: 2019_4598
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 04/12/2020

Eligibility of mortgage mandates under Belgian law

Are mortgage mandates under Belgian law eligible as immovable property collateral? Is there a difference between the SA and IRB approach?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4721
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 13/11/2020

Absolute materiality threshold for Retail based on the new RTS

How to apply Article 123(c) CRR to set the absolute component of the materiality threshold in the case of transition of exposures to or from Retail.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2016/07 - Guidelines on the application of the definition of default under Article 178 CRR
  • ID: 2019_4666
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 09/10/2020

Retail Classification

Retail classification if an obligor has exposure under both the STA and IRB approach. This question is relevant for banks that are partially using the SA and partially using the IRB approach and where the use of the different methods is on the basis of the product type i.e. mortgages are under IRB, other Retail loans under SA. Article 123 allows for the exclusion of exposures fully and completely secured on residential property that have been assigned to the exposure class laid down in point (i) of Article 112 (exposures secured by mortgages on immovable property) when calculating the total amount owed the institution.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2018_4012
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 09/10/2020

Application of the LGD floor

Are there any specific requirements regarding the adjustment for the LGD floor? More specifically, is it a sufficient condition to ensure (may be on a daily basis) that the exposure weighted average LGD just needs to meet the floor on a portfolio level and the respective adjustments on the facility level are at the discretion of the bank?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4680
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 21/08/2020