Credit risk

Credit risk focuses on the development of BTS, Guidelines and Reports regarding the calculation of capital requirements under the Standardised Approach and IRB Approach for credit risk and dilution risk in respect of all the business activities of an institution, excluding the trading book business. The objective is to provide a consistent implementation across the EU of the provisions related to topics such as credit risk adjustments, definition of default, permission to use Standardised/IRB approach, appropriateness of risk weights or credit risk mitigation techniques.

Technical Standards, Guidelines & Recommendations

  • Guidelines on the treatment of CVA risk under SREP

    The Guidelines are based on a policy recommendation contained in the EBA’s CVA report and aim to provide a common European approach to assessing CVA risk under SREP. Additionally, these Guidelines will provide a common European approach to the assessment of capital adequacy of own funds and the determination of potential additional own funds requirements for CVA risk.

    Status: Under development

  • Guidelines on the application of the definition of default

    These Guidelines harmonise the definition of default across the EU prudential framework and improve consistency in the way EU banks apply regulatory requirements to their capital positions. A detailed clarification of the definition of default and its application is provided in these Guidelines, which cover key aspects, such as the days past due criterion for default identification, indications of unlikeliness to pay, conditions for the return to non-defaulted status, treatment of the definition of default in external data, application of the default definition in a banking group and specific aspects related with retail exposures.

    Status: Final and translated into the EU official languages

  • Regulatory Technical Standards on exclusion from CVA of non-EU non-financial counterparties

    These Regulatory Technical Standards (RTS) align the treatment of non-financial counterparties (NFCs) established in a third country with the treatment of EU NFCs. As NFCs established in a third country are not directly subject to EU regulation, these RTS specify that it is for the institution to check that a counterparty established in a third country would qualify as a NFC if it were established in the EU and, if that is the case, that this NFC calculates and does not exceed the clearing threshold in accordance with EMIR provisions in this respect.

    Status: Final draft adopted by the EBA and submitted to the European Commission

  • RTS on conditions for capital requirements for mortgage exposures

    The proposed Regulatory Technical Standards (RTS) illustrate the conditions, as well as financial stability considerations, that would ensure a harmonised approach in setting higher risk weights and higher minimum loss given default (LGD) values.

    Status: Under development

  • Regulatory Technical Standards (RTS) on the method for the identification of the geographical location of the relevant credit exposures

    Under the capital requirements rules in the EU, institutions at Member State level are required to hold countercyclical buffers (CCB) to protect the banking system against potential losses when excess credit growth is associated with an increase in system wide risks. The size of countercyclical buffers will depend on the countercyclical buffer rates set by national authorities and the portfolio distribution of the institutions. In particular, the buffers to be held by individual institutions with cross-border activities will depend on the geographical location of their credit portfolios and not on the location of the institutions that hold these exposures. These Regulatory Technical Standards aim at setting out criteria for identifying the geographical location of all relevant credit exposures, namely credit risk, trading book and securitisation exposures.

    Status: Adopted and published in the Official Journal

  • Regulatory technical standards on disclosure of information related to the countercyclical capital buffer

    These Regulatory Technical Standards (RTS) specify what information institutions must disclose in relation to their requirements for a countercyclical capital buffer (CBB). These RTS proposes two disclosure templates that harmonise the information available to the general public on the institution-specific CCB and the geographical location of the exposures determining that buffer.

    Status: Adopted and published in the Official Journal

  • Regulatory Technical Standards (RTS) on risk mitigation techniques for OTC derivatives not cleared by a central counterparty (CCP)

    These Regulatory Technical Standards (RTS) are to be developed by the Joint Committee of the European Supervisory Authorities (ESAs) will define the risk mitigation techniques to be put in place for OTC derivatives not cleared by a central counterparty (CCP). In particular, it will elaborate on the level of capital and collateral counterparties to derivatives transactions need to maintain, the type of collateral and segregation arrangements as well as on the procedures to apply an intragroup exemption.

    Status: Adopted and published in the Official Journal

  • Regulatory technical standards on specialised lending exposures

    The RTS on specialised lending exposures aim to specify how institutions should take into account several factors when assigning risk weights to specialised lending exposures and how they should treat these factors. Specialised lending is a type of exposure towards an entity specifically created to finance or operate physical assets, where the primary source of income and repayment of the obligation lies directly with the assets being financed. The proposed RTS define four classes of specialised lending and is in line with the Basel framework.

    Status: Final draft adopted by the EBA and submitted to the European Commission

  • Regulatory and Implementing Technical Standards on benchmarking portfolios

    Internal approaches used for the calculation of own funds requirements for market and credit risk are subject to an annual assessment by competent authorities. The EBA assists competent authorities in their assessment by providing a report including benchmarks which help to identify any material differences in RWA outcomes. The legal framework for the above is provided by Directive 2013/36/EU (CRD) and in particular Article 78 thereof as well as by the following technical standards provided by the EBA: a) Regulatory technical standards (RTS) laying down standards for competent authorities as regards the assessment of the internal approaches adopted by institutions and the procedures for sharing of those assessments between competent authorities; b) Implementing technical standards (ITS) specifying the benchmarking portfolios and reporting instructions for institutions to be applied in the annual benchmarking exercises.

    Status: Adopted and published in the Official Journal

  • Regulatory Technical Standards on assessment methodology for IRB approach

    The Regulatory Technical Standards (RTS) on assessment methodology for internal ratings-based (IRB) approach are a key component of the EBA’s work to ensure consistency in models outputs and comparability of risk-weighted exposures. These RTS will contribute to harmonise the supervisory assessment methodology across all EU Member States.

    Status: Final draft adopted by the EBA and submitted to the European Commission

  • Regulatory Technical Standards on materiality threshold of credit obligation past due

    These Regulatory Technical Standards (RTS) propose a series of conditions on both the structure and the application of the threshold that should help banking institutions to assess the materiality of their past due credit obligations, so that the occurrence of default can be defined in a harmonised manner across the EU.

    Status: Final draft adopted by the EBA and submitted to the European Commission

  • Regulatory Technical Standards in relation to credit valuation adjustment risk

    These Regulatory Technical Standards (RTS) specify certain elements of the calculation of own funds requirements for credit valuation adjustment (CVA) risk. CVA is the risk of loss caused by changes in the credit spread of a counterparty on derivatives transactions due to changes in its credit quality. The Capital Requirements Regulation (CRR) introduces two methods for calculating CVA risk, respectively a standardised and an advanced method, and mandates the EBA to specify how a proxy spread should be determined for the purposes of identifying the LGDMKT (Loss given default of the counterparty) and to provide details on what constitutes a limited number of smaller portfolios under the advanced method for calculating CVA risk.

    Status: Adopted and published in the Official Journal

  • Regulatory technical standards on the permanent and temporary use of IRB approach

    These Regulatory technical standards (RTS) specify the conditions for the permanent and temporary uses of the Standardised Approach (SA) by institutions that have received permission to use the IRB Approach (the so-called IRB institutions). These RTS will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in the European Union.

    Status: Under development

  • Regulatory Technical Standards on the treatment of equity exposures under the IRB Approach

    These Regulatory Technical Standards (RTS) specify the treatment of equity exposures under the internal ratings-based (IRB) approach. According to the Capital Requirements Regulation (CRR) competent authorities are allowed to temporarily exempt from IRB treatment certain equity exposures held by institutions as at 31 December 2007. These RTS specify the conditions under which competent authorities can grant such an exemption.

    Status: Adopted and published in the Official Journal

  • Mechanistic references to credit ratings in the ESAs’ guidelines and recommendations

    The Joint Committee of the European Supervisory Authorities (EBA, ESMA and EIOPA - ESAs) consults the public on the removal of mechanistic references to credit ratings in their guidelines and on the definition of sole and mechanistic reliance on such ratings.

    Status: Under development

  • Regulatory Technical Standards (RTS) on the conditions for assessing the materiality of extensions and changes of internal approaches for credit, market and operational risk

    These Regulatory Technical Standards aim at harmonising the assessment of the materiality of extensions and changes to credit institutions’ internal approaches and to ensure that the approved internal approaches comply with the regulatory requirements. In particular, these RTS specify the conditions for assessing the materiality of extensions and changes to: the Internal Rating Based approach (IRB approach) for credit risk; the Advanced Measurement Approach (AMA) for operational risk and the Internal Models Approach (IMA) for market risk.

    Status: Adopted and published in the Official Journal

  • Regulatory Technical Standards on the calculation of credit risk adjustments

    These Regulatory Technical Standards (RTS) stem from Article 110(4) of the Capital Requirements Regulation which provides for the EBA to clarify the calculation of specific credit risk adjustments (SCRAs) and general credit risk adjustments (GCRAs) under the applicable accounting framework for (i) the determination of exposure values; (ii) the treatment of expected loss amounts; and (iii) the determination of default.

    Status: Adopted and published in the Official Journal

  • Implementation Guidelines on large exposures exemptions for money transmission, correspondent banking, clearing and settlement and custody services

    These Guidelines provide further clarification on the criteria to be met to qualify money transmission, correspondent banking, clearing and settlement and custody services for an exemption from the large exposures rules. The Guidelines elaborate in particular on “types of services”, the definition of client activity and “life-span” of exposures. They are structured in two main parts, covering respectively Article 106(2) (c) and (d) of the Capital Requirements Directive.

    Status: Final and translated into the EU official languages

  • Guidelines on the revised large exposures regime

    These Guidelines aim at ensuring an harmonised application of the revised large exposures regime regarding the definition of "connected clients", in particular with reference to the concepts of "control" and "economic interconnection".

  • Guidelines on common reporting of large exposures

    These Guidelines include common reporting templates and guidance in relation to large exposures reporting. They are included in the COREP framework so as to ensure a unified European reporting system. Thereafter, large exposures reporting will be based on the same standards (i.e. frequency, remittance dates, formats and platform) as the other COREP data. The development of the templates was undertaken on the same basis as the COREP framework, i.e. to identify the items to be reported on a “need-to-know”-basis.

    Status: Repealed

  • Guidelines on the implementation, validation and assessment of Advanced Measurement (AMA) and Internal Ratings Based (IRB) Approaches

    These Guidelines aim at providing guidance on what supervisors should take into account when assessing an application from an institution to use the Internal Ratings Based (IRB) or Advanced Measurement (AMA) approaches for regulatory purposes. The objective is to streamline the approval process, especially for cross-border groups, and to contribute to a level-playing field for institutions using the more advanced risk measurement approaches.

    Status: Final and translated into the EU official languages

Opinions, Reports and other Publications

 

Reports

 

Other Publications

Opinions