Definition of ‘retail deposit’

Although the institution does not have actual retail/SME credit exposures to a given customer, the institution should still apply the criteria set out in the context of the retail exposure class under the Standardised or IRB approaches for credit risk or in article 153(4) of Regulation (EU) No 575/2013 (CRR). For the Standardised approach for credit risk, the criteria are set out in Article 123. Institutions using IRB approach for retail exposures shall follow the criteria stipulated in Article 147(5) of the CRR. Where an institution does not have any exposures to an SME, the institution may include such a deposit in this category provided that the total aggregate funding raised from the customer is less than EUR1 million and the deposit is managed as a retail deposit. The institution should also treat such deposits consistently through its internal risk management systems and in the same way as other retail deposits (i.e. not as it would treat a larger corporate deposit). As the treatment of an SME as a retail deposit results in a lower risk weight, this beneficial treatment is subject to obtaining the background information required to classify them as such. In addition, it should also be noted that under Article 8 (1)(d) of Directive 2005/60/EC institutions are obliged to conduct ongoing monitoring of the business relationship. This includes scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution's or person's knowledge of the customer, the business and risk profile, including, where necessary, the source of funds and ensuring that the documents, data or information held are kept up-to-date. These requirements should be helpful in providing an institution with information necessary for the purpose of classifying a client.