EBA · 2013_430 Final Q&A

Highly leveraged obligors

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
180, para. 1
Topic
Credit risk
Submitted by
Credit institution
Submitted
2013-10-24
Answered
2014-07-25
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

How to define/identify 'highly leveraged obligors' under Article 180(1)(a)?

Background

Highly leveraged obligors is not defined in Regulation (EU) No 575/2013 (CRR).

Answer

Regulation (EU) No. 575/2013 does not define "highly leveraged obligors", but requires institutions to ensure that the probability of default (PD) estimates for such obligors reflect the performance of their assets based on stressed volatilities. Accordingly, institutions are under an obligation to identify among their obligors those for whom the default risk is particularly sensitive to changes in the value of their assets because of a high leverage or because their assets are predominantly traded assets, and to ensure that PD estimates for such obligors are reflective of the performance of assets based on stressed periods.

Original source: European Banking Authority, Q&A ID 2013_430

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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