EBA · 2013_511 Final Q&A

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

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
127, para. 1
Topic
Credit risk
Submitted by
Competent authority
Submitted
2013-11-07
Answered
2014-04-30
Answer provided by
ESAs (EBA, ESMA, EIOPA)
Browse ECB SSM Register → More Q&As on this regulation →

Question

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)?

Background

The definition of exposures in default has changed compared to Directive 2006/48/EC in a way that the reference regarding the default definition is made to the IRB approach. So when default of the obligor occurs under this definition (Article 178 of the CRR), all exposures of defaulted obligor are taken into account. However under the SA approach the treatment so far was(is) that only exposures that are past due more than 90 days are categorised under "Exposures in default". Since the latter definition has changed, my question is whether still only individual exposures that had defaulted under the IRB definition are taken into account in the SA approach.

Answer

Yes, all exposures of a defaulted obligor must be assigned to the exposure class "Exposures in default" under Article 127 of Regulation (EU) No 575/2013 (CRR), except for those retail exposures to an obligor, for which the definition of default in Article 178 of this Regulation is not met (i.e. individual credit facility approach). Article 127 of the CRR applies to any item where the obligor has defaulted in accordance with Article 178, but in the case of retail exposures solely to any credit facility which has defaulted in accordance with Article 178. Article 178 of the CRR states that in the case of retail exposures, institutions may apply the definition of default laid down in points (a) and (b) of the first subparagraph at the level of an individual credit facility rather than in relation to the total obligations of a borrower.

Original source: European Banking Authority, Q&A ID 2013_511

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.

Similar Q&As

SA - Retail Classification - EUR1 million limit

Answered 2013-11-29

Implementation of default definition - retail portfolio

Answered 2017-05-12

Absolute materiality threshold for Retail based on the new RTS

Answered 2020-10-09

Retail Classification

Answered 2020-10-09

Classification of in default exposures that are at the same time is an Item Associated with Particular High Risk

Answered 2015-01-16

More Q&As on this topic

Application of the currency mismatch treatment to self-employed individuals (natural persons carrying out an economic activity) under Article 123a CRR.

Answered 2026-07-31

Requirements for the purpose of treating exposures secured by mortgages on immovable property as duly secured from an RWA computation perspective under CRR Article 124(2) of the CRR.

Answered 2026-05-08

Use of credit assessments by ECAIs not in scope of Regulation (EC) No 1060/2009.

Answered 2026-03-13

US Hard test: adequacy of considering US charge-off rates corresponding to loss rates for exposures secured by residential property or commercial immovable property situated within the territory of the US

Answered 2026-02-27

Application of the SME definition in specific cases

Answered 2025-11-28

📋 Track EU financial regulation continuously

Forseti monitors EU financial regulation and delivers personalised alerts anchored to verified official sources.

Start free trial → Learn more

14-day free trial. No credit card required.