Recognition of real estate as commercial property

Where an institution accepts collateral that does not qualify for recognition for the risk weights according to Articles 125 or 126 of Regulation (EU) No 575/2013 (CRR) and assigns the collateralised exposure to an exposure class other than "exposures secured by mortgages on immovable property" according to Article 112(i), this needs to be reported for the other exposure class to which the exposure is assigned. Regarding reporting in the category "Mortgage loans [Loans collateralized by immovable property]" as specified by Annex V, Part 2 point 41(h) of Regulation (EU) 680/2014 (ITS on Supervisory Reporting), please note that this does not relate to reporting of capital requirements but to a breakdown of assets in the balance sheet. According to the reporting instructions, this does not require eligibility of the property for the risk weights according to Articles 125 or 126 of the CRR, but explicitly includes all "loans formally secured by immovable property collateral independently of their loan/collateral ratio". For the purposes of the CRR, "commercial immovable property" encompasses any immovable property that is not a "residential property" within the meaning of Article 4(1)(75) of the CRR. This means that exposures secured by mortgages on immovable property (Article 124) should be restricted to exposures secured by residential or "offices or other commercial premises" properties. In determining whether an exposure meets the description of "offices or other commercial premises" for the purposes of Article 126(1) of the CRR, consideration should be given to the dominant purpose of the property in question, which should be linked to an economic activity. However, this does not mean that all commercial immovable property is necessarily recognised for the risk weights for exposures or any part of an exposure fully and completely secured by mortgages on commercial immovable property according to Article 126 of the CRR. Recognition of "commercial immovable property" for the risk weights applicable to exposures or any part of an exposure fully and completely secured by mortgages under Article 126 of the CRR is restricted by the conditions set out in Articles 126(1) and (2).    See also Q&A 2013 94 .