Definition of the exposure portfolio for which permanent partial use of standardised approach can be applied for by a credit institution using the IRB approach

Under Article 150(1)(c) of Regulation (EU) No 575/2013 (CRR) competent authorities may grant permission for institutions to apply the Standardised Approach for exposures in non-significant business units as well as exposure classes or types of exposures that are immaterial in terms of size and perceived risk profile. The terms 'business unit' and 'types of exposures' are defined by the CRR. Article 142(3) of the CRR states that 'business unit' means "any separate organisational or legal entities, business lines, geographical locations", Article 142(2) states that 'type of exposures' means "a group of homogeneously managed exposures which are formed by a certain type of facilities and which may be limited to a single entity or a single sub-set of entities within a group provided that the same type of exposures is managed differently in other entities in the group", and Article 147 sets out how institutions which have received permission to apply the IRB Approach are to assign exposures to exposure classes. Neither the definition of 'business unit' nor the definition of 'types of exposures' refer to 'type of client' (which is not defined in the CRR), and it is therefore possible to grant permission to apply the Standardised Approach irrespective of the type of client as long as the exposures belong to a separate business unit, type of exposures, or exposure class and the criteria set out in Article 150(1)(c) of the CRR are met. The decision whether to grant permission to apply the Standardised Approach for a given business unit, type of exposure or exposure class rests with the competent authorities.