EBA · 2014_883 Final Q&A

Residual maturity of exposures with an undefined maturity

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
119, para. 2
Topic
Credit risk
Submitted by
Credit institution
Submitted
2014-02-26
Answered
2014-07-04
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Do exposures with an undefined maturity, such as deposits or time deposits which can be called by the depositor and must then be reimbursed with a delay shorter than three months, quality as such?

Background

Article 119 of regulation 575/2013/UE states that exposures to institutions of a residual maturity of three months or less denominated and funded in the national currency of the borrower shall be assigned a risk weight that is one category less favourable than the preferential risk weight, as described in Article 114(4) to (7), assigned to exposures to the central government in which the institution is incorporated.

Answer

The remaining maturity is determined by the maximum remaining time that the obligor is permitted to take to fully discharge its contractual obligations. Identifying this maximum remaining time for exposures with an undefined maturity requires considering both the maximum period until a cancellation by the institution would become effective and the maximum period that the obligor is permitted to take, after cancellation has become effective, to fully discharge its contractual obligations. If the total of these two periods is three months or less, the condition of a residual maturity of three months or less is met. Besides the residual maturity, for application of Article 119(2) of the Regulation (EU) No. 575/2013, it is also required that the exposure be denominated and funded in the national currency of the borrower.

Original source: European Banking Authority, Q&A ID 2014_883

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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