EBA · 2015_2224 Final Q&A

Extending the range of application system.

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
99
Topic
Model validation
Submitted by
Credit institution
Submitted
2015-08-14
Answered
2016-09-23
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

What is practically meant by 'additional exposures related to the lending decision of a third party to the group'?

Background

According to RTS 529/2014, extending the range of the application system is a material change and needs the approval of competent authorities. Among other cases that are mentioned in RTS, extending the appllication to additional exposures that are subject of a lending decision of a third party is mentioned to be a material change or exposures.

Answer

As clarified by the criteria in points (i) and (ii) of Annex 1, Part 1, Section 1, Point 1(c) of RTS 529/2014, 'additional exposures related to the lending decision of a third party to the group' indicates any exposures not originated by the institution itself. The wording 'to the group' clarifies that the third party does not belong to the same group of the institution, while the additional exposures are now exposures of the group to which the institution belongs. This would be the case, for example, of a bank acquiring a portfolio of exposures from another institution or of an institution outsourcing parts of the credit process (including the underwriting) in relation to a portfolio of exposures which is in the balance sheet of the institution.

Original source: European Banking Authority, Q&A ID 2015_2224

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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