EBA · 2015_2412 Archive

Recovery rate of the foreclosure assets calculation

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
78, para. 2
Topic
Supervisory reporting - Supervisory Benchmarking
Submitted by
Credit institution
Submitted
2015-10-15
Answer provided by
ESAs (EBA, ESMA, EIOPA)
Browse ECB SSM Register → More Q&As on this regulation →

Question

Regarding to the Supervisory Benchmarking Process, Annex III, C 105.01: When calculating the recovery rate of the foreclosure assets, should the recovery rate include a prediction for LGD for the recent defaults or only observed recoveries are expected?

Background

For example, for clients just defaulted, observed recovery will be next to zero. Should we consider only the recoveries of the "already observed" period of time or should we include the recent years too? On the other hand, for products with real collateral, should we include an estimation of the total LGD (considering this as the LGD until the asset is sold)?

Answer

The recovery rate reported in c090 of template C 105.01 of Annex III of the ITS on Supervisory Reporting for Institutions for benchmarking the internal approaches (ITS on benchmarking) has to be based on the recovery rate used for the LGD calibration, where observed recoveries as well as the estimations of recoveries for incomplete work out should be taken into account.   DISCLAIMER: The present Q&A on Supervisory reporting is provisional. It will be reviewed after the Implementing Regulation is in force and published in the Official Journal. The text of the Implementing Regulation may differ from the text of the draft ITS to which this Q&A refers

Original source: European Banking Authority, Q&A ID 2015_2412

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

Supervisory Benchmarking - Alternative risk weight

Answered 2019-07-26

Draft Implementing Technical Standards (ITS) on supervisory reporting under the CRR, CR IP Losses (C 15.00)

Answered 2014-04-30

EBA Benchmarking 2016

Answered 2016-12-02

Definition of low default portfolios for 2017 supervisory benchmarking exercise: Missing Portfolio ID for exposures assigned to both the exposure class ‘institutions’ and to the sector of counterparty ‘general governments’

Answered 2017-03-24

Clarification of the collateral amounts

Answered 2017-02-03

📋 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.