EBA · 2015_2506 Rejected question

Can multiple exemptions be applied to an exposure at the same time?

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
400, para. 2
Topic
Large exposures
Submitted by
Consultancy firm
Submitted
2015-12-07
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Question

This question relates to the application of multiple exemptions from article 400 (2) CRR in specific cases. As stated in article 400 (2) CRR „competent authorities may fully or partially exempt exposures“. Which exemption should be applied to an exposure if it falls under the incidence of more than one of the partial exemptions from article 400 (2) CRR? We would like to give an example related to this question. In Germany, a partial exemption of 75% may be applied according to article 400 (2) c) CRR for exposures, excluding participations or other kinds of holdings, incurred by an institution to its parent undertaking, to other subsidiaries of that parent undertaking or to its own subsidiaries, in so far as those undertakings are covered by the supervision on a consolidated basis to which the institution itself is subject, in accordance with this Regulation, Directive 2002/87/EC or with equivalent standards in force in a third country. Furthermore, according to article 400 (2) i) CRR an exemption of 50% may be applied to medium/low risk off-balance sheet undrawn credit facilities referred to in Annex I.

Background

Example: Assume an institute has given a loan commitment of 200 million euro to a subsidiary and 100 million euro of this commitment have been drawn. Thus an open loan commitment of 100 million euro remains. Considering the exemption of 75% given by article 400 (2) c) CRR a capital charge recourse of 25 million euro remains outstanding. However, given that an exemption of 50% according to article 400 (2) i) CRR could be applied to this exposure, should a capital charge open loan position of 12.5 million euro be reported?
No answer published yet.

Original source: European Banking Authority, Q&A ID 2015_2506

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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