EBA · 2016_2574 Final Q&A

Assigning Specific Credit Risk Adjustments for a group of exposures to the exposures within the group

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
24, 111, para. 1
Topic
Credit risk
Submitted by
Credit institution
Submitted
2016-01-18
Answered
2016-11-18
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Following question 2013_499 , could you confirm that this implies that the collective provisions allocated to specific portfolios for accounting purposes (FINREP) will agree at aggregate level with the amounts booked in the financial statements but the allocation for RWA to single exposures will differ from the allocation for accounting purposes to single exposures and thus a single exposure will show a different collective provision for accounting purposes (FINREP) than that for RWA?

Background

The reason behind this question is during audits (supervisory or otherwise) it is expected that the COREP provision of RWA should be in line with the accounting provision allocation. See also Q&A 2013_499 and Q&A 2013_201 .

Answer

Article 2(1) of the Regulation (EU) No. 183/2014 states that when a Specific Credit Risk Adjustment reflects losses related to the credit risk of a group of exposures, they should be assigned to all single exposures of the group proportionally to the risk-weighted exposure amounts (see also Q&A 2013_499 ). On the other hand, collective impairment allowances should be proportionally allocated among group assets for FINREP templates F 04.04 and F 07.00 (see also Q&A 2013_201 ). Consequently, the allocation of collective impairment allowances to single exposures for calculation of capital requirement for credit risk might differ from the allocation for FINREP purposes.

Original source: European Banking Authority, Q&A ID 2016_2574

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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