EBA · 2016_2646 Rejected question

Risk weight for exposures to central-government-risk PSEs with an original maturity of 3 months or less, which are denominated in foreign currency

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
116, para. 3 and 4
Topic
Credit risk
Submitted by
Competent authority
Submitted
2016-02-25
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Question

May exposures to PSEs established in a Member State, whose level of risk in the opinion of the competent authority of the Member State in question does not differ from the level of risk of the central government, be assigned a risk weight of 20% in accordance with Article 116(3) CRR if they are denominated in foreign currency?

Background

In accordance with Article 116(4) CRR, exposures to PSEs may be treated as exposures to central government in whose jurisdiction they are established where in the opinion of the competent authorities of this jurisdiction there is no difference in risk between such exposures because of the existence of appropriate guarantee by the central government. Institutions may risk weight exposures to such PSEs in accordance with the provisions of Article 114 CRR. In accordance with Article 116(3) CRR, exposures to PSEs with original maturity of 3 months or less shall be assigned a risk weight of 20%. However, in Article 114 CRR there is no preferential treatment for exposures with original maturity of 3 months or less. There is only preferential treatment for exposures which are denominated and funded in the domestic currency of any Member States.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2016_2646

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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