EBA · 2016_2711 Final Q&A

Classifications of loans to SPVs as to SME

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
501, para. 2
Topic
Credit risk
Submitted by
Competent authority
Submitted
2016-04-18
Answered
2016-11-11
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

How should the repayment of loans to SPV's (classified as SME) be considered for the purpose of Article 501 of Regulation (EU) No 575/2013 (CRR)? Should the original exposure amount be taken into account?

Background

A bank's core business is commercial real estate. The obligors are to a large extent SPV's with staff less than 250 and annual revenues below € 50 million so they would fulfil the EU-definition regarding SME. The bank classifies these obligors as SME. However, the original loan size is more than € 1.5 million. By the time the exposure is below the threshold of € 1.5 million the bank applies the SME SF. Is that correct?

Answer

Article 501 (2)(c) (1) of Regulation (EU) No 575/2013 (CRR) refers to the total amount owed to the institution , its subsidiaries, its parent undertakings and other subsidiaries of those parent undertakings, including any exposure in default, but excluding claims or contingent claims secured on residential property collateral by the SME or the group of connected clients of the SME . Provided that the other criteria of the Commission Recommendation concerning the definition of micro, small and medium-sized enterprises ( 2003/361/EC ) are fulfilled, there is no reference in Article 501 CRR to the exposure value at the time when entering the exposure. See also Q&A 417 which clarifies that the 1.5 million Euro threshold is an 'ongoing condition' and other requirements that an institution must meet in that context. Q&A 414 and Q&A 2135 may also be relevant in this context.

Original source: European Banking Authority, Q&A ID 2016_2711

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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