EBA · 2016_3067 Rejected question

Funded and unfunded credit protection

Regulation
Directive 2013/36/EU (CRD)
Article
78
Topic
Supervisory reporting - Supervisory Benchmarking
Submitted by
Credit institution
Submitted
2016-12-21
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Question

In cases when a contract has funded and unfunded credit protection, should any of them take precedence over the other? For example, a contract with an exposure of 100, a funded credit protection of 50 and unfunded of 70. If there is no preference, the sum of credit protections is more than exposure, but if funded credit protection takes precedence over unfunded, the result is the next: funded credit protection of 50, 35 unfunded (70% of 50) and 15 without credit protection. In the last case, the sum is the exposure. How should we treat these guarantees?

Background

Treatment of contracts with funded and unfunded credit protection.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2016_3067

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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