Criteria for sufficiently diversified private equity portfolios under the simple risk weight approach

What rules should be applied in assessing whether a private equity exposure is in a sufficiently diversified portfolio of portfolio companies as mentioned in Article 155(2)? In case of exposure to several private equity funds, may the portfolio companies of these private equity funds be considered as one portfolio before assessing whether the portfolio is sufficiently diversified?

Pursuant to Article 155(2) CRR Risk weighted exposure amounts for equity exposures, a risk weight of 190% may be applied for private equity exposures in sufficiently diversified portfolio under the simple risk weight approach. To our knowledge, there are no technical standards defining "sufficiently diversified portfolios".   Most private equity funds are set up as a limited partnership and are governed by the terms set forth in the limited partnership agreement (LPA). The fund has a general partner (GP), which raises capital from investors, which invest as limited partners (LPs) in the fund. The private equity fund typically makes investments in companies known as portfolio companies. Private equity funds typically make control and co-control equity investments in companies with strong market positions, significant potential for revenue and earnings growth, strong cash flows and a solid platform that can retain and/or attract high quality management. Some private equity funds may have a special sector focus, but in general they are diversified across sectors. They can have a specific focus by region, e.g. Europe or the US, or they can be global. Some also have a special focus regarding the size of the companies they acquire, e.g. small or large cap. The private equity fund itself typically invests in 10-15 portfolio companies. As an investor you typically invest in several private equity funds in order to diversify the exposure in the underlying portfolio of portfolio companies.   This question has been rejected by EBA 11/04/2017 because the issue it deals with is already addressed in Article 4(1)(7) and 152 of Regulation (EU) No. 575/2013. From our point of view Article 152 does not provide any guidance on the criteria because Article 152(2)(a) refers to Article 155(2) and hence creates a circular reference.