Scope of conversion factor estimation and application

The exposure arising from an amount drawn without a pre-existent underlying credit line does not fall under the scope of application of Article 166(8) of Regulation (EU) No 575/2013 as amended (CRR). In particular, in case the overdraft only refers to an amount, which is drawn in the absence of any committed credit line, there is no undrawn amount to be multiplied by a conversion factor. However, the circumstance that the amount of a possible overdraft, permitted according to internal policies of the institution, has not been disclosed to the customer does not prevent this from being considered as a credit line. Furthermore, in case of institutions applying the IRB Approach by using their own estimates of credit conversion factors (CCF), if an institution systematically allows unauthorised drawings, this should be appropriately reflected in the estimates of conversion factors (for instance through a separate calibration segment). However, any amount drawn exceeding the credit facility would be considered past due in accordance with Article 178(2)(a) and (b) CRR. See also Q&A 3246 on the classification of credit lines under the off-balance sheet items, Q&A 2663 on the meaning of credit lines and Q&A 1263 on the use of own estimates of conversion factors.