EBA · 2019_4486 Rejected question

Original maturity of credit lines until-further notice

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
Annex I, para. (2)(b)(ii) and (3(b)(i)
Topic
Credit risk
Submitted by
Competent authority
Submitted
2019-01-25
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Question

For risk classification as off-balance sheet item according to Annex I CRR, is the original maturity longer than one year where non-retail credit lines until further notice (i.e. no fixed maturity) may be cancelled with 3 months advance notification period and even immediately in case the borrower becoming delinquent or declaring bankruptcy?

Background

Unless meeting the conditions for low risk, the risk category of undrawn credit facilities depends on whether the original maturity is longer than one year, cf. paragraphs (2)(b)(ii) and (3)(b)(i) of Annex I CRR. There is no fixed original maturity where an institution provides a credit line until further notice (i.e. available as long as not having been cancelled). The credit line could be available for less than one year under a scenario where the institution exercises a right to cancel the credit line with effect before one year after origination of this credit line. In the specific case in question, the institution has the right to cancel the credit facility with an advance notice of three months, but the facility can be cancelled immediately in case of the borrower becoming delinquent or declaring bankruptcy,
No answer published yet.

Original source: European Banking Authority, Q&A ID 2019_4486

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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