EBA · 2019_4889 Rejected question

USA public sector entities risk weight

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
116, para. 1-5
Topic
Credit risk
Submitted by
Credit institution
Submitted
2019-08-29
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Question

USA is listed by the EBA as applying supervisory and regulatory arrangements at least equivalent to those applied in the Union. However the competent authorities of this country does not require the use of ECAI ratings to assess risk weights of exposures to public sector entities. Should we nevertheless consider that this competent authority treat exposures to public sector entities in accordance with paragraph 1 or 2 of article 116, and so should we risk weight these exposures in accordance to paragraph 1 or 2?

Background

USA competent authorities do not use ECAI ratings. Nevertheless, we think that they treat these exposures in accordance to paragraph 1 or 2 because they preconize a 20 percent risk weight should be applied to general obligations of states and other political subdivisions of OECD countries. And exposures that rely on repayment from specific projects (for example, revenue bonds) are assigned a risk weight of 50 percent (source https://www.federalreserve.gov/aboutthefed/boardmeetings/standardized_ap... ).
No answer published yet.

Original source: European Banking Authority, Q&A ID 2019_4889

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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