EBA · 2020_5223 Rejected question

Definition of the parameter E in the formula regarding the Adjustment of risk-weighted non-defaulted SME exposures.

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
501, para. 1
Topic
Credit risk
Submitted by
Competent authority
Submitted
2020-04-29
Browse ECB SSM Register → More Q&As on this regulation →

Question

We believe there is a need of clarification in the definition of the parameter E* in the formula of the article 501 in order to insure that the result of the formula is valid in all cases.

Background

Institutions shall adjust the risk-weighted exposure amounts for non-defaulted exposures to an SME (RWEA), which are calculated in accordance with Chapter 2 or 3 of Title II of Part Three, as applicable, in accordance with the formula described in Article 501,1. The formula has a parameter E* = the total amount owed to the institution, its subsidiaries, its parent undertakings and other subsidiaries of those parent undertakings, including any exposure in default, but excluding claims or contingent claims secured on residential property collateral, by the SME or the group of connected clients of the SME. If the total amount owed to the institution, its subsidiaries, its parent undertakings and other subsidiaries of those parent undertakings, including any exposure in default is the same as claims or contingent claims secured on residential property collateral, by the SME or the group of connected clients of the SME, the value of E* is 0. That leads to the fact that both the numerator and the denominator in the formula described in Article 501 equals 0, and consequently, if E* = 0, it causes an error in the formula (0 / 0).
No answer published yet.

Original source: European Banking Authority, Q&A ID 2020_5223

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.

Similar Q&As

Calculation of the SME supporting factor for off-balance-sheet exposures

Answered 2025-10-31

Treatment of SME-supporting factor in the case of secured exposures.

Answered 2014-07-04

C 07.00 CR SA STD Column 215: which amount should be display in Column 215 for exposures NOT subject to SME-supporting factor? Should we display 0 or the amount of risk weighted assets?

Answered 2014-09-05

New EBA Validation rule (taxonomy 2.6) v4786_m about the comparison between the risk weighted exposure amount and the exposure value for Equity in CR GB IRB

Answered 2017-12-08

Leased assets residual value under standardised method

Answered 2019-10-04

More Q&As on this topic

Application of the currency mismatch treatment to self-employed individuals (natural persons carrying out an economic activity) under Article 123a CRR.

Answered 2026-07-31

Requirements for the purpose of treating exposures secured by mortgages on immovable property as duly secured from an RWA computation perspective under CRR Article 124(2) of the CRR.

Answered 2026-05-08

Use of credit assessments by ECAIs not in scope of Regulation (EC) No 1060/2009.

Answered 2026-03-13

US Hard test: adequacy of considering US charge-off rates corresponding to loss rates for exposures secured by residential property or commercial immovable property situated within the territory of the US

Answered 2026-02-27

Application of the SME definition in specific cases

Answered 2025-11-28

📋 Track EU financial regulation continuously

Forseti monitors EU financial regulation and delivers personalised alerts anchored to verified official sources.

Start free trial → Learn more

14-day free trial. No credit card required.