EBA · 2021_5753 Rejected question

Collateralized loans below 35% Risk Weight

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
Article 428af, para. (b)
Topic
Liquidity risk
Submitted by
Individual
Submitted
2021-02-22
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Question

Could you please clarify whether in case of collateralized loans (collateralized credit claims) the applicable risk weight (based on the CRR standardised approach) used for classifying certain assets in NSFR refers to the risk weight after credit risk mitigation (i.e. considering the collateral) of the loan?

Background

For the purpose of NSFR, only the Standardised Approach risk weights may be used to determine the NSFR treatment. According to Article 428af (b), unencumbered loans with a residual maturity of one year or more, excluding loans to financial customers and loans referred to in Articles 428r to 428ad, provided that those loans are assigned a risk weight of 35 % or less in accordance with Chapter 2 of Title II of Part Three, shall be subject to a 65 % required stable funding factor. If a credit claim to a corporate client (individually, 50% risk weight) is collateralized in full by securities issued by 0% risk weight issuers, is it classified under or above 35% risk weight in the context of NSFR?
No answer published yet.

Original source: European Banking Authority, Q&A ID 2021_5753

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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