EBA · 2021_6234 Rejected question

CRM for off balance sheet commitments

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
124 and 203
Topic
Credit risk
Submitted by
Credit institution
Submitted
2021-10-08
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Question

1) Can the part of the off-balance exposure that is covered by the (to be vested) mortgage inscription be taken into account as 'fully secured and completely secured by mortgage' under Article 125(1) CRR?    2) Can the part of the off-balance exposure that is covered by the (to be vested) mortgage guarantee be taken into account as credit risk mitigation under Article 203 CRR?

Background

A credit institution has loan commitments for the provision of mortgage loans. The loan commitments relate to mortgage loan offers granted by the institution to clients, and can be either already accepted by the client, or pending acceptance (or refusal) by the client. The loan offer is contractually cancelled if the loan offer conditions are not fulfilled, among which are the vesting of a mortgage inscription on the property, or the vesting of a (unfunded) mortgage guarantee (national guarantee scheme provided by a government-backed foundation).  The official (opposable to third parties) mortgage act and vesting of the mortgage inscription and/or mortgage guarantee is done with the passing of the mortgage act by the notary.  Since the effective payment of credit (the moment the off-balance sheet commitment is payed and goes to an on balance exposure) is conditional on the vesting of the mortgage inscription and/or mortgage guarantee, it is unclear whether this can already be taken into account as credit risk mitigation.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2021_6234

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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