EBA · 2022_6368 Rejected question

Own estimation of conversion factors for off-balance sheet exposures for binding mortgage/loan offers

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
166, para. 8
Topic
Credit risk
Submitted by
Credit institution
Submitted
2022-02-11
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Question

Is the own estimation of credit conversion factors considered relevant for binding mortgage/loan offers, with a maturity of less than one year?. Should the total amount of a binding mortgage/loan offer be considered as "currently undrawn amount of a commitment that could be drawn" or not?

Background

The estimation of the credit conversion factor as described in article 4(56) of the CRR requires the "currently undrawn amount of a commitment that could be drawn". It is also to be considered that a client in financial difficulties cannot directly draw amounts from a mortgage/loan offer as he or she could in case of a granted credit facility.  Q&As 1263, 3366 and 3376 do not directly address the specific case of binding mortgage offers. For the purpose of RWA calculation the treatment of these exposures as medium/low risk items or as exposures with a own estimated conversion factor close to 1 has a significant quantitative RWA impact for banks with large RRE mortgage exposures. If banks apply different treatments of this closed norm this could have an adverse impact on the level playing field.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2022_6368

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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