EBA · 2023_6936 Rejected question

Automatic cancellation of commitments qualified as unconditionally cancellable commitments (UCC)

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
111, 166, Annex I, para. 111(1), 166(10), Annex I
Topic
Credit risk
Submitted by
Credit institution
Submitted
2023-12-21
Browse ECB SSM Register → More Q&As on this regulation →

Question

If contractual arrangements of a commitment provide for automatic cancellation due to deterioration in a borrower’s creditworthiness, but the cancellation is not always automatic considering client relationship, can this commitment be considered as an unconditionally cancellable commitment (UCC)?

Background

The annex I of CRR states that undrawn credit facilities can be considered as low risk items if they can be automatically cancelled due to deterioration in a borrower’s creditworthiness: 4. Low risk: (a) undrawn credit facilities comprising agreements to lend, purchase securities, provide guarantees or acceptance facilities which may be cancelled unconditionally at any time without notice, or that do effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness. Retail credit lines may be considered as unconditionally cancellable if the terms permit the institution to cancel them to the full extent allowable under consumer protection and related legislation; The text uses the term “may be cancelled” which seems to indicate that we must rely on the terms of the contract to define whether a commitment is UCC or not. The term “provide” also indicates that the bank must have the right to cancel but do not have to demonstrate that the cancelation is systematically cancelled whenever the borrower’s creditworthiness is downgraded.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2023_6936

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

CCF for uncommitted lines

Answered 2017-11-24

Appropriate reporting of unconditionally cancellable commitments (UCCs) subject to transitional arrangements of Article 495d in CR SA (COREP C_07.00)

Answered 2025-12-05

Pending credit offers

Answered 2022-02-11

Original maturity of credit lines until further notice

Answered 2022-12-22

Eligibility of unconditional Financial Letters of Credit as eligible financial collateral

Answered 2017-01-06

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.