EBA · 2024_7111 Rejected question

Unrated short term claim/exposure

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
120, para. 3
Topic
Credit risk
Submitted by
Individual
Submitted
2024-06-15
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Question

As per CRR Article 120(para 3, subpara c), it states: "If there is a short-term assessment and such an assessment determines a less favourable risk weight than the use of the general preferential treatment for short-term exposures, as specified in paragraph 2, then the general preferential treatment for short-term exposures shall not be used and all unrated short-term claims shall be assigned the same risk weight as that applied by the specific short-term assessment." Question: What is meant by unrated short-term claims as per this paragraph? If there is a general issuer rating available, will the exposures with residual maturity of less than 3 months be classed as Unrated and not eligible for preferential risk weight treatment as per CRR Article 120 (2)?

Background

As per CRR Article 120 (3c), it is not clear what is meant by unrated short term claim? Since short term claims are usually issue specific, does it mean any exposure to the institution with less than three months of residual maturity will be classed as Unrated in spite of issuer rating for the institution available? According to my interpretation as clarified in EBA Q&A question id: 2013_652 (https://www.eba.europa.eu/single-rule-book-qa/qna/view/publicId/2013_652), it indicates   "The availability of a "credit assessment by a nominated ECAI" referenced in Article 120 (1) of Regulation (EU) No 575/2013 (CRR) shall be read as referring to the "exposures" ( i.e. to both issuer and issue) (referenced in this paragraph." However, the article only specifies CRR Article 120(1) instead of the whole CRR Article 120 which includes CRR Article 120 (3c). Can EBA confirm that the Q&A highlighted above covers CRR Article 120 as a whole (including para 3, subpara c) and not just Article 120 (1) and if a short term claim has a issuer rating, it cannot be treated as unrated irrespective of residual maturity?
No answer published yet.

Original source: European Banking Authority, Q&A ID 2024_7111

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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