EBA · 2024_7116 Rejected question

Privileged access to foreign currency resources in the context of Art. 172 (1) letter e case (i) CRR

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
172, para. 1
Topic
Credit risk
Submitted by
Credit institution
Submitted
2024-06-20
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Question

Can local currency denomination, as laid down in Art. 172 (1) letter e case (i) CRR, be employed on an evidence-based material basis, too?

Background

When acting as a co-lender to a multilateral development bank (MDB) and providing foreign currency loans within a so called A-/B-loan-structure, a commercial lending institution is granted privileged access to foreign currency resources of a member state to such MDB. This is due to respective provisions as typically laid down in the MDB’s articles of association which, in turn, are resolved by the obliged countries itself when acting as the MDB’s members. Such privileged access to foreign currency resources resulting from a co-lender-status to an MDB de facto eliminates transfer risk. History shows that such transactions have never been defaulted due to a transfer risk event.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2024_7116

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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