Consistency of treatment between the technical guarantees that are subject to the Pillar 2 requirement (Supervisory Expectation of the ECB) and the technical guarantees that are subject to the Pillar 1 requirement (Regulation EU 2019/630).

Should the exemption of technical guarantees from the backstop calculation subject to the Pillar 2 requirement) be extended to the technical guarantees subject to the Pillar 1 requirement?

The current backstop regulation specifies a backstop exemption only for technical guarantees originated before April 26 th 2019, i.e. exposures that are not subject to the Regulation (EU) 2019/630 as regards minimum loss coverage for non-performing exposures.   Indeed, the ECB’s STE reporting instructions published in 2021 explicitly state that non-performing technical guarantees granted before April 26 th 2019 are exempted from the calculation of the Pillar 2 backstop:  « Exemptions are also applicable to the “technical guarantees”, defined as those that guarantee the ability of the bank’s client to comply with contractual non-economic obligations (such as the supply of goods or execution of works) towards a third party ». This treatment has been confirmed each year in ECB’s STE reporting instructions published since 2021. However, Article 47a CRR (introduced by Regulation EU 2019/630) does not provide any specific treatment for non-performing technical guarantees granted from April 26 th 2019. CRR has not been updated to take this specific treatment for technical guarantees into account.