EBA · 2024_7247 Rejected question

Calculation of the Exposure-to-Value

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
124, para. 6
Topic
Credit risk
Submitted by
Credit institution
Submitted
2024-11-12
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Question

How should be calculated the Exposure-to-Value (ETV) where a loan is secured by a combination of several liens on multiple properties (both residential and commercial) ?

Background

Should one single ETV be calculated where the "V" is the sum of the values of all properties (both residential and commercial). Use case 1 or Should several ETV be calculated separately for the various liens where "V" will be composed of one single property (residential or commercial). Use case 2. Example: Loan of 1700 Mortgage 1 Residential property A value: 3000 Nominal of the lien: 2500 Mortgage 2 Commercial property B value: 1000 Nominal of the lien: 950   Use case 1 Should one single ETV be calculated as follows: ETV = min (sum(2500; 950);1700)/ (3000+1000) = 0.43 This leads to 30% RW for residential and 70% RW for commercial.   Use case 2 Should two separate ETV be calculated as follows ETV residential: min (1700;2500)/3000 = 0.57 this leads to 35% RWA as per 125 (2) ETV commercial : min (1700;950)/1000 = 0.95 --> this leads to 110% RWA as per 126 (2)
No answer published yet.

Original source: European Banking Authority, Q&A ID 2024_7247

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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