EBA · 2025_7368 Rejected question

Calculation of Kirb

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
255, para. 3
Topic
Securitisation and Covered Bonds
Submitted by
Individual
Submitted
2025-03-06
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Question

According to Article 255(2)(3), Kirb seems to be defined as (EL+UL)*8%/exposure value of the underlying pool. However, considering the fact that, for unexpected loss, banks hold an amount of regulatory capital by UL*8%, but for expected loss not covered by provisions, banks have to deduct it from Tier 1 capital,  As Kirb stands for the averaged capital requirement of the underlying exposures(including expected loss), it should be calculated as (UL*8%+EL)/exposure value of the underlying pool instead.

Background

The reasoning above could be verified by Article 267(3), where the look-through risk weight includes a portion as "EL*1250%/the exposure value of the underlying exposures".
No answer published yet.

Original source: European Banking Authority, Q&A ID 2025_7368

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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