EBA · 2025_7405 Rejected question

Application of real estate valuation principles to AIRB

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
229, para. 1
Topic
Credit risk
Submitted by
Credit institution
Submitted
2025-04-09
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Question

Are the valuation principles per CRR 229.1(e) (capping to 6/8-year averages) applicable when using own estimates of LGD (AIRB)?

Background

(Part Three, Title II of CRR) Per article 108.1 institutions may apply credit risk mitigation per Chapter 4 when using either the Standardised approach or IRB approach without own estimates of LGD (FIRB). Article 229.1(e) applies as a part of Chapter 4. Requirements for own-LGD estimates per article 181.1(f) require that when taking collateral into account in own LGD estimates, institutions’ internal requirements must be generally consistent with those set out in Chapter 4, Section 3, Sub-section 1. Chapter 229 is part of Section 4 and as such is not referred to by article 181. This suggests that the valuation principles of article 229.1(e) are not applicable when using own estimates of LGD.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2025_7405

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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