EBA · 2025_7419 Rejected question

Clarification on Risk Weight Assignment for ADC Exposures in Default

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
Article 127
Topic
Credit risk
Submitted by
Credit institution
Submitted
2025-04-17
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Question

Could you please clarify what risk weight should be applied to ADC exposures that are in default?

Background

According to CRR, ADC exposures should generally be assigned a 150% risk weight, unless they qualify for treatment under Article 126a(2), in which case a 100% risk weight may apply. However, based on the ITS decision tree, when an exposure is in default, it is assigned to the exposure class “in default”, and the risk weight is determined by evaluating how sufficiently the exposure is secured and whether there are specific credit risk adjustments or deductions under Article 36(1). In some cases, even for ADC exposures in default, where there is sufficient collateral coverage and applicable deductions, the calculated risk weight could result in 100%, effectively resulting in a more favourable treatment than the standard 150%. We would appreciate your clarification on whether such an outcome is acceptable, and what risk weight should be applied in the case of defaulted ADC exposures.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2025_7419

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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