EBA · 2026_7722 Rejected question

Assigning risk-weight to a credit facility where the drawdown is contingent on non-credit risk related conditions that are required to be met by the obligor prior to any initial or subsequent drawdown and where the conditions for the drawdown are not met.

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
111, para. 2
Topic
Credit risk
Submitted by
Credit institution
Submitted
2026-02-17
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Question

What risk-weight should be assigned to a credit facility where the drawdown is contingent on non-credit risk related conditions that are required to be met by the obligor prior to any initial or subsequent drawdown and where the conditions for the drawdowns are not met per the reporting date?

Background

CRR article 5(10) defines that commitments include arrangements where there are conditions that are required to be met by the obligor prior to any initial or subsequent drawdown. Meaning the contingent credit facility should be reported as a commitment and risk-weighted according to CRR article 111(2).  The obligor is a corporation that does not fulfil requirements for SME or retail classification. The arrangement does not fulfil the conditions for 0% risk-weight in CRR article 5(10)(a-e). The arrangement does not fulfil the requirements for being unconditionally cancellable (UCC).  The arrangement consists of a credit facility of 5.000.000 CU where the drawdown is contingent on certain non-credit risk related conditions such as financial targets for profitability and securing the proper licenses to operate from local authorities. When the conditions are met, the obligor has the right to, within the maturity, drawdown the full amount of the credit facility at their discretion.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2026_7722

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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