EBA Consults on Credit Risk Mitigation Guidelines Under A-IRB Approach
EBA issued a consultation on the guidelines on credit risk mitigation for institutions applying the advanced internal rating-based (A-IRB) approach, with own estimates of loss given defaults (LGDs). The consultation runs until May 25, 2019. The consultation contains guidelines on the application of the credit risk mitigation provisions laid down in the Capital Requirements Regulation (CRR), which is applicable to institutions using the A-IRB approach. The guidelines clarify the eligibility requirements for different credit risk mitigation techniques, namely funded and unfunded credit protection (for example, collateral and guarantees) available to institutions.
For funded credit protection, the guidelines provide a mapping to the eligibility requirements of legal certainty and collateral valuation applicable to institutions using the standardized approach and the A-IRB approach. The guidelines also clarify how institutions may recognize the effects of different credit risk mitigation techniques for capital requirement purposes. For unfunded credit protection, the guidelines clarify the set of compliant approaches that are available to institutions to recognize the effects of the credit protection by adjusting their risk parameter estimates—that is, the probability of default or the LGD. Moreover, the guidelines clarify whether exposure values or LGD estimates are to be adjusted to recognize different forms of funded credit protection, namely netting and collateral.
The aim of the guidelines is to eliminate the remaining significant differences in approaches in the area of credit risk mitigation, which are either due to different supervisory practices or bank-specific choices. These draft guidelines complement the EBA report on credit risk mitigation, which focused on the standardized approach and the foundation-IRB approach (F-IRB).
Related Links
Comment Due Date: May 25, 2019
Keywords: Europe, EU, Banking, Credit Risk, Credit Risk Mitigation, IRB Approach, CRR, LGD, EBA
Related Articles
|
News
EBA Single Rulebook Q&A: Fourth Update for March 2019EBA published answers to five questions under the Single Rulebook question and answer (Q&A) updates for this week.
March 22, 2019
WebPage
Regulatory News
|
|
News
ECB Updates Validation Checks and List of Identifiers Under AnaCreditECB updated the AnaCredit validation checks (Version 1.4) and the list of national identifiers (version 2.4) for AnaCredit reporting.
March 21, 2019
WebPage
Regulatory News
|
|
News
BCBS Publishes Results of the Basel III Monitoring ExerciseBCBS published results of the Basel III monitoring exercise based on data as of June 30, 2018.
March 20, 2019
WebPage
Regulatory News
|
|
News
EBA, FCA, and PRA Agree on MoU Template for Supervisory CooperationEBA, FCA, and PRA announced that they have agreed on a template for the Memorandum of Understanding (MoU) that sets out the expectations for supervisory cooperation and information-sharing arrangements between UK and EU/European Economic Area national authorities.
March 20, 2019
WebPage
Regulatory News
|
|
News
HKMA Publishes CoP on Loss-Absorbing Capacity Requirements of BanksHKMA issued, in relation to the Financial Institutions Resolution (Loss-Absorbing Capacity Requirements—Banking Sector) Rules (LAC Rules) a chapter of a code of practice (LAC CoP) under section 196 of the Financial Institutions Resolution Ordinance (FIRO).
March 20, 2019
WebPage
Regulatory News
|
|
News
EBA Publishes Reports Monitoring the Implementation of Basel III in EUEBA published two reports measuring the impact of implementing the final Basel III reforms and monitoring the implementation of liquidity measures in EU.
March 20, 2019
WebPage
Regulatory News
|
|
News
BCBS Publishes Results of Survey on Proportionality in Bank RegulationBCBS published a report presenting the results of a survey conducted on proportionality practices in bank regulation and supervision.
March 19, 2019
WebPage
Regulatory News
|
|
News
US Agencies Adopt Interim Rule to Facilitate Transfers of Legacy SwapsUS Agencies (FCA, FDIC, FED, FHFA, and OCC) are adopting and inviting comments on an interim final rule.
March 19, 2019
WebPage
Regulatory News
|
|
News
EBA Updates List of Other Systemically Important Institutions in EUEBA updated the 2018 list of other systemically important institutions (O-SIIs) in EU. The list also reflects the additional capital buffers that the relevant authorities have set for the identified O-SIIs.
March 19, 2019
WebPage
Regulatory News
|
|
News
HKMA Expects Banks to Manage Risks Related to Crypto-Asset ExposuresHKMA issued a statement announcing that it expects authorized institutions to take note of the BCBS statement on crypto-assets and its prudential expectations.
March 18, 2019
WebPage
Regulatory News
|
