Featured Product

    EC Regulation Amends Standards for Calculating Credit Risk Adjustments

    June 21, 2022

    The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments. This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union—that is, July 11, 2022.

    The Regulation 2022/954 amends Regulation 183/2014 with respect to calculating the specific credit risk adjustments for purposes of assigning the risk-weights, referred to in Article 127(1) of the Capital Requirements Regulation or CRR (575/2013), to the unsecured part of a defaulted exposure. When calculating specific credit risk adjustments for such purposes, institutions shall include any positive difference between the amount owed by the obligor on that exposure and the sum of the following:

    • Additional own funds reduction if that exposure was written-off fully
    • Any already existing own funds reductions related to that exposure

    The Regulation 2022/954 highlights that it is necessary to ensure that the specific credit risk adjustments recognized for the purposes of Article 127(1) of CRR incorporate any discount in a transaction price of a defaulted exposure that the purchasing institution has not recognized by increasing common equity tier (CET 1) capital. In case of a revaluation of the defaulted exposure occurring after its purchase, the discount should no longer incorporate the part of the revaluation amount of the defaulted exposure that has been recognized as increasing the institution’s CET 1 capital. This needs to be done to avoid any undue double recognition of the potential decrease in the level of expected loss by the purchasing institution after the purchase on both CET 1 capital of that institution and for the purposes of determining the risk-weight in accordance with Article 127(1) of CRR. Therefore, Regulation 183/2014 has been amended accordingly.

     

    Related Link: Regulation 2022/954

     

    Keywords: Europe, EU, Banking, Credit Risk, CRR, Basel, Regulatory Technical Standards, Regulatory Capital, Risk-Weighted Assets, Defaulted Exposures, EC

    Featured Experts
    Related Articles
    News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News
    News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News
    News

    EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation

    The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)

    October 26, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8582