Featured Product

    BaFin Circular on Specifying High-Risk Exposures Under CRR

    November 08, 2019

    BaFin published Circular 13/2019 (BA) on specification of types of exposures to be associated with high risk in accordance with Article 128(3) of the Capital Requirements Regulation (CRR). The circular comes into force on January 01, 2020. With this circular, BaFin is adopting the EBA guidelines (EBA/GL/2019/01) regarding the types of exposures to be associated with high risk under the Article 128(3) of the CRR. The circular highlights that if an institution determines item types according to section 4.3, Sub-section 7 of the guidelines, it shall communicate this together with a brief description of the most important features of the risk positions to BaFin. BaFin sends the information regarding the risk position type and the characteristics anonymously to EBA.

    Article 128 of the CRR sets out the requirements for classifying an exposure as an item associated with particularly high risk, which results in an assignment of a 150% risk-weight for the considered exposure. Paragraph 2 of Article 128 provides a list of exposures which are assigned to this exposure class:

    • Investments in venture capital firms
    • Investments in AIFs as defined in Article 4(1)(a) of Directive 2011/61/EU, except where the mandate of the fund does not allow a leverage higher than that required under Article 51(3) of Directive 2009/65/EC
    • Investments in private equity
    • Speculative immovable property financing

    Additionally, Article 128(3) CRR provides a mandate to EBA to draft guidelines that specify which types of exposures, other than those mentioned in Article 128(2) CRR, are to be associated with particularly high risk and the circumstances under which this should happen. As a result of an exposure being identified as an "item of particularly high risk," such exposure receives a risk-weight of 150%. This high-risk exposure class represents the implementation of the discretion that national supervisors are granted in paragraph 80 of the current Basel II standard that states that national supervisors may decide to apply a 150% (or higher) risk-weight to reflect "the higher risks associated with some other assets, such as venture capital and private equity investments."

     

    Related Links (in German)

    Effective Date: January 01, 2020

    Keywords: Europe, Germany, Banking, CRR, High Risk Exposures, Credit Risk, Reporting, Risk-Weighted Assets, Standardized Approach, National Discretions, EBA, BaFin

    Featured Experts
    Related Articles
    News

    APRA Finalizes Reporting Standard for Operational Risk Requirements

    APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.

    March 03, 2021 WebPage Regulatory News
    News

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    March 01, 2021 WebPage Regulatory News
    News

    EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR

    EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).

    March 01, 2021 WebPage Regulatory News
    News

    EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package

    EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.

    February 26, 2021 WebPage Regulatory News
    News

    EBA Publishes Single Rulebook Q&A Updates in February 2021

    The EBA Single Rulebook question and answer (Q&A) tool updates for this month include answers to ten questions.

    February 26, 2021 WebPage Regulatory News
    News

    ESMA Releases Schema and Instructions for Securitization Reporting

    ESMA updated the set of questions and answers (Q&A), along with the reporting instructions and an XML schema for the templates set out in the technical standards on disclosure requirements, under the Securitization Regulation.

    February 26, 2021 WebPage Regulatory News
    News

    EU Rule Amends Requirement for European Single Electronic Format

    EU published Regulation 2021/337, which amends the Transparency Directive (2004/109/EC), regarding the use of the single electronic reporting format for annual financial reports.

    February 26, 2021 WebPage Regulatory News
    News

    EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway

    The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.

    February 25, 2021 WebPage Regulatory News
    News

    PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks

    In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.

    February 25, 2021 WebPage Regulatory News
    News

    FSB Sets Out Work Priorities for 2021

    In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.

    February 25, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6637