EBA Opinion on Changes to Standards on Specialized Lending Exposures
EBA published an opinion in response to the EC intention to amend the final draft regulatory technical standards on assigning risk-weights to specialized lending exposures, before endorsing these standards. The regulatory standards have been developed on the basis of Article 153 (9) of the Capital Requirements Regulation, or CRR (575/2013). EBA is of the view that the proposed changes, despite their substantive nature, do not alter the draft technical standards in a significant manner, as they still maintain a good balance between the flexibility and risk-sensitivity required for the internal ratings-based, or IRB, approach and the need for a harmonized regulatory framework.
In its opinion, EBA identifies three substantive changes introduced by EC. The first two changes allow a certain flexibility in relation to the incorporation of risk drivers. The first change introduces the possibility for institutions to consider a sub-factor or a sub-factor component as irrelevant for certain types of specialized lending exposures. The second change allows institutions to consider additional relevant information (or an additional risk driver) for a type of specialized lending exposures, jointly with the sub-factor that most closely corresponds to the additional risk driver. EBA is of the view that the flexibility introduced through these two substantive changes only marginally reduces the harmonization across institutions since such factors should be applied consistently for the same type of exposure and duly justified and documented.
The third substantive change simplifies the rules on overlapping criteria at the level of the sub-factor or of the sub-factor components. EBA is of the view that this change does not significantly jeopardize the risk-sensitivity of the approach and has the merit of simplifying the technical standards.
Related Links
Keywords: Europe, EU, Banking, Risk Weight, CRR, Lending Exposures, Opinion, Regulatory Technical Standards, IRB Approach, Credit Risk, Regulatory Capital, EC, EBA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Related Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
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.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.
