Featured Product

    EBA Guidelines on Credit Risk Mitigation Under Advanced IRB Approach

    May 06, 2020

    EBA finalized the guidelines on credit risk mitigation for institutions applying the advanced internal ratings-based (IRB) approach, with own estimates of loss given default (LGD). The guidelines clarify the application of the credit risk mitigation provisions, as laid down in the Capital Requirements Regulation (CRR) and applicable to institutions using the advanced IRB approach. They clarify the eligibility requirements for different credit risk mitigation techniques, namely funded and unfunded credit protection, available to institutions. The guidelines apply from January 01, 2022.

    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 foundation IRB approach.
    • Outline specifics on other than immovable physical collateral for which the assessment of legal certainty is particularly challenging
    • Clarify how institutions may recognize the effects of different credit risk mitigation techniques for capital requirement purposes

    For unfunded credit protection, the guidelines clarify:

    • Set of compliant approaches that are available to institutions to recognize the effects of the credit protection by adjusting their risk parameter estimates
    • How to recognize the effects of funded credit protection based on netting

    The guidelines aim to eliminate the remaining significant differences in approaches in the area of credit risk mitigation, which are due to either different supervisory practices or bank-specific choices. The guidelines were subject to a three-month consultation period and have been developed in dialog with the industry, which provided significant input on the current practices. The guidelines complement the EBA report on credit risk mitigation, which focuses on the standardized approach and the foundation-IRB approach. These guidelines are complementary to the EBA guidelines on the probability of default (PD) estimation, LGD estimation, and the treatment of defaulted exposures, which clarify how to adjust LGD estimates to recognize the effects of collateral. 


    Related Links

    Keywords: Europe, EU, Banking, Credit Risk, Credit Risk Mitigation, IRB Approach, CRR, LGD, EBA

    Related Articles

    NGFS Seeks Public Feedback on Climate Risk Assessment Scenarios

    The Network for Greening the Financial System (NGFS) launched its first user feedback survey on climate scenarios, with the feedback period ending on February 27, 2023.

    February 06, 2023 WebPage Regulatory News

    EBA Launches Stress Tests for Banks, Issues Other Updates

    The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.

    January 31, 2023 WebPage Regulatory News

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8702