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

    ESAs Publish Reporting Templates for Financial Conglomerates

    ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.

    January 18, 2021 WebPage Regulatory News
    News

    EBA Publishes Report on Asset Encumbrance of Banks in EU

    EBA published the annual report on asset encumbrance of banks in EU.

    January 18, 2021 WebPage Regulatory News
    News

    US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C

    FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.

    January 15, 2021 WebPage Regulatory News
    News

    EBA Proposes Guidelines for Establishing Intermediate Parent Entities

    EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.

    January 15, 2021 WebPage Regulatory News
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Issues Erratum for Technical Package on Reporting Framework 3.0

    EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.

    January 14, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets

    APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.

    January 14, 2021 WebPage Regulatory News
    News

    ECB Letter Sets Out Strategies to Address Issue of Nonperforming Loans

    ECB published a letter from Andrea Enria, the Chair of the Supervisory Board of ECB, answering questions raised by the President of the Bundestag (the German federal parliament) on how ECB assesses the financial stability of the euro area in the context of the significant level of nonperforming loans.

    January 14, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6453