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    EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits

    September 15, 2021

    The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance. The guidelines aim to support competent authorities in their assessment of breaches of the large exposure limits set in the Capital Requirements Regulation (CRR). The guidelines will apply from January 01, 2022.

    These final guidelines aim to provide guiding principles based on pre-defined criteria to help competent authorities decide  whether the exceptional circumstances leading to a breach of the large exposure limits would justify the decision to grant a limited period of time to the institution to comply with the limit. The guidelines also provide criteria for competent authorities to determine the appropriate period of time as well as the specific measures to be taken for an institution to return to compliance with the large exposure limits. The guidelines include 

    • criteria to determine the exceptional cases referred to in Article 396(1) of CRR.
    • information to be provided to the competent authority in case of a breach of the large exposure limits.
    • criteria to determine the appropriate time to return to compliance with the limits of Article 395(1) of CRR.
    • measures to be taken to ensure the timely return to compliance of the institution with the limits of Article 395(1) of CRR.

    The guidelines are from the going-concern perspective while gone-concern situations in which an institution is in the process of restructuring, or undergoes a similar crisis-induced scenario, are consequently outside the scope of these guidelines. In such situations, measures are needed that go well beyond restoring compliance with the large exposures framework of the CRR. The final guidelines were consulted for three months, during which EBA received stakeholder feedback, which led to certain minor amendments compared to the initial proposal.

     

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    Effective Date: January 01, 2022

    Keywords: Europe, EU, Banking, CRR, Large Exposures, Systemic Risk, Basel, Regulatory Capital, Concentration Risk, Credit Risk, Compliance Risk, EBA

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