The losses on the part of the exposures up to 55 % of the property value do not exceed 0,3 % of the total amount of credit obligations outstanding in that year. The losses on the part of the exposures up to 100 % of the property value do not exceed 0,5 % of the total amount, across all these exposures, of credit obligations outstanding in that year. The losses on the part of the exposures up to 55 % of the property value do not exceed 0,3 % of the total amount, across all those exposures, of credit obligations outstanding in that year. The part of the exposure up to 55 % of the property value remaining after any senior or pari passu ranking liens not held by the institution have been deducted shall be assigned a risk weight of 20 %. For the purposes of the second subparagraph of this paragraph, the authority designated in accordance with paragraph 6 may increase the risk weights laid down in Article 125, point , or Article 126, point .
The institution has the legal right to take a mortgage on the residential property in the event that the guarantor referred to in point fails. For the purposes of providing the opinion referred to in the second subparagraph, EBA shall monitor the market conditions to assess whether extraordinary circumstances have occurred and accordingly, shall notify the Commission immediately. Institutions’ trading activities in wholesale markets can easily be carried out across borders, including between Member States and third countries. The implementation of the final FRTB standards should therefore converge as much as possible across jurisdictions, both in terms of substance and timing.
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In line with the internationally agreed Basel III standards on assigning risk weights to specialised lending exposures, a dedicated specialised exposures class should be introduced under the SA-CR, thereby improving consistency with the already existing specific treatment of specialised lending under the IRB approaches. A specific treatment for specialised lending exposures should be introduced, whereby a distinction should be made between ‘project finance’, ‘object finance’ and ‘commodities finance’ to better reflect the inherent risks of those sub-classes of the specialised exposures class. Like for exposures to corporates, two approaches to assign risk weights should be implemented, one for jurisdictions allowing the use of external ratings for regulatory purposes and one for jurisdictions that do not allow it. Article 124 is replaced to set out in paragraphs 1 to 5 the general and some specific requirements for the assignment of risk weights for exposures secured by mortgages on residential immovable property and commercial immovable property, respectively, including for IPRE mortgages. Paragraphs 6 to 10 retain the current periodic assessment of the appropriateness of the standard risk weights and the process to increase them at the discretion of the designated authority. An output floor to the risk-based capital requirements is introduced through amendments to both the CRR and the CRD.
The EU is committed to high standards of protection of fundamental rights and is signatory to a broad set of conventions on human rights. In this context, the proposal is not likely to have a direct impact on these rights, as listed in the main UN conventions on human rights, the Charter of Fundamental Rights of the European Union, which is an integral part of the EU Treaties and the European Convention on Human Rights . The proposed amendments are built on the same legal basis as the legislative acts that are being amended, i.e.
The value is not higher than a market value for the immovable property where such market value can be determined. The legal domicile in which the corporate exposure is governed has a well-established bankruptcy code that allows for a company to reorganise and restructure, and provides for an orderly settlement of creditor claims.
For both residential and commercial real estate exposures, more risk-sensitive approaches have been developed by the Basel Committee to better reflect different funding models and stages in the construction process. At the current juncture, the Commission therefore does not see a need for additional supervisory powers to be granted to the competent authorities to impose restrictions on distributions by institutions in exceptional circumstances.
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For the purposes of this paragraph, the conditions to revert to the use of less sophisticated approaches laid down in Article 149 shall not apply. The total number of counterparties for which the standardised approach is used, with a breakdown by counterparty types. Institutions other than small and non-complex institutions shall submit all the information required under Titles II and III in electronic format to EBA no later than the date on which institutions publish their financial statements or financial reports for the corresponding period, where applicable, or as soon as possible thereafter.
An institution that no longer meets one or more of the conditions set out in Article 273a shall comply with the requirements set out in Article 273b. For inflation rate risk denominated in a currency other than the currencies referred to in Article 383c, the risk weight of the sensitivity to the inflation rate risk shall be 1.58%. For inflation rate risk denominated in one of the currencies referred to in Article 383c, the risk weight of the sensitivity to the inflation rate risk shall be 1.11%. Referred to in paragraph 1, point , are to be determined by the institution for the purposes of calculating default probabilities.
Jurisdictions may disregard historical losses for the calculation of operational risk capital for all relevant institutions, or may take historical loss data additionally into account for institutions below a certain business size. For the calculation of the minimum own funds requirements, in order to ensure a level playing field within the Union and to simplify the calculation of operational risk capital, those discretions are exercised in a harmonised manner by disregarding historical operational loss data for all institutions. Article 325bh is amended to introduce adjustments for calculating the own fund requirements for market risk for CIUs positions under the A-IMA, in particular to ensure that more CIUs could be eligible under the approach. Similarly to the amendments made to the CIU treatment under the A-SA, institutions are allowed, under specific conditions, to use data provided by relevant third-parties in the calculation of the own funds requirements under the look-through approach, and are required to apply the look-through approach with a minimum weekly frequency. These objectives are addressed by specifying that institutions should apply the look-through approach with a monthly frequency for those positions in CIUs concerned by that approach, and by allowing institutions, under specific conditions, to use data provided by relevant third-parties in the calculation of the own funds requirements under the look-through approach. In addition, under the mandate-based approach, Article 325j introduces a mandate for the EBA to further specify the technical elements that the institutions must use to build up the hypothetical portfolio used in the calculation of the own funds requirements. On the FRTB approaches set out in Chapters 1a (alternative standardised approach or A-SA), 1b (alternative internal model approach or A-IMA) and 2 to 4 , as well as conditions for their use and the frequency of calculation of the own funds requirements.
To ensure a consistent approach for all RGLA-PSE exposures, a new RGLA-PSA exposure class should be created, independent from both sovereign and institutions exposure classes, and which should all be subject to the input floors provided by the new rules. Specialised lending exposures have risk characteristics that differ from general corporate exposures. It is thus appropriate to provide for a transitional period during which the LGD input floor applicable to specialised lending exposures is reduced.
- Risk exposures from any issuer that an institution can not assign to a sector in such a manner shall be assigned to bucket 19 in Table 5, depending on the credit quality of the issuer.
- For the purposes of providing the opinion referred to in the second subparagraph, EBA shall monitor the market conditions to assess whether extraordinary circumstances have occurred and accordingly, shall notify the Commission immediately.
- The credit protection contract is legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement.
- To ensure that the transitional arrangement is available only to low-risk mortgage exposures, appropriate eligibility criteria, based on established concepts used under the SA-CR, should be set.
- There shall be one bucket for all currencies and maturities, containing all foreign exchange vega risk factors and a single net sensitivity.
In line with the final Basel III standards, the treatment of the real estate exposure class is amended to increase further the granularity with regard to the inherent risk posed by different types of real estate transactions and loans. Preferential treatment provided in the new Article 122a for “high quality” project finance exposures will only apply to exposures to which institutions do not already apply the ‘infrastructure supporting factor’ treatment under Article 501a to avoid an unjustified reduction in own funds requirements. Roject finance, object finance and commodities finance exposure classes are introduced under the SA-CR, in line with the same three subcategories in the internal ratings-based approaches. According to Article 72e of the CRR, institutions that are subject to Article 92a of the CRR are required to deduct indirect and synthetic holdings of certain eligible liabilities instruments. However, the current definitions of the term ‘indirect holding’ and ‘synthetic holding’, respectively, capture holdings of capital instruments only. Therefore, those definitions are amended to also capture holdings of relevant liabilities (Article 4, points and , of the CRR).
Sometimes, you may not even be in a position to ask the question to begin with – this is particularly true for external consultants. Some of these steps may require you to take a more “roundabout” approach, which means you’ll need to “educate” your clients to get the answers you need as opposed to challenging them to provide you with that information. When the type and complexity of certain problems can no longer be solved by a standard managerial approach, one enters a completely different situation, which quickly becomes complex. The solution that a manager is looking for can be a relatively simple “change management” approach, or a much more complex “transformation” approach. Both cases, at different levels of importance, require a specific approach with dedicated people , specific change management capabilities, more complex stakeholder management , budget approval, involvement of HR and personal representatives… This is part of what you need to identify during this diagnosis, and the only way to do this is to first choose the right diagnosis to perform.
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The provisions regarding the SA-CR should therefore be revised to increase the risk sensitivity of that approach in relation to several key aspects. On SFTs and leverage in the EU, pointed out, however, that it was not clear what impact the application of such framework would have on institutions. Those recommendations also expressed concerns that the application of that framework to certain types of SFTs could create undesirable consequences to those financial activities.
However, while the overall level of capital in EU institutions is now satisfactory on average, some of the problems that were identified in the wake of global financial crisis have not yet been addressed. Article 132 of the CRR provides for a “look-through approach”, whereby the investor institution may “look through to the underlying exposures in order to calculate an average risk weight for its exposures in the form of units or shares in the CIUs” in accordance with the methods set out in the CRR. This is subject to the condition that the investor institution be “aware” of the CIU’s underlying exposures. Article 434 is amended to reduce the administrative burden related to disclosures, especially for small and non-complex institutions. The rationale of this provision leverages on the progress made by the EBA and the competent authorities in the creation of an infrastructure that aggregates supervisory reporting . The proposal enhances proportionality mandating the EBA to publish disclosures of small and non-complex institutions based on supervisory reporting information. This way, small and non-complex institutions are only required to report to their supervisors, and not to publish relevant disclosures.
In view of the changes made to the CRR to implement the final Basel III standards, as well as the need to further reduce the administrative costs related to disclosures and to facilitate the access to information disclosed by institutions, several changes are made to Part Eight of the CRR. Therefore, Article 4 is amended to introduce new harmonised definitions of the different types of risks in the universe of ESG risks (Article 4, points 52d to 52i).
These exemptions were agreed to prevent a potential excessive increase in the cost of some derivative transactions triggered by the introduction of the capital requirement for CVA risk, particularly when banks could not mitigate the CVA risk of certain clients that were not able to exchange collateral. According to estimated impacts calculated by EBA, the capital requirements for CVA risk under the revised Basel standards would remain unduly high for the exempted transactions with these clients. To ensure that banks’ clients continue hedging their financial risks via derivative transactions, the exemptions should be maintained when implementing the revised Basel standards.
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For the purposes of point , the minimum period of 1 year shall start from the date on which the operational risk event, included in the loss data set, first became greater than the materiality threshold referred to in Article 319. Upon request from the competent authority, the institution shall provide all the documentation needed to perform verification of payments received and factored in the calculation of the net loss of an operational risk event. Institution that apply to comparable direct exposures to the protection provider the IRB Approach using the method provided for in Article 153, shall apply the risk weight and expected loss applicable to the covered portion of the exposure that correspond to the ones provided in Articles 153 and 158. Institutions that apply to comparable direct exposures to the protection provider the IRB Approach using the method provided for in Article 153, shall use the risk weight and expected loss applicable to the covered portion of the exposure that correspond to the ones provided for in Articles 153 and 158. Risk-weighted exposures amounts shall be calculated for first-to-default credit derivatives. For that purpose, the risk-weights of the underlying assets included in the basket shall be aggregated up to a maximum of 1250 % and multiplied by the nominal amount of the protection provided by the credit derivative to obtain the risk-weighted exposure amount for the exposure related to that derivative. ‘Exposures fulfilling all the conditions laid down in points , , , shall be assigned to the exposure class ‘retail exposures secured by residential property’ as referred to in paragraph 2, point .