EBA欧洲银行-EBA-2016-RTS-02-28Final-RTS-on-specialised-lending-exposures29_74页_1mb

Summary of EBA/RTS/2016/02: Final Draft Regulatory Technical Standards on Assigning Risk Weights to Specialised Lending Exposures

Core Content

The EBA/RTS/2016/02 document outlines the final draft Regulatory Technical Standards (RTS) for assigning risk weights to specialised lending exposures under Article 153(9) of the Capital Requirements Regulation (CRR). These standards are designed to ensure a harmonised and consistent approach across the European Union for assessing credit risk in specialised lending, which includes project finance, real estate, object finance, and commodities finance.

The standards are based on the Basel framework, particularly the slotting criteria approach, which allows institutions to assign risk weights to specialised lending exposures using a five-category system depending on remaining maturity and credit risk assessment. The framework is intended to be used when an institution cannot estimate the Probability of Default (PD) or the PD estimates do not meet the CRR requirements.

Main Features

• Definition of Specialised Lending Exposures:

  • Created specifically to finance or operate physical assets.
  • Lender has substantial control over the assets and their income.
  • Primary repayment source is the income generated by the assets.

• Five Categories for Risk Weights:

  • Based on remaining maturity and credit risk assessment.
  • Table 1 in Article 153(5) of the CRR outlines the risk weights for each category.

• Factors for Assessment:

  • Financial strength
  • Political and legal environment
  • Transaction and/or asset characteristics
  • Strength of the sponsor and developer (including public-private partnership income streams)
  • Security package

• Factor Weighting:

  • Each factor should be assigned a weight between 5% and 60%.
  • The final category is determined by the weighted average of the cardinal numbers assigned to each factor.

• Default Handling:

  • If a specialised lending exposure is considered in default (per Article 178 of the CRR), it must be assigned to Category 5.

• Documentation Requirements:

  • Institutions must document the weight assigned to each factor and the justification for these weights.
  • All steps in the assessment process must be recorded for each exposure.

• Implementation Timeline:

  • The RTS will apply one year after publication in the Official Journal of the European Union, allowing institutions time to adjust their processes.

Key Information

• Purpose: To ensure a consistent and risk-sensitive method for assigning risk weights to specialised lending exposures.

• Scope: Applies to all types of specialised lending exposures under the IRB approach, as defined in Article 147(8) of the CRR.

• Methodology: Uses the slotting criteria approach, which is based on the Basel II framework and adapted to European experience.

• Classes of Specialised Lending:

  • Project finance
  • Real estate
  • Object finance (commodities finance)
  • Commodities finance

• Assessment Process:

  • Determine the class of exposure.
  • Evaluate each factor and sub-factor using specific criteria.
  • Combine the results using factor weights to assign a final category.

• Regulatory Basis:

  • The RTS are supplementing Regulation (EU) No 575/2013 (CRR).
  • The EBA has conducted public consultations and considered feedback from stakeholders.

• Conservatism and Overrides:

  • Institutions are required to apply conservatism when there is insufficient information on certain factors.
  • Overrides are allowed in exceptional cases, provided they are justified and documented.

Main Viewpoints

• The slotting approach provides a structured way to assign risk weights when PD estimates are not reliable or not available.
• The five-category system is based on remaining maturity and credit risk assessment, with different risk weights for each category.
• The factor weighting ensures that institutions can customise the risk assessment based on the relative importance of each factor.
• Documentation is a key requirement to ensure transparency and consistency in the application of the framework.
• A one-year implementation period is provided to allow institutions to adjust their internal processes and systems.

Conclusion

The final draft RTS aim to provide a clear, consistent, and risk-sensitive framework for assigning risk weights to specialised lending exposures. They align with international standards (Basel II) and incorporate European experiences to ensure practical application. The framework includes detailed assessment criteria, documentation requirements, and a phased implementation to support banks in adapting to the new standards.