19 March 2018

EBA published an assessment of the current credit risk mitigation framework

The Report clarifies the application to the different credit risk approaches of the provisions currently laid down in the Capital Requirements Regulation (CRR) regarding Credit Risk Mitigation (CRM). In order to do so, the EBA carried out a mapping of such provisions for the techniques, eligibility and methods of the CRM available to institutions under the Standardised Approach (SA) and the Foundation-IRB (F-IRB) Approach. The mapping is supplemented by a quantitative overview of the institutions' use of the CRM framework, as well as a series of policy proposals for the consideration of the Commission, with a view to ensuring a proper and harmonised application of the current CRR provisions on the CRM framework through the necessary amendments to the Regulation.

One of the aspects highlighted in the Report, for the consideration of the Commission, is the limited guidance provided in the current CRR provisions on CRM under the Advanced-IRB (A-IRB) Approach. Also in line with the feedback received from the industry, the EBA has committed to provide further guidance on the application of CRM provisions to institutions using the A-IRB Approach. A set of guidelines detailing the use of current CRM provisions for A-IRB banks would be particularly useful to help eliminate the remaining significant differences in approaches in the area of CRM either due to different supervisory practices or bank-specific choices.

The Report also re-iterates the EBA's position regarding the three mandates for technical standards in the area of credit risk mitigation (CRM) identified in the CRR. These include the Regulatory Technical Standards (RTS) on the recognition of conditional guarantees, the RTS on liquid assets and the RTS on the internal models approach for master netting agreements.

Press release

Report

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