25 February 2019

EBA consults on Guidelines on credit risk mitigation for institutions applying the IRB approach with own estimates of LGD

The Guidelines provide guidance on the application of the CRM provisions currently laid down in the Capital Requirements Regulation (CRR) applicable to institutions using the A-IRB Approach. In particular, they clarify the eligibility requirements for different CRM techniques, namely funded and unfunded credit protection (e.g. collateral and guarantees), available to institutions.

For funded credit protection, the Guidelines provide a mapping to the eligibility requirements of legal certainty and collateral valuation applicable to institutions using the SA and the A-IRB approach. The Guidelines also clarify how institutions may recognise the effects of different CRM techniques for capital requirement purposes. In particular, for unfunded credit protection they clarify the set of compliant approaches that are available to institutions to recognise the effects of the credit protection by adjusting their risk parameter estimates, i.e. the probability of default (PD) or the loss given default (LGD). Moreover, the Guidelines clarify whether exposure values or LGD estimates are to be adjusted to recognise different forms of funded credit protection, namely netting and collateral.

Responses to this consultation can be sent to the EBA by 25 May 2019 2019. A public hearing will take place at the EBA premises in Paris on 15 April 2019 from 14:00 to 16:00 CET time.

Press release

Consultation paper

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