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The EBA’s starting point in setting out the calculation methodology is to require institutions to take all the reasonable steps to look-through to the underlying assets and to identify the obligors of all credit risk exposures underlying the transaction.
In case an institution is not able to identify the obligors of underlying exposures, it is requested to add all these exposures to the same hypothetical ‘unknown client’ and the large exposures limit applies to the ‘unknown client’ in the same way it applies to any other single client. Therefore, all unknown exposures stemming from all transactions should be considered as a single risk and as one hypothetical ‘unknown client’.
An important development compared to the ‘CEBS Guidelines on the implementation of the revised large exposures regime’ is the proposal for a more prudent treatment for securitisation positions whereby all tranches in a securitisation would be treated equally as if they were a first loss tranche and therefore fully exposed to the underlying assets.
The EBA is requested to submit these draft RTS to the European Commission by 1 January 2014. Therefore comments to this consultation paper should be sent to the EBA by 16 August 2013.
A public hearing will take place at the EBA premises on 4 July 2013 from 14:00 to 17:00 UK time.
Full information with link to public hearing registration