Contents    Prev    Next    Last

Title[ Part 2: The First Pillar - Minimum Capital Requirements

Section[ 7. Claims included in the regulatory retail portfolios

---

69.       Claims that qualify under the criteria listed in paragraph 70 may be considered as retail claims for regulatory capital purposes and included in a regulatory retail  portfolio. Exposures included in such a portfolio may be risk-weighted at 75%, except as provided in paragraph 75 for past due loans.

70.       To be included in the regulatory retail portfolio, claims must meet the following four criteria:

w Orientation criterion ? The exposure is to an individual person or persons or to a small business;

w Product criterion ? The exposure takes the form of any of the following: revolving credits and lines of credit (including credit  cards and overdrafts), personal termloans  and  leases  (e.g.  instalment  loans,  auto  loans  and  leases,  student  and educational loans, personal finance) and small business facilities and commitments. Securities  (such  as  bonds  and  equities),  whether  listed  or  not,  are  specifically excluded from this category.  Mortgage loans are excluded to the extent that they qualify for treatment as claims secured by residential property (see paragraph 72).

w Granularity  criterion  ?  The supervisor must be satisfied that the regulatory retail portfolio is sufficiently diversified to a degree that reduces the risks in the portfolio, warranting the 75% risk weight. One way of achieving this may be to set a numerical limit that no aggregate exposure to one counterpart ²⁸ can exceed 0.2% of the overall regulatory retail portfolio.

w Low value of individual exposures. The maximum aggregated retail exposure to one counterpart cannot exceed an absolute threshold of €1 million.

71.       National  supervisory  authorities   should  evaluate  whether  the  risk   weights  in paragraph 69 are considered to be too low based on the default experience for these types of exposures in their jurisdictions.  Supervisors, therefore,  may require banks  to increase these risk weights as appropriate.

28   Aggregated exposure means gross amount (i.e. not taking any credit risk mitigation into account) of all forms of debt exposures (e.g. loans or commitments) that individually satisfy the three other criteria. In addition, “to one counterpart” means one or several entities that may  be considered as a single beneficiary (e.g. in the case of a small business that is affiliated to another small business, the limit  would apply to the bank’s aggregated exposure on both businesses).

	Contents    Prev    Next    Last