Article 147
Methodology to assign exposures to exposure classes
1.
The methodology used by the institution for assigning exposures to different exposure classes shall be appropriate and consistent over time.
2.
Each exposure shall be assigned to one of the following exposure classes:
(a)
exposures to central governments and central banks;
(aa)
exposures to regional governments, local authorities and public sector entities, to be assigned to the following exposure classes:
(i)
exposures to regional governments and local authorities;
(ii)
(b)
(c)
exposures to corporates, to be assigned to the following exposure classes:
(i)
general corporates;
(ii)
specialised lending exposures;
(iii)
corporate purchased receivables;
(d)
retail exposures, to be assigned to the following exposure classes:
(i)
qualifying revolving retail exposures (‘QRREs’);
(ii)
retail exposures secured by residential property;
(iii)
retail purchased receivables;
(iv)
other retail exposures;
(e)
equity exposures;
(f)
items representing securitisation positions;
(g)
other non credit-obligation assets.
3.
3a.
By way of derogation from paragraph 2 of this Article, exposures to regional governments, local authorities and public sector entities shall be assigned to the exposure class referred to in paragraph 2, point (a), of this Article where those exposures are treated as exposures to central governments in accordance with Article 115 or 116.
4.
The following exposures shall be assigned to the class laid down in point (b) of paragraph 2:
(c)
exposures to multilateral development banks which are not assigned a 0 % risk weight under Article 117; and
(d)
exposures to financial institutions which are treated as exposures to institutions in accordance with Article 119(5).
5.
To be eligible for the retail exposure class laid down in point (d) of paragraph 2, exposures shall meet the following criteria:
(a)
they shall be one of the following:
(i)
exposures to one or more natural persons;
(ii)
exposures to an SME, provided that the total amount owed to the institution and parent undertakings and its subsidiaries, including any exposure in default, by the obligor client or group of connected clients, but excluding exposures secured by residential property, up to the property value does not, to the knowledge of the institution, which shall take reasonable steps to verify the amount of that exposure, exceed EUR 1 million;
(iii)
exposures secured by residential property, including first and subsequent liens, term loans, revolving home equity lines of credit, and exposures as referred to in Article 108(4) and (5), regardless of the exposure size, provided that the exposure is either of the following:
(1)
an exposure to a natural person;
(2)
an exposure to associations or cooperatives of individuals that are regulated under national law and exist with the sole purpose of granting their members the use of a primary residence in the property securing the loan;
(b)
they are treated by the institution in its risk management consistently over time and in a similar manner;
(c)
they are not managed just as individually as exposures in the exposure classes referred to in paragraph 2, point (c)(i), (ii) or (iii);
(d)
they each represent one of a significant number of similarly managed exposures.
In addition to the exposures listed in the first subparagraph, the present value of retail minimum lease payments shall be included in the retail exposure class.
Exposures fulfilling all of the conditions set out in the first subparagraph, point (a)(iii), points (b), (c) and (d), of this paragraph shall be assigned to the exposure class referred to in paragraph 2, point (d)(ii).
By way of derogation from the third subparagraph of this paragraph, competent authorities may exclude from the exposure class referred to in paragraph 2, point (d)(ii), loans to natural persons who have mortgaged more than four immovable properties or housing units, including the loans to natural persons referred to in Article 108(4), and assign those loans to one of the exposure classes referred to in paragraph 2, point (c)(i), (ii) or (iii).
5a.
Retail exposures belonging to a type of exposures meeting all of the following conditions shall be assigned to the exposure class referred to in paragraph 2, point (d)(i):
(a)
the exposures of that type of exposures are to one or more natural persons;
(b)
the exposures of that type of exposures are revolving, unsecured, and, to the extent they are not drawn immediately and unconditionally, cancellable by the institution;
(c)
the maximum exposure in that type of exposure to a single natural person is EUR 100 000 or less;
(d)
that type of exposures has exhibited low volatility of loss rates, relative to its average level of loss rates, especially within the low PD bands;
(e)
the treatment of exposures assigned to that type of exposures as a qualifying revolving retail exposure is consistent with the underlying risk characteristics of that type of exposures.
By way of derogation from the first subparagraph, point (b), the requirement to be unsecured shall not apply in respect of collateralised credit facilities linked to a wage account. In that case, amounts recovered from the collateral shall not be taken into account in the LGD estimates.
Institutions shall identify within the exposure class referred to in paragraph 2, point (d)(i) transactor exposures (‘QRRE transactors’) and exposures that are not transactor exposures (‘QRRE revolvers’). In particular, QRREs with less than 12 months of repayment history shall be identified as QRRE revolvers.
6.
Unless they are assigned to the exposure class referred to in paragraph 2, point (ea), of this Article the exposures referred to in Article 133(1) shall be assigned to the exposure class referred to in paragraph 2, point (e), of this Article.
7.
Any credit obligation not assigned to the exposure classes referred to in paragraph 2, point (a), point (aa)(i) or (ii), point (b), point (d)(i), (ii), (iii) or (iv), point (e), (ea) or (f), shall be assigned to one of the exposure classes referred to in point (c)(i), (ii) or (iii) of that paragraph.
8.
Within the corporate exposure class laid down in point (c) of paragraph 2, institutions shall separately identify as specialised lending exposures, exposures which possess the following characteristics:
(a)
(b)
the contractual arrangements give the lender a substantial degree of control over the assets and the income that they generate;
(c)
the primary source of repayment of the obligation is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise.
Those exposures shall be assigned to the exposure class referred to in paragraph 2, point (c)(ii), and shall be categorised as follows: ‘project finance’ (PF), ‘object finance’ (OF), ‘commodity finance’ (CF) and ‘income-producing real estate’ (IPRE).
9.
The residual value of leased properties shall be assigned to the exposure class laid down in point (g) of paragraph 2, except to the extent that residual value is already included in the lease exposure laid down in Article 166(4).
10.
The exposure from providing protection under an nth-to-default basket credit derivative shall be assigned to the same class laid down in paragraph 2 to which the exposures in the basket would be assigned, except if the individual exposures in the basket would be assigned to various exposure classes in which case the exposure shall be assigned to the corporates exposure class laid down in point (c) of paragraph 2.
11.
EBA shall develop draft regulatory technical standards to specify the following:
(a)
the categorisation to PF, OF and CF, consistently with the definitions of Chapter 2;
(b)
the determination of the IPRE category, in particular specifying which ADC exposures and exposures secured by immovable property may or shall be categorised as IPRE.
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
12.
EBA shall develop draft regulatory technical standards to further specify the conditions and criteria for assigning exposures to the classes referred to in paragraph 2 and, where necessary, to further specify those exposure classes.
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2027.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.