Article 147 | CRR | Regulation 575/2013

Article 147 - Methodology to assign exposures to exposure classes

Attention! This article will be amended on 01/01/2025. Please consult Regulation 2024/1623 to review the changes that will be made to the article.

Article 147

Methodology to assign exposures to exposure classes

The methodology used by the institution for assigning exposures to different exposure classes shall be appropriate and consistent over time.

Each exposure shall be assigned to one of the following exposure classes:

(a)

exposures to central governments and central banks;

(b)

exposures to institutions;

(c)

exposures to corporates;

(d)

retail exposures;

(e)

equity exposures;

(f)

items representing securitisation positions;

(g)

other non credit-obligation assets.

The following exposures shall be assigned to the class laid down in point (a) of paragraph 2:

(a)

exposures to regional governments, local authorities or public sector entities which are treated as exposures to central governments under Articles 115 and 116;

(b)

exposures to multilateral development banks referred to in Article 117(2);

(c)

exposures to International Organisations which attract a risk weight of 0 % under Article 118.

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.

The following exposures shall be assigned to the class laid down in point (b) of paragraph 2:

(a)

exposures to regional governments and local authorities which are not treated as exposures to central governments in accordance with Article 115(2) and (4);

(b)

exposures to public sector entities which are not treated as exposures to central governments in accordance with Article 116(4);

(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).

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 in that case that the total amount owed to the institution and parent undertakings and its subsidiaries, including any past due exposure, by the obligor client or group of connected clients, but excluding exposures secured on residential property collateral, shall not, to the knowledge of the institution, which shall have taken reasonable steps to confirm the situation, exceed EUR 1 million;

(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 corporate exposure class;

(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.

The following exposures shall be assigned to the equity exposure class laid down in point (e) of paragraph 2:

(a)

non-debt exposures conveying a subordinated, residual claim on the assets or income of the issuer;

(b)

debt exposures and other securities, partnerships, derivatives, or other vehicles, the economic substance of which is similar to the exposures specified in point (a).

Any credit obligation not assigned to the exposure classes laid down in points (a), (b), (d), (e) and (f) of paragraph 2 shall be assigned to the corporate exposure class referred to in point (c) of that paragraph.

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)

the exposure is to an entity which was created specifically to finance or operate physical assets or is an economically comparable exposure;

(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.

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.

PART ONE - GENERAL PROVISIONS (Article 1-24)

PART TWO - OWN FUNDS AND ELIGIBLE LIABILITIES (Article 25-91)

PART THREE - CAPITAL REQUIREMENTS (Article 92-386)

TITLE I - GENERAL REQUIREMENTS, VALUATION AND REPORTING (Article 92-106)

TITLE II - CAPITAL REQUIREMENTS FOR CREDIT RISK (Article 107-311)

CHAPTER 1 - General principles (Article 107-110)

CHAPTER 2 - Standardised approach (Article 111-141)

CHAPTER 3 - Internal Ratings Based Approach (Article 142-191)

Section 1 - Permission by competent authorities to use the IRB approach (Article 142-150)Article 142 - Definitions IAQ&A Article 143 - Permission to use the IRB Approach ITSRTSQ&AGL Article 144 - Competent authorities' assessment of an application to use an IRB Approach RTSQ&A Article 145 - Prior experience of using IRB approaches RTS Article 146 - Measures to be taken where the requirements of this Chapter cease to be met RTS Article 147 - Methodology to assign exposures to exposure classes RTSQ&A Article 148 - Conditions for implementing the IRB Approach across different classes of exposure and business units RTSQ&A Article 149 - Conditions to revert to the use of less sophisticated approaches Article 150 - Conditions for permanent partial use RTSQ&A

Section 2 - Calculation of risk-weighted exposure amounts (Article 151-157)

Section 3 - Expected loss amounts (Article 158-159)

Section 4 - PD, LGD and maturity (Article 160-165)

Section 5 - Exposure value (Article 166-168)

Section 6 - Requirements for the IRB approach (Article 169-191)

CHAPTER 4 - Credit risk mitigation (Article 192-241)

CHAPTER 5 - Securitisation (Article 242-270e)

CHAPTER 6 - Counterparty credit risk (Article 271-311)

TITLE III - OWN FUNDS REQUIREMENTS FOR OPERATIONAL RISK (Article 312-324)

TITLE IV - OWN FUNDS REQUIREMENTS FOR MARKET RISK (Article 325-377)

TITLE V - OWN FUNDS REQUIREMENTS FOR SETTLEMENT RISK (Article 378-380)

TITLE VI - OWN FUNDS REQUIREMENTS FOR CREDIT VALUATION ADJUSTMENT RISK (Article 381-386)

PART FOUR - LARGE EXPOSURES (Article 387-403)

PART FIVE - EXPOSURES TO TRANSFERRED CREDIT RISK (Article 404-410)

PART SIX - LIQUIDITY (Article 411-428az)

PART SEVEN - LEVERAGE (Article 429-429g)

PART SEVEN A - REPORTING REQUIREMENTS (Article 430-430c)

PART EIGHT - DISCLOSURE BY INSTITUTIONS (Article 431-455)

PART NINE - DELEGATED AND IMPLEMENTING ACTS (Article 456-464)

PART TEN - TRANSITIONAL PROVISIONS, REPORTS, REVIEWS AND AMENDMENTS (Article 465-520)

PART ELEVEN - FINAL PROVISIONS (Article 521)

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Article 147 - Methodology to assign exposures to exposure classes

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