Article 402
Exposures arising from mortgage lending
1.
For the calculation of exposure values for the purposes of Article 395, institutions may, except where prohibited by applicable national law, reduce the value of an exposure or any part of an exposure that is secured by residential property in accordance with Article 125(1) by the pledged amount of the property value, but by not more than 55 % of the property value, provided that all of the following conditions are met:
(a)
the competent authorities have not set a risk weight higher than 20 % for exposures or parts of exposures secured by residential property in accordance with Article 124(9);
(b)
the exposure or part of the exposure is fully secured by any of the following:
(i)
one or more mortgages on residential property; or
(ii)
a residential property in a leasing transaction under which the lessor retains full ownership of the residential property and the lessee has not yet exercised his or her option to purchase;
(c)
the requirements laid down in Article 208 and Article 229(1) are met.
2.
For the calculation of exposure values for the purposes of Article 395, institutions may, except where prohibited by applicable national law, reduce the value of an exposure or any part of an exposure that is secured by commercial immovable property in accordance with Article 126(1) by the pledged amount of the property value, but by not more than 55 % of the property value, provided that all of the following conditions are met:
(a)
the competent authorities have not set a risk weight higher than 60 % for exposures or parts of exposures secured by commercial immovable property in accordance with Article 124(9);
(b)
(c)
the requirements in Article 124(3), point (c), and in Article 208 and Article 229(1) are met;
(d)
the commercial immovable property is fully constructed.
3.
An institution may treat an exposure to a counterparty that results from a reverse repurchase agreement under which the institution has purchased from the counterparty non-accessory independent mortgage liens on immovable property of third parties as a number of individual exposures to each of those third parties, provided that all of the following conditions are met:
(a)
the counterparty is an institution or an investment firm;
(b)
the exposure is fully secured by liens on the immovable property of those third parties that have been purchased by the institution and the institution is able to exercise those liens;
(c)
the institution has ensured that the requirements in Article 208 and Article 229(1) are met;
(d)
the institution becomes beneficiary of the claims that the counterparty has against the third parties in the event of default, insolvency or liquidation of the counterparty;
(e)
the institution reports to the competent authorities in accordance with Article 394 the total amount of exposures to each other institution or investment firm that are treated in accordance with this paragraph.
For these purposes, the institution shall assume that it has an exposure to each of those third parties for the amount of the claim that the counterparty has on the third party instead of the corresponding amount of the exposure to the counterparty. The remainder of the exposure to the counter party, if any, shall continue to be treated as an exposure to the counter party.