(1)

Article 124(2) of Regulation (EU) No 575/2013, on the one hand, deals with the assessment of the appropriateness of risk weights for exposures secured by mortgages on residential property and commercial immovable property. Article 164(6), of Regulation (EU) No 575/2013, on the other hand, deals with the assessment of the appropriateness of minimum loss given default (‘LGD’) values for exposures secured by mortgages on residential property or commercial immovable property. Both provisions thus deal with the calibration of parameters for exposures secured by immovable property. It is therefore appropriate that the types of factors to be considered for the assessment of the appropriateness of those risk weights and the conditions to be taken into account for the assessment of the appropriateness of those minimum LGD values are specified in a coherent manner.

(2)

When specifying those factors and conditions, it is necessary to ensure proportionality and to account for the heterogeneity of the immovable property markets across Member States, while at the same time setting out a sufficiently harmonised framework for the assessment of the appropriateness of the risk weights and the minimum LGD values for exposures secured by mortgages on immovable property. To that end, a one-size-fits-all approach should be avoided.

(3)

When specifying the loss expectation for the purposes of determining the appropriateness of risk weights a number of factors providing insights into forward-looking market developments should be considered, including past and present structural characteristics of immovable property markets and national specificities related to real estate financing.

(4)

Given the economic relevance of real estate markets for Member States, sources of systemic risk, rather than merely economic downturns and idiosyncratic risks, should be taken into account when specifying the conditions for assessing the minimum LGD values. When taking into account the conditions for assessing minimum LGD values, a number of conditions related to sources of systemic risk that affect forward-looking property market developments should be considered, among them whether macroeconomic imbalances relate to a downturn, whether other macroprudential measures are in place, and national specificities related to immovable property markets and their financing.

(5)

Furthermore, given the significant differences between the real estate markets of the Member States, the specificities exclusively related to a national real estate market and its financing should be taken into account when assessing both the appropriateness of risk weights for exposures secured by immovable property, and the appropriateness of minimum loss given default values for such exposures.

(6)

Article 124(2) and Article 164(6), of Regulation (EU) No 575/2013 allow for the assessment of the appropriateness of risk weights or minimum LGD values for one or more property segments or for one or more parts of the territory of a Member State. It should thus be provided that the types of factors or the conditions for the assessment of the appropriateness of risk weights or minimum LGD values may be applied to one or more property segments or to one or more parts of the territory of a Member State. It is however possible that data collected by means of Union harmonised reporting are not sufficiently granular to allow for the assessment of the appropriateness of risk weights or minimum LGD values at the level of such property segment or part of a territory of a Member State. Where that is the case, the authorities designated in accordance with Article 124(1a) and Article 164(5) of Regulation (EU) No 575/2013 should be able to use additional sources of data for those assessments.

(7)

Given that both Articles 124 and 164 of Regulation (EU) No 575/2013 deal with the assessments of the appropriateness of input parameters for the determination of own funds requirements for exposure types secured by immovable property, it is necessary to ensure coherence between the two assessments. It is therefore appropriate to include both sets of the relevant regulatory technical standards required by those Articles in a single Regulation.

(8)

This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European Banking Authority (EBA).

(9)

The EBA has conducted an open public consultation on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits, and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council (2),