Question
What does short-term in this context mean? 90 days or 1 year? Residual maturity or original effective maturity?
Background on the question
In different parts of CRR the term 'short-term' is used but with different meaning. For example: '... fixed short-term maturity, generally of less than one year', Article 4 (1)(80) CRR; 'Exposures to an institution of up to three months residual maturity ', Article 120 CRR; 'For exposures to unrated institutions with an original effective maturity of three months or less', Article 121 CRR.
Answer
Article 4(1)(80) of Regulation (EU) No 575/2013 (CRR) defines 'trade finance' as 'financing, including guarantees, connected to the exchange of goods and services through financial products of fixed short-term maturity, generally of less than one year, without automatic rollover'. Therefore, to the extent that letters of credit are typically trade finance products, 'short term' should be understood as implying generally a maturity of less than one year at origination.