Question
May exposures to PSEs established in a Member State, whose level of risk in the opinion of the competent authority of the Member State in question does not differ from the level of risk of the central government, be assigned a risk weight of 20% in accordance with Article 116(3) CRR if they are denominated in foreign currency?
Background on the question
In accordance with Article 116(4) CRR, exposures to PSEs may be treated as exposures to central government in whose jurisdiction they are established where in the opinion of the competent authorities of this jurisdiction there is no difference in risk between such exposures because of the existence of appropriate guarantee by the central government. Institutions may risk weight exposures to such PSEs in accordance with the provisions of Article 114 CRR. In accordance with Article 116(3) CRR, exposures to PSEs with original maturity of 3 months or less shall be assigned a risk weight of 20%. However, in Article 114 CRR there is no preferential treatment for exposures with original maturity of 3 months or less. There is only preferential treatment for exposures which are denominated and funded in the domestic currency of any Member States.
Answer
Please note that as part of adjustments to the Single Rulebook Q&A process, agreed by the EBA and the European Commission, it has been decided to reject outstanding questions submitted before 1 January 2020, when the Q&A process was updated as part of the last ESAs Review. In particular, the question that you have submitted has now regrettably been rejected and will not be addressed.If you believe your question would still benefit from clarification, you are invited to resubmit your question, adapting it to reflect any legislative, regulatory or other relevant developments that may have occurred since the initial date of submission. The EBA will aim to address resubmitted questions as a matter of priority. When considering to resubmit, you are kindly requested to observe the updated admissibility criteria agreed in the context of the adjustment of the Q&A process, available in theAdditional background and guidance for asking questions. We hope for your understanding.For further information please refer to thepress releaseand the updatedQ&A page.