Question
In case a loan has multiple collaterals (of which immovable property and also other collateral types) should the entire gross carrying amount be reported as collateralised by the immovable property or should the amount be pro-rated?
Background on the question
In Template 2 of Annex XXXIX to the Final draft implementing technical standards on prudential disclosures on ESG risks in accordance with Article 449a CRR we are asked to report on our loans collateralised by immovable property. Guidance is given for loans collateralised by multiple immovable properties but no guidance is given for those loans collateralised by both immovable property and other collateral types.
Answer
The general treatment of a loan with multiple immovable collaterals (residential real estate, commercial real estate or both types of collaterals) is explained or addressed in ANNEX XL - Instructions for disclosure of ESG risks of Regulation (EU) 2021/637 (ITS on Pillar 3 disclosures)Final draft implementing technical standards (EBA/ITS/2022/01) on prudential disclosures on ESG risks in accordance with Article 449a CRR, even though the developed example refers to a loan with two immovable collaterals. According to the instructions for Template 2 paragraph 3, the gross carrying amount of the loan to be disclosed, as referred to in Part 1 of Annex V to Implementing Regulation 2021/451. The gross carrying amount of the loan shall be allocated to the columns of the Template 2 in accordance with Therefore, the instructions in paragraph 715 under the same template. More specifically this paragraph states, that apply: “More specifically,[…] institutions shall calculate the share of each collateral in the gross carrying amount of exposure based on the basis of the value of the collateral and disclose under the energy efficiency bucket linked to each collateral […]”. As a result, when dealing with Regarding a loan collateralized by both immovable property and other types of collaterals, the entire gross carrying amount of the exposure shall be computed and pro-rata approach should not be considered in such cases, i.e. on the basis of the market value of the immovable property part of the collaterals only. Therefore, the value to be indicated as the gross carrying amount of exposure is the carrying amount of the loan minus the market value of the collaterals that are not immovable property collaterals. This approach should be used for both Template 2 and Template 5 of Annex XXXIX of ITS on Pillar 3 disclosures.