Question
Should the RWEA to which the adjustment shall be made under CRR Article 501 constitute the total RWEA for credit risk determined in accordance with Part Three, Title II, Chapter 2 or 3 that relates to non-defaulted credit exposures defined in 501 p 2 - regardless if the RWEA stems from the standardized approach, the IRB approach or any national measures impacting the credit risk RWEA?
Background on the question
A competent authority may impose higher risk weights based on CRR article 458. According to Q&A 2018_4220, by using CRR Article 458 the risk weights in Part Three, Title II of the CRR are adjusted and consequently replaced by the risk weights imposed by the national measure. The RWEA based on these risk weights now forms the basis for the own funds requirements for credit risk under Part Three, Title II of the CRR. According to CRR Article 501, institutions shall further adjust the risk-weighted exposure amounts for non-defaulted exposures to an SME (RWEA), which are calculated in accordance with Chapter 2 or 3 of Title II of Part Three. As CRR Article 501 does not specify any exceptions, we interpret the RWEA to which the adjustment shall be made to constitute the total RWEA for credit risk determined in accordance with Part Three, Title II, Chapter 2 or 3 that relates to non-defaulted credit exposures defined in 501 p 2 - regardless if the RWEA stems from the standardized approach, the IRB approach or any national measures impacting the credit risk RWEA. Can you please confirm this interpretation?
Answer
This question has been rejected because the issue it deals with is already explained or addressed in the regulatory framework. In particular, please see Article 501(1) of Regulation (EU) No 575/2013 (CRR), in conjunction withQ&A 4220).For further information on the purpose of this tool and on how to submit questions, please see “Additional background and guidance for asking questions.