Question
is it possible to consider that the derogation applied to the part of the non-performing exposure guaranteed or counter-guaranteed by an eligible protection provider referred to in Article 201(1), points (a) to (e), the unsecured exposures to which would be assigned a risk weight of 0 % under Part Three, also applies to unsecured exposures themselves when assigned a risk weight of 0% ?
Background on the question
Prudential provisioning supplements accounting coverage to account for the impact of the passage of time on loss risk. Article 47c (a)(i) states that when an exposure is secured by an exposure with a risk weight of 0%, the loss risk does not increase over the first 7 years of default. We understand that this relies on the guarantor's ability to meet the debtor's obligations, and that the final loss would remain negligible. Based on this assumption, the same treatment could be applied to exposures weighted at 0% themselves. In other words, a factor of 0 could be applied to non performing exposures that would be weighted 0% in a non-default situation.
Answer
This question has been rejected because the issue it raises is beyond the remit of the Q&A process and as such it cannot be addressed via a Q&A.The Single Rule Book Q&A tool has been established to provide explanations and non-binding interpretations on questions relating to the practical application or implementation of the provisions of legislative acts referred to in Article 1(2) of the EBA’s founding Regulation, as well as associated delegated and implementing acts, and guidelines and recommendations, adopted under these legislative acts. The Q&A process cannot, for example, consider issues which would require changes to the regulatory framework.For further information on the purpose of this tool and on how to submit questions, please see “Additional background and guidance for asking questions”.