1. NCAs shall apply the supervisory approach set out in this Guideline with respect to non-performing exposures within the scope of this Guideline.
2. Underlying exposures of traditional or synthetic securitisations shall remain outside of the scope of this Guideline if either one of the following conditions is met with respect to those exposures:
the less significant supervised entity has achieved significant risk transfer (SRT) in accordance with Article 244(1), point (a), or Article 245(1), point (a) of Regulation (EU) No 575/2013;
the less significant supervised entity follows the full deduction approach in accordance with Article 244(1), point (b), or Article 245(1), point (b), of Regulation (EU) No 575/2013.
3. Upon the request of a less significant supervised entity, NCAs may decide not to apply Article 5 to individual exposures or portfolios of exposures based on specific circumstances demonstrated by detailed and robust evidence submitted by the less significant supervised entity. On the basis of said evidence, NCAs shall assess and decide upon the less significant supervised entity’s request.
4. For the purpose of paragraph 3, specific circumstances shall include any of the following situations:
ongoing regular payments of principal and interest, based on the official debtor’s cash flows, will lead to full repayment;
the coverage of NPEs would, in combination with Pillar 1 capital requirements for credit risk, result in more than 100 % of the exposure being covered;
the exposure relates to technical guarantees.