What changed, Commission Delegated Regulation (EU) 2023/206 of 5 October 2022 supplementing Regulation (EU) No 575/2013

+ ### Article 1 — Types of factors to be considered for the assessment of the appropriateness of risk weights for exposures secured by immovable property
− ### art_1
+ **1.** ►M1 When assessing the appropriateness of the risk weights referred to in Article 124(9), first subparagraph, of Regulation (EU) No 575/2013, the authorities designated in accordance with Article 124(8) of that Regulation shall determine all of the following:** ◄ **▼M1(a) the loss experience …
− Article 1
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− 1. When assessing the appropriateness of the risk weights referred to in Article 124(2), first subparagraph, of Regulation (EU) No 575/2013, the authorities designated in accordance with Article 124(1a) of that Regulation shall determine all of the following:
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− | (a) | the loss experience as the ratio of the following:(i)in the case of exposures secured by mortgages on residential property as referred to Article 124(2), first subparagraph, of Regulation (EU) No 575/2013, the losses reported in accordance with Article 430a(1), point (a), of that Regulation …
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− | (i) | in the case of exposures secured by mortgages on residential property as referred to Article 124(2), first subparagraph, of Regulation (EU) No 575/2013, the losses reported in accordance with Article 430a(1), point (a), of that Regulation and the exposure value reported in accordance with Ar…
− | (ii) | in the case of exposures secured by mortgages on commercial immovable property as referred to in Article 124(2), first subparagraph, of Regulation (EU) No 575/2013, the losses reported in accordance with Article 430a(1), point (d), of that Regulation and the exposure value reported in accor…
− | (b) | the loss expectation as the best estimate of losses to be realised during a forward-looking horizon of at least one year, and, if so determined by that authority, up to three years. |
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+ **2.** The authorities designated in accordance with Article 124(8) of Regulation (EU) No 575/2013 shall determine the loss expectation referred to in paragraph 1, point (b), in either of the following ways:(a) by adjusting the loss experience referred to in paragraph 1, point (a), upwards or downwa…
− 2. The authorities designated in accordance with Article 124(1a) of Regulation (EU) No 575/2013 shall determine the loss expectation referred to in paragraph 1, point (b), in either of the following ways:
+ **3.** The loss expectation referred to in paragraph 1, point (b), and determined in accordance with paragraph 2, shall be based on all of the following:(a) the historical evolution and cyclical characteristics of the immovable property market as reflected in immovable property market transactions a…
− | (a) | by adjusting the loss experience referred to in paragraph 1, point (a), upwards or downwards; |
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+ **4.** Where there is a lot of uncertainty as to the factors referred to in paragraph 3, point (e), the authorities designated in accordance with Article 124(8) of Regulation (EU) No 575/2013 shall consider a margin of prudence when determining the loss expectation in accordance with paragraph 2 of …
− | (b) | by keeping the loss experience unchanged. |
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+ **5.** For the purposes of paragraph 1, the authorities designated in accordance with Article 124(8) of Regulation (EU) No 575/2013 shall have regard to other macroprudential measures in force that already address the identified systemic risks affecting the appropriateness of the risk weights referr…
− When determining the loss expectation referred to in paragraph 1, point (b), the authorities shall reflect the forward-looking immovable property market developments referred to in Article 124(2), first subparagraph, point (b), of Regulation (EU) No 575/2013 during a forward-looking horizon of at le…
+ ### Article 2 — Conditions to be taken into account for the assessment of the appropriateness of the LGD input floor values for retail exposures secured by immovable property
− 3. The loss expectation referred to in paragraph 1, point (b), and determined in accordance with paragraph 2, shall be based on all of the following:
+ **1.** When assessing the appropriateness of the LGD input floor values in accordance with Article 164(6) of Regulation (EU) No 575/2013, the authorities designated in accordance with paragraph 5 of that Article shall, when performing the systemic risk assessment on the basis of macroeconomic imbala…
− | (a) | the historical evolution and cyclical characteristics of the immovable property market as reflected in immovable property market transactions and prices, and in the volatility of those prices, as evidenced by the relevant data indicators or qualitative information; |
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+ **2.** For the purposes of paragraph 1, the authorities designated in accordance with Article 164(5) of Regulation (EU) No 575/2013 shall have regard to all of the following:(a) whether the macroeconomic imbalances are related to an economic downturn and hence are considered in the downturn LGD esti…
− | (b) | the past and present structural characteristics of the immovable property market, and the future evolution of those structural characteristics related to the size of the immovable property market, the specificities of real estate financing, national taxation systems and the national regulato…
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− | (c) | the fundamental drivers of demand and supply in the immovable property market, as evidenced by any relevant data indicators or qualitative information, including lending standards, construction activity, vacancy rates, or transaction activity; |
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+ ### Article 3 — Assessments for property segments or specific parts of the territory of a Member State
− | (d) | the riskiness of the exposures secured by immovable property, as measured by all of the following:(i)indicators relevant for the property segments of the Member State and, where relevant, for parts of the territory of that Member State, having regard to Section 6 of the EBA Guidelines on sub…
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− | (i) | indicators relevant for the property segments of the Member State and, where relevant, for parts of the territory of that Member State, having regard to Section 6 of the EBA Guidelines on subsets of exposures in the application of a Systemic Risk Buffer (3), issued in accordance with Article…
− | (ii) | the lending standard indicators specified in the recommendation of the European Systemic Risk Board on closing real estate data gaps (5); |
+ An authority designated in accordance with Article 124(8) or Article 164(5) of Regulation (EU) No 575/2013 may consider the factors set out in Article 1 of this Regulation, or take into account the conditions set out in Article 2 of this Regulation, for one or more property segments or one or more p…
− | (e) | the expected evolution in immovable property market prices and the expected volatility in those prices, including an assessment of the uncertainty around such expectations; |
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+ ### Article 4 — Use of other sources of data
− | (f) | the expected evolution in meaningful macroeconomic key variables that could affect the solvency of borrowers, including an assessment of the uncertainty around such expectations; |
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+ Authorities designated in accordance with Article 124(8) or Article 164(5) of Regulation (EU) No 575/2013 that determine the loss experience in accordance with Article 1(1), point (a), of this Regulation, or that assess the appropriateness of the LGD input floor values in accordance with Article 2 o…
− | (g) | the time horizon over which the forward-looking property market developments are expected to materialise; |
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+ ### Article 5 — Entry into force
− | (h) | national specificities related exclusively to the real estate market and its financing, including public and private guarantee schemes, tax deductibility, and public support in the form of recourse regimes and social safety nets; |
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+ This Regulation shall enter into force on the twentieth day following that of its publication in the *Official Journal of the European Union*.
− | (i) | any other data indicators and sources which provide insight into forward-looking property market developments which affect the loss expectation referred to in paragraph 1, point (b), or support the data quality of the loss experience referred to in paragraph 1, point (a). |
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− 4. Where there is a lot of uncertainty as to the factors referred to in paragraph 3, point (e), the authorities designated in accordance with Article 124 (1a) of Regulation (EU) No 575/2013 shall consider a margin of prudence when determining the loss expectation in accordance with paragraph 2 of th…
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− 5. For the purposes of paragraph 1, the authorities designated in accordance with Article 124 (1a) of Regulation (EU) No 575/2013 shall have regard to other macroprudential measures in force that already address the identified systemic risks affecting the appropriateness of the risk weights referred…
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− | (a) | loan-to-value (LTV) limits; |
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− | (b) | debt-to-income limits; |
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− | (c) | debt-service-to-income limits; |
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− | (d) | other instruments addressing lending standards. |
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− ### art_2
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− Article 2
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− 1. When assessing the appropriateness of the minimum LGD values in accordance with Article 164(6) of Regulation (EU) No 575/2013, the authorities designated in accordance with paragraph 5 of that Article shall, when performing the systemic risk assessment on the basis of macroeconomic imbalances aff…
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− | (a) | demand and supply conditions of real estate markets, and dynamics in real estate prices, including, where relevant and where a robust estimation is available, the degree of overvaluation or undervaluation of real estate prices; |
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− | (b) | conditions that affect drivers of LGD estimates, including, where relevant:(i)changes in the length and in the effectiveness of the process for pursuing recoveries, due to changes in the recovery procedures;(ii)changes in the frequency of the return of obligors or individual credit facilitie…
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− | (i) | changes in the length and in the effectiveness of the process for pursuing recoveries, due to changes in the recovery procedures; |
− | (ii) | changes in the frequency of the return of obligors or individual credit facilities to non-defaulted status, due to changes in unemployment rates, or changes in household or corporate debt levels; |
− | (iii) | interest rates; |
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− | (c) | other conditions that indirectly affect the value of collateral taken into account in LGD estimates, including, where relevant, loan-to-value (LTV) ratios, cross collateralisation, and other common forms of credit protection relevant to retail exposures secured by immovable property in the M…
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− 2. For the purposes of paragraph 1, the authorities designated in accordance with Article 164(5) of Regulation (EU) No 575/2013 shall have regard to all of the following:
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− | (a) | whether the macroeconomic imbalances are related to an economic downturn and hence are considered in the downturn LGD estimation for the exposures concerned; |
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− | (b) | other macroprudential measures in force that already address the identified systemic risks affecting the adequacy of minimum LGD values, including the following measures in national law designed to enhance the resilience of the financial system:(i)loan-to-value limits;(ii)debt-to-income limi…
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− | (i) | loan-to-value limits; |
− | (ii) | debt-to-income limits; |
− | (iii) | debt-service-to-income limits; |
− | (iv) | other instruments addressing lending standards; |
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− | (c) | the degree of uncertainty around the evolution of immovable property markets and their price volatility; |
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− | (d) | national specificities exclusively related to the real estate market and its financing, including public and private guarantee schemes, tax deductibility and public support in the form of recourse regimes and social safety nets; |
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− | (e) | where relevant and available, benchmarking comparisons of LGD estimates across credit institutions or Member States for comparable portfolios, comparable risk levels and comparable facilities secured by immovable property pledged as collateral. |
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− ### art_3
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− Article 3
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− An authority designated in accordance with Article 124(1a) or Article 164(5) of Regulation (EU) No 575/2013 may consider the factors set out in Article 1 of this Regulation, or take into account the conditions set out in Article 2 of this Regulation, for one or more property segments or one or more …
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− ### art_4
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− Article 4
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− Authorities designated in accordance with Article 124(1a) or Article 164(5), of Regulation (EU) No 575/2013 that determine the loss experience in accordance with Article 1(1), point (a), of this Regulation, or that assess the appropriateness of the minimum LGD values in accordance with Article 2 of …
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− ### art_5
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− Article 5
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− This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.