+categories assessment areas
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categories assessment areas
| The risk that the institution will incur significant credit losses stemming from a concentration of Credit exposures to a small group of concentration borrowers, to a set of borrowers risk with similar default behaviour or to highly correlated financial assets and concentrated credit risk mitigation | • Single -name concentrations (including a client or group of connected clients as defined for large exposures) • Sectoral concentrations • Geographical concentrations • Product concentration • Collateral and guarantees concentration • Hidden sources of concentration that can materialise under stressed conditions, when the level of credit risk correlation can increase compared to normal conditions • The quality of counterparties and relevant CVAs and the complexity of transactions • The wrong -way risk arising when the exposure to a counterparty is adversely correlated with its credit quality • The exposure to counterparty credit and settlement risks in terms of both current market values and nominal amount, compared to the overall | Regulation (EU) 575/2013: Articles 129, 170, 171, 184, 207, 209, 395, 400-401 Directive 2013/36/EU: Articles 81, 98 | | The risk that the counterparty to a Counterparty transaction could default before credit risk the final settlement of the transaction ’ s cash flows | credit exposure and to own funds • The proportion of transactions processed through financial market infrastructures that provide payment versus delivery settlement • The p roportion of transactions to central counterparties and the effectiveness of loss protection mechanisms for them • The proportion of transactions to central counterparties established in third countries the effectiveness of loss protection mechanisms for them, and how any excessive exposure to non-EU CCPs is reduced • The proportion of non -centrally cleared OTC transactions and the effectiveness of loss protection mechanisms for them | Regulation (EU) 575/2013: Articles 181, 246, Part Three, Title II, Chapter 6 Directive 2013/36/EU: Article 79 |
Credit risk sub- Legal references related to the Legal references/Definitions Assessment areas categories assessment areas | • The existence, significance, effectiveness and enforceability of netting agreements | |
The risk arising in the case of transactions with debt instruments, equities, foreign currencies and commodities | Settlement and (excluding repurchase delivery risk transactions and securities or | | Regulation (EU) 575/2013: Articles 1,92, Part Three, Title V |
commodities lending and securities or commodities borrowing) remain unsettled after their due delivery date | The risk that the institution will incur credit losses associated to the business carried out in a specific country due to adverse Country risk circumstances and/or events, including the impact of geopolitical events, in the specific country | • The risk of a deterioration in the quality of an institution’s exposures in a specific country (including collective debtor risk – i.e. the default by a large group of debtors), stemming from threats, occurrences, and the escalation of adverse events associated with wars, terrorism, and tensions among states and political actors affecting international relations • The degree of concentration within all types of exposures to country risk, including sovereign exposures, in proportion to the whole institutio n’s credit portfolio (per obligor and amount) • The economic strength and stability of the borrower’s country and its track record in terms of punctual payment and occurrence of serious default events • The risk of other forms of sovereign intervention that can materially impair the creditworthiness of borrowers (e.g. deposit freezes, expropriation or punitive taxation) • The transfer risk linked to cross -border foreign currency lending for material cross-border lending and exposures in foreign currencies | |
Credit risk sub- Legal references related to the Legal references/Definitions Assessment areas categories assessment areas | The risks arising from securitisation transactions in relation to which the credit Credit risk from institutions are investor, securitisations originator or sponsor, including reputational risks, such as arise in relation to complex structures or products | • The appropriateness of allocation of securitisation exposures to the banking book and trading book and the consistency with the institution’s securitisation strategy • The rating and the performance of the securitisation tranches held by the institution, the nature, composition and quality of the underlying assets • The consistency of the capital relief with the actual risk transfer for originated securitisations • Whether there is a clear distinction between drawn and undrawn amounts for liquidity facilities provided to the securitisation vehicle • The existence of contingency plans for Asset -Backed Commercial Paper conduits managed by the institution in the event that an issuance of commercial paper is not possible because of liquidity conditions, and the impact on the total credit risk exposure of the institution • Any non -linear relationship between market risk and credit risk where | Regulation (EU) 575/2013: Article 67, Part Three, Title II, Chapter 5 Directive 2013/36/EU: Article 82 | | The additional credit risk arising from FX lending exposures to FX lending risk unhedged retail and SME borrowers | exchange rates may have a disproportional impact on the credit risk of an institution’s FX loans portfolio such as a material increase in both the outstanding value of debt and the flow of payments to service such debt and an increase in the outstanding value of debt compared to the value of collateral assets denominated in the domestic currency • The risk of decline in the value of the institution’s equity investments | | | The risk of loss on financial Equity risk in the instruments from changes in banking book equities posted in the banking book | and ensure that this risk is appropriately captured by the institution’s risk framework • Where relevant, on participation risk in strategic holdings (both insurance and non-insurance) | Regulation (EU) 575/2013: Article 133 |
Credit risk sub- Legal references related to the Legal references/Definitions Assessment areas
1. Prezentare generală
1.1 Referințe
1.2 Cerințe identificate
1.3 Standarde asociate
2. Cerințe identificate
3. Standarde asociate
- EBA - Published by the European Banking Authority at https://www.eba.europa.eu/
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