Shearman & Sterling LLP | Financial Regulatory Developments Focus | European Central Bank Consults on Materiality Threshold for Credit Obligations Past Due
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  • European Central Bank Consults on Materiality Threshold for Credit Obligations Past Due
    07/03/2018
    The European Central Bank has launched a consultation on a proposed Regulation on the materiality threshold for credit obligations past due under the Capital Requirements Regulation. The CRR risk quantification provisions set out that a default occurs when an obligor is past due more than 90 days on any material credit obligation to a firm, its parent or any of its subsidiaries. The materiality of the credit obligation is to be assessed against a threshold set by the national regulator according to its view of a reasonable level of risk. The ECB is responsible for direct prudential supervision of certain significant banks based in the Eurozone as part of the Single Supervisory Mechanism and must set the materiality threshold for these banks. The ECB must take into account the Regulatory Technical Standards on the materiality threshold for credit obligations past due that supplement the CRR requirements on the conditions for use of the internal ratings-based approach.

    The ECB is proposing a single materiality threshold for all Eurozone significant institutions for retail and for non-retail exposures, regardless of the method used for the calculation of capital requirements.

    The consultation closes on August 17, 2018. The ECB will consider the feedback it receives when finalizing the Regulation. The final Regulation will take effect from December 31, 2020.

    View the draft Regulation.

    View the FAQs.

    View the costs and benefits analysis.

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