Q&A

Question

Can Eiopa please clarify, the term “overdue” under counterparty risk, type 2. And also if “overdue”, should be considered under the 15% charge. Assumption 1, Only debtors which have passed their contractual agreement should be included under type 2, if by less than 3 months with a charge of 15% and if more, then with a charge of 90%. e.g. If there is an agreed payment term of 6 months with a debtor, no charge is given under type 2 within months 1 to 6 as it’s not “overdue”, 15% if not received between months 7 to 9 and 90% after that. Assumption 2 All debtors regardless of their contractual agreement must be included under a 15% charge and only when they have not been received for 3 months after their contractual agreement they should get a 90% charge. e.g. If there is an agreed payment term of 6 months with a debtor, it should wholly be charged as 15% and only after 9 months when overdue by more than 3 months it should then be given a 90% charge. Assumption 3 Debtor from the point of transaction are reported under 15% up to 3 months and 90% after 3 months regardless of their contractual agreement. e.g. . If there is an agreed payment term of 6 months with a debtor, up to 3 months it’s 15% charge and after at 90%. Also should intra group balances be included under Type 2 debtors when doing a solo report.

EIOPA answer

All credit exposures are in the scope of the Spread Risk Sub-module, the sub-module for counterparty default risk on type 1 exposures or the sub-module for counterparty default risk on type 2 exposures (see Article 189(3) of the Delegated Regulation).

This includes intragroup credit exposures.

For each type 2 exposure, a loss given default shall be calculated. The capital requirement for counterparty default risk on type 2 exposures then either takes into account 15% of that loss given default, or 90% of the loss given default if the exposure is a receivable from an intermediary that has been due for more than three months. 

Therefore, the 15% applies to all type 2 exposures that have not been due for more than three months. It also applies to all type 2 exposures that have been due for more than three months but are not receivables from intermediaries. The 90% applies only to receivables from intermediaries that have been due for more than three months. 

Based on the provided example: Assume that at t=0 a receivable from an intermediary is due in 6 month. Then the 15 % apply until t=0+9 months and afterwards the 90 %.