On May 11, 2015, the European Banking Authority (EBA) published a consultation paper (EBA/CP/2015/09) on draft regulatory technical standards (RTS) on assigning risk weights to specialized lending exposures under Article 153(9) of the Capital Requirements Regulation (Regulation 575/2013).
Specialized lending is a type of exposure towards an entity specifically created to finance or operate physical assets, where the primary source of income and repayment of the obligation lies directly with the assets being financed.
The proposed RTS define four classes of specialized lending:
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project finance;
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real estate;
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object finance; and
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commodities finance.
For each of these classes, the draft RTS specify a list of factors that institutions shall take into account and propose two options on how these factors should be combined to determine the risk weight assigned to the specialized lending exposure. The EBA has invited responses to the consultation before August 11, 2015, and will hold a public hearing for discussion on July 6, 2015.
