The European Banking Authority has issued final guidelines on proportionate retail diversification methods under the CRR, including criteria for granular portfolios and securitised exposures, to ensure proportionality for smaller institutions.
The European Banking Authority (EBA) has published its final Guidelines on proportionate retail diversification methods under the Capital Requirements Regulation (CRR).
The Guidelines establish a harmonised framework to assess whether retail portfolios are sufficiently diversified, with a focus on proportionate application for smaller institutions.
To qualify for the 75% risk weight for retail exposures, institutions must demonstrate that their retail portfolios are sufficiently granular. Specifically, no single exposure to a counterparty or connected clients should exceed 0.2% of the total eligible retail portfolio.
Recognising that smaller institutions may not always meet this benchmark, the Guidelines allow an alternative: institutions may still apply the preferential risk weight if no more than 10% of their retail portfolio exceeds the 0.2% threshold.
The Guidelines also include an assessment approach, choosing a one-step method over the iterative approach proposed in the consultation. The diversification threshold has been increased from 5% to 10%, reflecting industry feedback and easing the impact on small and medium-sized institutions.
Regarding securitised retail exposures, the Guidelines differentiate between originators and investors. For investors, a limited, temporary derogation is introduced when obligor‑level information is unavailable, allowing the diversification condition to be considered fulfilled.
The Guidelines are issued pursuant to Article 123(1) of Regulation (EU) No 575/2013 (CRR), which requires the EBA to specify proportionate diversification methods for retail exposures under the standardised approach.
