Proportionate retail diversification methods
For the purpose of Article 123(1), point (c) of Regulation (EU) No 575/2013, an exposure should be considered as representing one of a significant number of exposures with similar characteristics, such that the risks associated with such exposure are substantially reduced, where it belongs to a sufficiently diversified portfolio in accordance with paragraph 11.
A portfolio should be considered sufficiently diversified where the ratio of the sum of the exposure values of the large eligible retail exposures, as defined in paragraph 12, over the sum of the exposure values of all the institution’s eligible retail exposures does not exceed 10%.
An eligible retail exposure should be considered a large eligible retail exposure when the ratio of its exposure value over the sum of the exposure values of all the institution’s eligible retail exposures exceeds the threshold of 0.2%. For the purpose of identifying large eligible retail exposures, the institution should treat the eligible retail exposures to a client or to a group of connected clients, as applicable, as a single exposure, summing their exposure values.
The institution should first assess whether the portfolio composed of all the institution’s eligible retail exposures meets the condition set out in paragraph 11.
Where the portfolio composed of all the institution’s eligible retail exposures does not meet the condition set out in paragraph 11, the institution may exclude from it one or more large eligible retail exposures as defined in paragraph 12.
The portfolio resulting from the exclusion of exposures carried out in accordance with paragraph 14 should be considered as sufficiently diversified if it meets the condition set out in paragraph 11.
The exposures excluded in accordance with paragraph 14 should not be considered as representing one of a significant number of exposures with similar characteristics for the purpose of Article 123(1), point (c) of Regulation (EU) No 575/2013.
In case of a portfolio including securitised exposures, the assessment of compliance with the diversification condition referred to in paragraph 11 should be carried out with regard to the retail exposures underlying the securitisation as if those underlying exposures were not securitised, in accordance with Article 255(6) of Regulation (EU) No 575/2013. Therefore, the calculation of the ratios referred to in paragraphs 11 and 12 should not be done for the whole portfolio of the institution’s eligible retail exposures but should be done separately for three sub portfolios. More specifically:
For the sub-portfolio consisting of non-securitised exposures, the numerator and the denominator should include only non-securitised exposures.
For the sub-portfolio consisting of securitised exposures where the institution acts as originator, the numerator and the denominator should include both those securitised exposures and all the non-securitised exposures.
For the sub-portfolio consisting of securitised exposures where the institution acts as investor, the numerator and the denominator should include only the underlying securitised exposures.
Notwithstanding paragraph 17, for securitised exposures where institutions act as investors, institutions may alternatively use the following guidance: the above-described assessment of diversification should be deemed as automatically fulfilled in the case of an institution’s investor position in a securitisation, to the extent that the latter is comprised of underlying exposures, for which, in line with the due diligence and transparency requirements set out in Articles 5 and 7 of Regulation (EU) 2017/2402, information on the obligor and on the exposure value of the underlying exposures of that securitisation positions is not requested in the templates referred to in Article 7 of that Regulation. This derogation should apply only in the sole cases where the templates mandated under Article 7(4) of Regulation (EU) 2017/2402 do not foresee the information on obligor and on the size of the obligor.