CRR2 - Large exposures

CRR2 treatment [‘Large Exposures (CRR)’ part of the PRA Rulebook]:

• Definition: Large exposure is defined as an exposure to an entity/group, after credit mitigation, that is more than 10% of the bank’s Tier-1 capital

• Limits (non-institutions): Large exposures, after credit mitigation, to an entity/group that is not an institution are limited to 25% of Tier-1 capital.

• Limits (institutions): Large exposures, after credit mitigation, to institutions/group of institutions is limited to the higher of 25% of Tier-1 capital or GBP 130 million. Where the GBP 130 million is higher than 25% of Tier-1 capital, the bank can set a limit to institution exposure of 100% of Tier-1 capital.

  Note: There are some exceptions and exemptions to these limits (e.g. trading book exposures, and sovereign exposures that are 0% risk-weighted)

Implementation date: The above requirements came into effect on 1 January 2022.

CRR treatment [Article 392, 395]:

• Definition: Large exposure is defined as exposure to an entity/group, after credit mitigation, that is more than 10% of the bank’s eligible capital. The eligible capital can comprise a combination of Tier-1 and Tier-2 capital, of which Tier-2 capital can be up to one-third of Tier-1 capital.

• Limits (non-institutions): Large exposures, after credit mitigation, to an entity/group that is not an institution are limited to 25% of eligible capital.

• Limits (institutions): Large exposures, after credit mitigation, to institutions/group of institutions is limited to the higher of 25% of eligible capital or EUR 150 million. Where EUR 150 million is higher than 25% of eligible capital, the bank can set its own internal limit - which should be lower than 100% of eligible capital or EUR 150 million.