Directive 2006/48/EC of the European Parliament and of the council (repealed)Show full title

PART 3 U.K. Use of ECAIs' credit assessments for the determination of risk weights

1. TREATMENT U.K.

1. A credit institution may nominate one or more eligible ECAIs to be used for the determination of risk weights to be assigned to asset and off-balance sheet items. U.K.

2. A credit institution which decides to use the credit assessments produced by an eligible ECAI for a certain class of items must use those credit assessments consistently for all exposures belonging to that class. U.K.

3. A credit institution which decides to use the credit assessments produced by an eligible ECAI must use them in a continuous and consistent way over time. U.K.

4. A credit institution can only use ECAIs credit assessments that take into account all amounts both in principal and in interest owed to it. U.K.

5. If only one credit assessment is available from a nominated ECAI for a rated item, that credit assessment shall be used to determine the risk weight for that item. U.K.

6. If two credit assessments are available from nominated ECAIs and the two correspond to different risk weights for a rated item, the higher risk weight shall be assigned. U.K.

7. If more than two credit assessments are available from nominated ECAIs for a rated item, the two assessments generating the two lowest risk weights shall be referred to. If the two lowest risk weights are different, the higher risk weight shall be assigned. If the two lowest risk weights are the same, that risk weight shall be assigned. U.K.

2. ISSUER AND ISSUE CREDIT ASSESSMENT U.K.

8. Where a credit assessment exists for a specific issuing program or facility to which the item constituting the exposure belongs, this credit assessment shall be used to determine the risk weight to be assigned to that item. U.K.

9. Where no directly applicable credit assessment exists for a certain item, but a credit assessment exists for a specific issuing program or facility to which the item constituting the exposure does not belong or a general credit assessment exists for the issuer, then that credit assessment shall be used if it produces a higher risk weight than would other wise be the case or if it produces a lower risk weight and the exposure in question ranks pari passu or senior in all respects to the specific issuing program or facility or to senior unsecured exposures of that issuer, as relevant. U.K.

10. Points 8 and 9 are not to prevent the application of points 68 to 71 of Part 1. U.K.

11. Credit assessments for issuers within a corporate group cannot be used as credit assessment of another issuer within the same corporate group. U.K.

3. LONG-TERM AND SHORT-TERM CREDIT ASSESSMENTS U.K.

12. Short-term credit assessments may only be used for short-term asset and off-balance sheet items constituting exposures to institutions and corporates. U.K.

13. Any short-term credit assessment shall only apply to the item the short-term credit assessment refers to, and it shall not be used to derive risk weights for any other item. U.K.

14. Notwithstanding point 13, if a short-term rated facility is assigned a 150 % risk weight, then all unrated unsecured exposures on that obligor whether short-term or long-term shall also be assigned a 150 % risk weight. U.K.

15. Notwithstanding point 13, if a short-term rated facility is assigned a 50 % risk-weight, no unrated short-term exposure shall be assigned a risk weight lower than 100 %. U.K.

4. DOMESTIC AND FOREIGN CURRENCY ITEMS U.K.

16. A credit assessment that refers to an item denominated in the obligor's domestic currency cannot be used to derive a risk weight for another exposure on that same obligor that is denominated in a foreign currency. U.K.

17. Notwithstanding point 16, when an exposure arises through a credit institution's participation in a loan that has been extended by a Multilateral Development Bank whose preferred creditor status is recognised in the market, competent authorities may allow the credit assessment on the obligors' domestic currency item to be used for risk weighting purposes. U.K.