Division C 102 – Definition of Low Default PortfoliosF1

Each portfolio is assigned one of the following names:

1. (a)

   Sovereign;

2. (b)

   Institutions;

3. (c)

   Large corporate;

4. (d)

   Large corporate sample.

The ‘ Large corporate sample ’ comprises all entities listed in template 101 of Annex I to this Implementing Regulation for which the Portfolio name (column 090 of template 101) is ‘ Large corporate sample ’ .

Exposures shall be split into parts and assigned to portfolios based on the rank of the internal rating applied by the institution from lowest risk to highest risk excluding defaults with a probability of default ( ‘ PD ’ ) corresponding to 100 %. It takes values from Rating 1, Rating 2 etc.

Where the reporting institution applies a unique rating system or is able to report according to an internal master scale, this scale shall be used. In all other cases, the different rating systems shall be merged and ordered according to the following instructions:

1. (a)

   obligor grades of the different rating systems shall be pooled and ordered from the lower PD assigned to each obligor grade to the higher;

2. (b)

   where a large number of grades or pools is used, a reduced number of grades or pools to be reported may be agreed with the competent authorities.

Exposures shall be split into parts and assigned to portfolios based on the exposure class:

1. (a)

   Central governments and central banks;

2. (b)

   Institutions;

3. (c)

   Corporates:

4. (c.1)

   Corporates – SME;

5. (c.2)

   Corporates – No SME;

6. (d)

   Retail:

7. (d.1)

   Retail – SME;

8. (d.1.1)

   Retail – SME — Secured by real estate;

9. (d.1.2)

   Retail – SME — Other;

10. (d.2)

    Retail – No SME;

11. (d.2.1)

    Retail – No SME — Other;

12. (d.2.2)

    Retail – No SME — Secured by real estate;

13. (d.3)

    Retail – Qualifying revolving;

14. (e)

    Not applicable

Exposures shall be split into parts and assigned to portfolios based on the default status:

1. (a)

   Defaulted: exposures assigned to the rating grade(s) with a PD of 100 %;

2. (b)

   Non-defaulted: exposures assigned to rating grades with a PD lower than 100 %.

3. (c)

   Not applicable

Exposures shall be split into parts and assigned to portfolios based on the collateralisation status:

1. (a)

   Exposures with credit protection;

2. (b)

   Exposures without credit protection;

3. (c)

   Not applicable.

Exposures shall be split into parts and assigned to portfolios based on the collateral type:

1. (a)

   Eligible financial collateral;

2. (b)

   Other eligible collateral: Receivables;

3. (c)

   Other eligible collateral: Residential real estate;

4. (d)

   Other eligible collateral: Commercial real estate;

5. (e)

   Other eligible collateral: Physical collateral;

6. (f)

   Other funded credit protection;

7. (g)

   Credit derivatives;

8. (h)

   Guarantees;

9. (i)

   Unfunded credit protection;

10. (j)

    Not applicable.

It should be noted that exposures treated under the substitution approach are already shifted to the corresponding exposures classes and shall thus not be reported under (g), (h) or (i).

Exposures shall be split into parts and assigned to portfolios based on the counterparty:

1. (a)

   Public sector entities (according to Article 112 (c) of Regulation (EU) No 575/2013) of the European Parliament and of the Council ^f2 ;

2. (b)

   Counterparties other than public sector entities.

3. (c)

   Not applicable

Exposures shall be split into parts and assigned to portfolios based on the size of the counterparty which shall be determined based on the total annual turnover for the consolidated group of which the counterparty is a part:

1. (a)

   <= EUR 50 million;

2. (b)

   > EUR 50 million and <= EUR 200 million;

3. (c)

   > EUR 200 million;

4. (d)

   Not applicable.

The total annual turnover is calculated in accordance with Article 4 of the Annex to Commission Recommendation 2003/361/EC ^f3 and shall refer to the year ending one year before the reporting reference date.

Exposures shall be split into parts and assigned to portfolios based on the size of the exposure expressed in terms of exposure value (i.e. exposure at default ( ‘ EAD ’ )):

1. (a)

   <= EUR 0,5 million;

2. (b)

   > EUR 0,5 million <= EUR 1 million;

3. (c)

   > EUR 1 million <= EUR 1,5 million;

4. (d)

   > EUR 1,5 million <= EUR 5 million;

5. (e)

   > EUR 5 million <= EUR 10 million;

6. (f)

   > EUR 10 million <= EUR 50 million;

7. (g)

   > EUR 50 million;

8. (h)

   Not applicable.

Exposures shall be split into parts and assigned to portfolios based on the balance sheet recognition:

1. (a)

   On-balance sheet items;

2. (b)

   Off-balance sheet items;

3. (c)

   Other

4. (d)

   Not applicable.

Exposures representing Securities Financing Transactions, Derivatives & Long Settlement Transactions or Contractual Cross Product Netting and which are subject to counterparty credit risk, shall be assigned to (c) other. These Exposure shall not be reported in (a) or (b).