Division C 103 – Definition of High Default PortfoliosF1

Each portfolio is assigned one of the following names by EBA:

1. 1.1.

   CORP Defaulted

2. 1.2.

   CORP Non-Defaulted

3. 1.2.1.

   CORP Non-defaulted Secured

4. 1.2.1.1.

   CORP Non-defaulted Secured Construction

5. 1.2.1.2.

   CORP Non-defaulted Secured Other

6. 1.2.2.

   CORP Non-defaulted Unsecured

7. 1.2.2.1.

   CORP Non-defaulted Unsecured Construction

8. 1.2.2.2.

   CORP Non-defaulted Unsecured Other

9. 2.1.

   SMEC Defaulted

10. 2.2.

    SMEC Non-Defaulted

11. 2.2.1.

    SMEC Non-defaulted Secured

12. 2.2.1.1.

    SMEC Non-defaulted Secured Construction

13. 2.2.1.2.

    SMEC Non-defaulted Secured Other

14. 2.2.2.

    SMEC Non-defaulted Unsecured

15. 2.2.2.1.

    SMEC Non-defaulted Unsecured Construction

16. 2.2.2.2.

    SMEC Non-defaulted Unsecured Other

17. 3.1.

    SMER Defaulted

18. 3.2.

    SMER Non-Defaulted

19. 3.2.1.

    SMER Non-defaulted Secured

20. 3.2.1.1.

    SMER Non-defaulted Secured Construction

21. 3.2.1.2.

    SMER Non-defaulted Secured Other

22. 3.2.2.

    SMER Non-defaulted Unsecured

23. 3.2.2.1.

    SMER Non-defaulted Unsecured Construction

24. 3.2.2.2.

    SMER Non-defaulted Unsecured Other

25. 4.1.

    Mortgages Defaulted

26. 4.2.

    Mortgages Non-defaulted

27. 4.2.1.1.

    Mortgages Non-defaulted Secured

28. 4.2.1.2.

    Mortgages Non-defaulted Unsecured

29. 4.2.2.1.

    Mortgages Non-defaulted ILTV <= 25 %

30. 4.2.2.2.

    Mortgages Non-defaulted ILTV > 100 %,<= 125 %

31. 4.2.2.3.

    Mortgages Non-defaulted ILTV > 125 %

32. 4.2.2.4.

    Mortgages Non-defaulted ILTV > 25 %,<= 50 %

33. 4.2.2.5.

    Mortgages Non-defaulted ILTV > 50 %,<= 75 %

34. 4.2.2.6.

    Mortgages Non-defaulted ILTV > 75 %,<= 100 %

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

1. (a)

   Eligible collateral other than real estate;

2. (b)

   Real estate collateral;

3. (c)

   Not applicable.

Exposures shall be split into parts and assigned to portfolios based on the indexed loan-to-value ( ‘ ILTV ’ ) range which shall be the ratio between the current loan amount and the current value of the property:

1. (a)

   <= 25 %;

2. (b)

   > 25 % <= 50 %;

3. (c)

   > 50 % <= 75 %;

4. (d)

   > 75 % <= 100 %;

5. (e)

   > 100 % <= 125 %;

6. (f)

   > 125 %;

7. (g)

   Not applicable.

The indexed loan-to-value range shall be calculated in a prudent manner and at least comply with the following features:

1. (a)

   Total amount of the loan: the outstanding amount of the mortgage loan plus any undrawn committed amount of the mortgage loan (after applying the corresponding credit conversion factor). The loan amount shall be calculated gross of any specific credit risk adjustments and shall include all other loans (including those provided by other financial institutions that are known to the institution) secured with liens of equal or higher ranking on the same residential property with respect to the lien securing the loan. Where there is insufficient information for ascertaining the ranking of the other liens, the institution shall assume that these liens rank pari passu with the lien securing the loan.

2. (b)

   Value of the property: the value of the property is the independent valuation of the property at some point in time (most likely at origination) and converted to a current value using a property price index. The valuation should be performed in an independent way and by appraisers that meet specific qualification requirements. Qualifying requirements and minimum appraisal standards shall comply with the following conditions:

   • there is an individual assessment of the property and the property is valued in a prudently conservative manner (e.g. excluding expectations of future price appreciations and taking into account any potential for the current property price to be above a level that is sustainable over the life of the loan, for example due to a property price bubble);

   • where a market value can be determined, the valuation is not higher than market value;

   • the valuation is supported by adequate appraisal documentation.

Institutions shall document their calculations and provide this documentation to their competent authority upon request.