Version in force , Inserted +1,816 −0§
Amended by Regulation (EU) 2024/1623 32024R1623 on EUR-Lex (external, EUR-Lex) · Regulation (EU) 2024/2987 32024R2987 on EUR-Lex (external, EUR-Lex) · Regulation (EU) 2024/2795 32024R2795 on EUR-Lex (external, EUR-Lex)
Explanation, written by a model and checked against the cited text
A new Article 123a introduces a requirement that, for certain retail and mortgage-secured exposures to natural persons, the risk weight otherwise assigned under this Chapter be multiplied by 1.5, capped at 150%, when the exposure's currency differs from the obligor's income currency and the obligor lacks sufficient hedging against that mismatch.
It also defines what counts as a source of income for this purpose, sets a fallback rule applying the 1.5 multiplier to all unhedged exposures in a foreign currency when specific mismatched exposures cannot be isolated, and excludes the euro/ERM II currency pairing from the multiplier.
Cited: Art. 123a, v2 (external, EUR-Lex)
v1 is the previous version, v2 this one.
Text from EUR-Lex
Inserted in this version 02013R0575-20250101
Article 123a Exposures with a currency mismatch 1. For exposures to natural persons that are assigned to the exposure class referred to in Article 112, point (h), or for exposures to natural persons that qualify as exposures secured by mortgages on residential property that are assigned to the exposure class referred to in Article 112, point (i), the risk weight assigned in accordance with this Chapter shall be multiplied by a factor of 1,5, whereby the resulting risk weight shall not be higher than 150 %, where the following conditions are met: (a) the exposure is denominated in a currency which is different from the currency of the obligor’s source of income; (b) the obligor does not have a hedge for its payment risk due to the currency mismatch, either by a financial instrument or foreign currency income that matches the currency of the exposure, or the total of such hedges available to the borrower covers less than 90 % of each instalment for this exposure. Where an institution is unable to single out those exposures with a currency mismatch, the risk weight multiplier of 1,5 shall apply to all unhedged exposures where the currency of the exposures is different from the domestic currency of the country of residence of the obligor. 2. For the purposes of this Article, source of income refers to any source that generates cash flows to the obligor, including from remittances, rental incomes or salaries, whilst excluding proceeds from selling assets or similar recourse actions by the institution. 3. By way of derogation from paragraph 1, where the pair of currencies referred to in paragraph 1, point (a), is composed of the euro and the currency of a Member State participating in the second stage of economic and monetary union (ERM II), the risk weight multiplier of 1,5 shall not apply.