in force 2025-01-01 MODIFIED+3,685 −3,000§
Amended by Regulation (EU) 2024/1623 32024R1623 · Regulation (EU) 2024/2987 32024R2987 · Regulation (EU) 2024/2795 32024R2795
applies from: unchanged
Sources disagree about the kind of change — they agree this provision changed and disagree about how: the text comparison called it MODIFIED and the EU's own amendment metadata called it INSERTED. Both are shown; neither is overruled.
The provision's title changes from referring to exposures fully and completely secured by mortgages on residential property to exposures secured by mortgages on residential property, and the entire substantive structure is replaced.
Where the earlier text set a flat 35% risk weight for fully secured residential mortgage exposures meeting listed conditions on valuation independence, borrower repayment capacity, Articles 208 and 229(1), and an 80% loan-to-value cap, the later text instead assigns a 20% risk weight to the portion of an exposure up to 55% of property value under Article 124(2), with adjustments for junior liens and pari passu liens, and applies a tiered risk-weight table by exposure-to-value bucket to the remainder.
The earlier loss-rate derogation tied to Member State evidence of a well-developed residential property market with specified loss thresholds is replaced by a derogation referencing loss rates published under Article 430a, and a new provision extends a comparable derogation to third countries with equivalent supervisory arrangements or to EBA-published data where a third country does not publish such rates.
Cited: Art. 125, v1 · Art. 125, v2
text before / after
texts differ too much for an inline diff; shown separately
before (02013R0575-20240709)
Article 125 Exposures fully and completely secured by mortgages on residential property 1. Unless otherwise decided by the competent authorities in accordance with Article 124(2), exposures fully and completely secured by mortgages on residential property shall be treated as follows: (a) exposures or any part of an exposure fully and completely secured by mortgages on residential property which is or shall be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, shall be assigned a risk weight of 35 %; (b) exposures to a tenant under a property leasing transaction concerning residential property under which the institution is the lessor and the tenant has an option to purchase, shall be assigned a risk weight of 35 % provided that the exposure of the institution is fully and completely secured by its ownership of the property. 2. Institutions shall consider an exposure or any part of an exposure as fully and completely secured for the purposes of paragraph 1 only if the following conditions are met: (a) the value of the property shall not materially depend upon the credit quality of the borrower. Institutions may exclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower from their determination of the materiality of such dependence; (b) the risk of the borrower shall not materially depend upon the performance of the underlying property or project, but on the underlying capacity of the borrower to repay the debt from other sources, and as a consequence, the repayment of the facility shall not materially depend on any cash flow generated by the underlying property serving as collateral. For those other sources, institutions shall determine maximum loan-to-income ratios as part of their lending policy and obtain suitable evidence of the relevant income when granting the loan; (c) the requirements set out in Article 208 and the valuation rules set out in Article 229(1) are met; (d) unless otherwise determined under Article 124(2), the part of the loan to which the 35 % risk weight is assigned does not exceed 80 % of the market value of the property in question or 80 % of the mortgage lending value of the property in question in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions. 3. Institutions may derogate from point (b) of paragraph 2 for exposures fully and completely secured by mortgages on residential property which is situated within the territory of a Member State, where the competent authority of that Member State has published evidence showing that a well-developed and long-established residential property market is present in that territory with loss rates which do not exceed the following limits: (a) losses stemming from lending collateralised by residential property up to 80 % of the market value or 80 % of the mortgage lending value, unless otherwise decided under Article 124(2), do not exceed 0,3 % of the outstanding loans collateralised by residential property in any given year; (b) overall losses stemming from lending collateralised by residential property do not exceed 0,5 % of the outstanding loans collateralised by residential property in any given year. 4. Where either of the limits referred to in paragraph 3 is not satisfied in a given year, the eligibility to use paragraph 3 shall cease and the condition contained in point (b) of paragraph 2 shall apply until the conditions in paragraph 3 are satisfied in a subsequent year.
after (02013R0575-20250101)
Article 125 Exposures secured by mortgages on residential property 1. For an exposure secured by residential property as referred to in Article 124(2), point (a)(i) or (ii), the part of the exposure up to 55 % of the property value shall be assigned a risk weight of 20 %. Where an institution holds a junior lien and there are more senior liens not held by that institution, to determine the part of the institution’s exposure that is eligible for the 20 % risk weight, the amount of 55 % of the property value shall be reduced by the amount of the more senior liens not held by the institution. Where liens not held by the institution rank pari passu with the lien held by the institution, to determine the part of the institution’s exposure that is eligible for the 20 % risk weight, the amount of 55 % of the property value, reduced by the amount of any more senior liens not held by the institution, shall be reduced by the product of: (a) 55 % of the property value, reduced by the amount of more senior liens, if any, both held by the institution and held by other institutions; and (b) the amount of liens not held by the institution that rank pari passu with the lien held by the institution divided by the sum of all pari passu liens. Where, in accordance with Article 124(9), the competent authority or designated authority has set a higher risk weight or a lower percentage of the property value than those referred to in this paragraph, institutions shall use the risk weight or percentage set in accordance with Article 124(9). The remaining part of the exposure referred to in the first subparagraph, if any, shall be risk weighted as an exposure to the counterparty that is not secured by residential property. 2. An exposure as referred to in Article 124(2), point (a)(iii), shall be assigned the risk weight set in accordance with the respective exposure-to-value risk weight bucket in Table 1. For the purposes of this paragraph, where, in accordance with Article 124(9), the competent authority or designated authority, has set a higher risk weight or a lower exposure-to-value percentage than those referred to in this paragraph, institutions shall use the risk weight or percentage set in accordance with Article 124(9). Table 1 ETV ETV ≤ 50 % 50 % < ETV ≤ 60 % 60 % < ETV ≤ 80 % 80 % < ETV ≤ 90 % 90 % < ETV ≤ 100 % ETV > 100 % Risk weight 30 % 35 % 45 % 60 % 75 % 105 % By way of derogation from the first subparagraph of this paragraph, institutions may apply the treatment referred to in paragraph 1 of this Article to exposures secured by residential property which is situated within the territory of a Member State, where the competent authority of that Member State has published in accordance with Article 430a(3) loss rates for such exposures which, based on the aggregate data reported by institutions in that Member State for that national immovable property market, do not exceed any of the following limits for losses aggregated across such exposures existing in the previous year: (a) the aggregated amount reported by institutions under Article 430a(1), point (a), divided by the aggregated amount reported by institutions under Article 430a(1), point (c), does not exceed 0,3 %; (b) the aggregated amount reported by institutions under Article 430a(1), point (b), divided by the aggregated amount reported by institutions under Article 430a(1), point (c), does not exceed 0,5 %. 3. Institutions may also apply the derogation referred to in paragraph 2, third subparagraph, of this Article in cases where the competent authority of a third country which applies supervisory and regulatory arrangements at least equivalent to those applied in the Union as determined in a decision of the Commission adopted in accordance with Article 107(4), publishes corresponding loss rates for exposures secured by residential property situated within the territory of that third country. Where a competent authority of a third country does not publish corresponding loss rates for exposures secured by residential property situated within the territory of that third country, EBA may publish such information for that third country, provided that valid statistical data, that are statistically representative of the corresponding residential property market, are available.