Basel 3.1 Overdraft / Revolving Loan commitments
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Hi RiskBowl,
A UK bank are in active discussions on what is covered by revolving loan commitments for PRA B3.1 statement below. This is within Wholesale exposure context.
Do you know if other banks are capturing Overdrafts under the revolving loan commitments? They internally classify overdrafts as unconditionally cancellable, thus there are people who argue that 166D.1.a (bolded below) will not capture these
Article 166D EXPOSURE VALUE FOR CORPORATES, INSTITUTIONS AND RETAIL: THE ADVANCED IRB APPROACH 1. An institution shall, subject to paragraph 3, determine the exposure value for off-balance sheet items in respect of which it uses the Advanced IRB Approach in accordance with Article 147A by multiplying the item’s nominal value by: (a) for revolving loan commitments which would not be subject to a 100% conversion factor under Credit Risk: Standardised Approach (CRR) Part Article 111: an own estimate of conversion factor that the institution shall provide in accordance with Section 6; (b) for all other off-balance sheet items: the conversion factor that would be applicable to the off balance sheet item under the Standardised Approach, as set out in Credit Risk: Standardised Approach (CRR) Part Article 111