Specific requirements for retail exposures
Article 62
1. When assessing the assignment of exposures to the retail exposure class in accordance with Article 147(5) of Regulation (EU) No 575/2013, competent authorities shall verify that: (a) the institution distinguishes between exposures to natural persons and to SMEs based on clear criteria in a consistent manner; (b) for the purposes of monitoring compliance with the limit laid down in Article 147(5)(a)(ii) of Regulation (EU) No 575/2013 the institution has in place adequate procedures and mechanisms for the following: (i) identifying groups of connected clients and aggregating relevant exposures that each institution and its parent or subsidiaries maintain against this group of connected clients; (ii) assessing cases where the limit has been exceeded; (iii) ensuring that an exposure to an SME for which the limit has been exceeded is re-assigned to the corporate exposure class without undue delay. 2. When verifying that retail exposures are not managed just as individually as exposures in the corporate exposure class in the meaning of Article 147(5)(c) of Regulation (EU) No 575/2013, competent authorities shall take into consideration at least the following components of the credit process: (a) marketing and sales activities; (b) type of product; (c) rating process; (d) rating system; (e) credit decision process; (f) credit risk mitigation methods; (g) monitoring processes; (h) collection and recovery process. 3. When determining whether the criteria laid down in Article 147(5)(c) and (d) of Regulation (EU) No 575/2013 are met, competent authorities shall examine whether the assignment of exposures is consistent with the institution’s business lines and the way those exposures are managed. 4. Competent authorities shall verify that the institution assigns each retail exposure to a single category of exposures to which the relevant correlation coefficient applies in accordance with paragraphs (1), (3) and (4) of Article 154 of Regulation (EU) No 575/2013: (a) for the purposes of verifying compliance with points (d) and (e) of Article 154(4) of Regulation (EU) No 575/2013, competent authorities shall verify that: (i) the volatility of loss rates for qualifying revolving retail exposures portfolio is low relative to their average level of loss rates, by assessing the institution’s comparison of the volatility of loss rates for qualifying revolving retail exposures portfolio as opposed to other retail exposures or to other benchmark values; (ii) the risk management of qualifying revolving retail exposures portfolio is consistent with the underlying risk characteristics, including loss rates; (b) for the purposes of verifying compliance with Article 154(3) of Regulation (EU) No 575/2013, competent authorities shall verify that for all exposures where the immovable property collateral is used in the own-LGD estimates in accordance with Article 181(1)(f) of Regulation (EU) No 575/2013, the coefficient of correlation laid down in Article 154(3) of Regulation (EU) No 575/2013 is assigned.