Pursuant to Article 125(3) and Article 126(3) CRR (credit risk: standardised approach) or Article 199(3) and (4) CRR (IRB approach) credit institutions may, in assessing whether exposures are fully and completely secured by property collateral, deviate from the principle requirement, that the risk of the debtor is not materially dependent on the performance of the underlying property or project, if the competent authority in the Member State in question, in which the property is located, has published proof that a well developed and well established property market exists, the loss rates of which are below specific upper limits.
The following upper limits are prescribed under CRR II:
- losses stemming from loans collateralised up to 80% (or 50%) of the market value by residential property (or commercial immovable property) do not exceed 0.3 % of the outstanding loans collateralised by residential property (or commercial immovable property) in any given year;
- the total losses stemming from loans collateralised by residential property (or commercial immovable property) do not exceed 0.5 % of the outstanding loans collateralised by residential property (or commercial immovable property) in any given year.
It is hereby determined, that the maximum loss rates for the Austrian property market that were collected to date by the FMA are lower than the aforementioned thresholds, thereby meaning – until 31.12.2024 – that deviation from point b) of Article 125(2), point b) of Article 126(2) and point b) of Article 199(2) CRR is permissible. The regulations set out in the CRR in the version amended in Regulation (EU) No. 2024/1623 will apply from 01.01.2025.
In revising the standardised approach to credit risk, the own funds requirements for exposures secured by mortgages on immovable property has been structured in a more risk-differentiated manner. From 01.01.2025, an exposure-to-value (ETV) approach with higher risk weights is to be applied for the income-producing real estate segment. It is possible from deviate from this approach, if the national supervisory authority has published loss rates for property located in that Member State, that is lower than certainly upper boundaries. The rules under the IRB Approach in this regard were generally maintained. In this case the ability for recognising property collateral continues to be based on the completeness of the collateralisation. By publishing the maximum loss rates that are lower than certain upper boundaries, it is possible to deviate from the general requirement that the risk of the obligor does not materially depend on the development in value of the underlying property or project.
The following upper boundaries have been set under the CRR III regime:
- losses stemming from loans collateralised up to 55 % of the market value by residential property (or commercial immovable property) do not exceed 0.3 % of the outstanding loans collateralised by residential property (or commercial immovable property) in any given year;
- the total losses stemming from loans collateralised by residential property (or commercial immovable property) do not exceed 0.5 % of the outstanding loans collateralised up to by residential property (or commercial immovable property) in any given year.
The reporting data used to calculate the maximum loss rates (up until the first report under the CRR III regime, i.e. until the data reported as of 31.12.2025) form the valid thresholds under CRR III. The reported loss data may only be considered as an approximate value for assessing the maximum loss rates under CRR III.
Based on the ongoing analyses about the Austrian real estate market, the FMA in consultation with the OeNB has arrived at the decision that conducting the hard test for exposures collateralised by commercial immovable property is no longer adequate, and therefore will not be extended. From 01.01.2025, the following applies:
- under the standardised approach to credit risk, exposures collateralised by residential property may also be weighted in accordance with Article 125 (1) CRR (loan-splitting approach) instead of the treatment stipulated in Article 125 (2) CRR, and under the IRB approach may be excluded from the requirement to meet Article 199 (2) point b CRR;
- under the standardised approach to credit risk, exposures collateralised by commercial immovable property are required to be weighted pursuant to Article 126 (2) CRR (ETV approach), and under the IRB approach may not be excluded from the requirement to meet Article 199 (2) point b CRR.
Further information:
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Maximum Loss Rate AT Immovable Property 2023 (until 31.12.2024) (Format: pdf, Size: 120,2 KB, Language: English) Maximum Loss Rates AT Immovable Property 2023 (from 01.01.2025) (Format: pdf, Size: 113,8 KB, Language: English)