AI Summary of Article 116 Exposures to public sector entities
This document outlines the risk-weighting framework for exposures to public sector entities lacking a credit assessment by a nominated External Credit Assessment Institution (ECAI). Specifically, the risk weight is aligned with the credit quality step assigned to the jurisdiction's central government, with weights ranging from 20% to 150%, depending on the assessed credit quality.
Moreover, exposures with a maturity of three months or less are afforded a lower risk weight of 20%. In exceptional cases where guarantees from central or regional authorities mitigate risk disparity, exposures may be treated similarly to those to such authorities. Lastly, exposures to entities in third countries with equivalent regulatory arrangements may follow similar risk-weighting guidelines.
Article 116 Exposures to public sector entities
1. Exposures to public sector entities for which a credit assessment by a nominated ECAI is not available shall be assigned a risk weight in accordance with the credit quality step to which exposures to the central government of the jurisdiction in which the public sector entity is incorporated are assigned in accordance with the following Table 2:
Table 2
|
Credit quality step to which central government is assigned |
1 |
2 |
3 |
4 |
5 |
6 |
|---|---|---|---|---|---|---|
|
Risk weight |
20 % |
50 % |
100 % |
100 % |
100 % |
150 % |
For exposures to public sector entities incorporated in countries where the central government is unrated, the risk weight shall be 100 %.
2. Exposures to public sector entities for which a credit assessment by a nominated ECAI is available shall be treated in accordance with Article 115(-1).