AI Summary of Article 211 Requirements for treating lease exposures as collateralised
Institutions are permitted to classify exposures from leasing transactions as secured by the leased property, provided specific criteria are satisfied. Firstly, the leased asset must meet the eligibility requirements outlined in either Article 208 or Article 210. Secondly, lessors must demonstrate solid risk management practices, covering the asset's use, location, age, and monitoring of its value.
Furthermore, the lessor must possess legal ownership and be capable of exercising ownership rights promptly. Lastly, should it be necessary for calculating the Loss Given Default (LGD) level, the gap between the unamortised amount and the asset's market value should not inflate the credit risk mitigation associated with the leased assets.
Article 211 Requirements for treating lease exposures as collateralised
Institutions shall treat exposures arising from leasing transactions as collateralised by the type of property leased, where all the following conditions are met:
(a) the conditions set out in Article 208 or 210, as applicable, for the type of property leased to qualify as eligible collateral are met;
(b) the lessor has in place robust risk management with respect to the use to which the leased asset is put, its location, its age and the planned duration of its use, including appropriate monitoring of the value of the security;
(c) the lessor has legal ownership of the asset and is able to exercise its rights as owner in a timely fashion;
(d) where this has not already been ascertained in calculating the LGD level, the difference between the value of the unamortised amount and the market value of the security is not so large as to overstate the credit risk mitigation attributed to the leased assets.