AI Summary of Article 122a Specialised lending exposures
The regulation outlines the definition and classification of specialised lending exposures under Article 112, point (g). It stipulates that such exposures must be linked to entities specifically created for financing physical assets, excluding residential or commercial properties, and establishes criteria for substantial control over income and assets. The primary repayment source must derive from the financed assets' income.
Furthermore, it specifies risk weights based on credit quality assessments and outlines particular provisions for object finance, commodity finance, and project finance, signifying the regulatory emphasis on rigorous risk management and assessment practices for specialized lending.
Article 122a Specialised lending exposures
1. Within the corporate exposure class referred to in Article 112, point (g), institutions shall separately identify as specialised lending exposures, exposures with all of the following characteristics:
(a) the exposure is to an entity which was created specifically to finance or operate physical assets or is an exposure that is economically comparable to such an exposure;
(b) the exposure is not related to the financing of residential property or commercial immovable property and is within the definitions of object finance, project finance or commodity finance exposures laid down in paragraph 3;
(c) the contractual arrangements governing the obligation related to the exposure give the institution a substantial degree of control over the assets and the income that they generate;
(d) the primary source of repayment of the obligation related to the exposure is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise.