The European Banking Authority has issued final Guidelines on proportionate retail diversification methods under the Capital Requirements Regulation, setting a harmonised way for institutions to evidence that eligible retail portfolios are sufficiently diversified to apply the preferential 75% risk weight under the standardised approach for credit risk, with a proportionality overlay for smaller institutions. As a starting point, the Guidelines assess granularity by requiring that no single exposure to a counterparty or group of connected clients exceeds 0.2% of the total eligible retail portfolio. Where this benchmark cannot be consistently met, institutions may still apply the preferential risk weight provided that no more than 10% of the eligible retail portfolio is above the 0.2% threshold. The final text adopts a one-step approach (rather than the iterative method proposed as baseline in consultation) and increases the tolerance from 5% to 10%. It also clarifies how to assess diversification for securitised retail exposures, distinguishing originator and investor treatments, and introduces a limited, temporary derogation for investors where obligor-level information is not available under the relevant transparency templates. The Guidelines are final and awaiting translation into the EU official languages.
European Banking Authority 2026-02-13
European Banking Authority finalises retail diversification test for 75% standardised risk weight with 0.2% benchmark and 10% tolerance
The European Banking Authority issued final Guidelines on proportionate retail diversification under the Capital Requirements Regulation, establishing a harmonised approach for institutions to demonstrate sufficient diversification in eligible retail portfolios to apply a 75% preferential risk weight. The Guidelines include a granularity benchmark, a one-step approach, increased tolerance levels, and provisions for securitised retail exposures, with a temporary derogation for investors lacking obligor-level information.