On 12 November 2024, the European Banking Authority (EBA) issued a consultation paper concerning draft guidelines that address the mandate given to the European Supervisory Authority under Article 123(1) of the Capital Requirements Regulation as amended by Regulation (EU) 2024/1623 (CRR) to specify proportionate diversification methods for retail exposures under which an exposure is to be considered as one of a significant number of exposures with similar characteristics, such that the risks associated with such exposure are substantially reduced. Satisfactory diversification is one of the mandatory requirements for retail exposures to be assigned the preferential retail risk weight, as set out under CRR Article 123 paragraphs 1 and 2.

The Basel III standards allow sufficient granularity of the retail portfolio as one method to ensure satisfactory diversification of the regulatory retail portfolio, whereby no aggregate exposure to one counterparty is to exceed 0.2% of the overall portfolio, with discretion given to national supervisors to instead determine another method to ensure satisfactory retail diversification. The draft guidelines are making use of this discretion.

The deadline for comments on the consultation paper is 12 February 2025.

The EBA will hold a virtual public hearing on the consultation paper on 16 December 2024, from 15:00 to 16:00 CET.