On 18 August 2025, the European Banking Authority (EBA) published its final draft Regulatory Technical Standards (RTS) on the allocation of off-balance sheet items and also set out the factors that might constrain institutions’ ability to cancel unconditionally cancellable commitments.
Background
As explained by the EBA in its final report, the draft RTS have been developed as required by Article 111 of Regulation (EU) No 575/2013 (CRR).
The EBA consulted on the draft RTS in March 2024 and has made certain changes to the draft standards in the light of comments received. The feedback and related changes are summarised in section 4.2 of the final report.
Summary
In these RTS, the EBA has introduced assignment criteria for off-balance sheet items not already assigned to any buckets under Annex I of the CRR. These assignment criteria aim at distinguishing between different levels of conversion probability, taking into consideration: (1) the existence of financial covenants, (2) conditions related to non-credit related events, and (3) the optionality the obligor has in drawing or not the off-balance sheet item. The EBA also provided non-exhaustive list of examples to support institutions to make this classification.
The final draft RTS also introduce four factors to be considered as constraining institutions’ ability to cancel an unconditionally cancellable commitment, which relate to: (1) risk management processes, (2) commercial considerations, (3) reputational risks, and (4) litigation risks.
The EBA also proposed to implement a notification process of off-balance sheet items not already included in Annex I, via the COREP framework.
Next steps
The draft RTS will be submitted to the European Commission for endorsement, they will then be scrutinised by the European Parliament and the Council, before being published in the Official Journal.