On 13 February 2026, the European Banking Authority (EBA) issued final guidelines (dated 5 February 2026) on proportionate retail diversification methods under the standardised approach for credit risk.
Background
The final guidelines have been developed pursuant to Article 123(1) of the Capital Requirements Regulation, which mandates the EBA to specify proportionate diversification methods for retail exposures under the Standardised Approach for credit risk.
The main objective of the final guidelines is to provide harmonised guidance at the EU level for appropriate retail diversification methods that are required to fulfil the mandatory criterion for satisfactory diversification for an exposure to be granted a preferential risk weight treatment and ultimately achieving a level playing field across the EU. In particular, this instrument should retain the possibility also for institutions that are not holding a granular enough retail portfolio to apply the preferential retail risk weights to that part of the portfolio, which is sufficiently diversified.
Consultation
Previously, the EBA conducted a consultation of the final guidelines which took place between 12 November 2024 to 12 February 2025. The EBA held a virtual public hearing on the consultation paper on 16 December 2024, from 15:00 to 16:00 CET.
Final guidelines
In the consultation paper, the EBA presented two alternative approaches for assessing diversification: an iterative method proposed as the baseline option, and a one-step alternative. In the final guidelines, the EBA has opted for the one-step approach to ensure proportionality and reduce the operational burden for institutions. The diversification threshold has also been raised from 5% to 10% compared with the consultation proposal, reflecting industry feedback and easing the impact on small and medium-sized institutions while maintaining sound prudential safeguards.
The final guidelines also clarify the treatment of securitised retail exposures, distinguishing between the diversification assessment applicable when institutions act as originators and when they act as investors. For investor institutions, a limited and temporary derogation is introduced when obligor‑level information is not available under the applicable transparency templates, allowing the diversification condition to be deemed fulfilled.