On 3 November 2022, the European Banking Authority (EBA) published a report on the application of the infrastructure supporting factor.
The report analyses the lending trends and riskiness of infrastructure loans which have benefited from a capital reduction due to the introduction of the so-called Infrastructure Supporting Factor (ISF) according to Article 501a of the Capital Requirements Regulation.
The quantitative results indicate that infrastructure lending increased in the years immediately after the introduction of the ISF in June 2020, while infrastructure lending subject to the ISF also increased, but at a lower rate. In terms of riskiness, banks applying the ISF have a lower risk as measured by default rates and defaulted exposures, but the information on loss rates, an important aspect of riskiness, if not sufficient to conclude about the overall riskiness.
The data collected is not sufficient to conclude on the impact of the ISF on lending consistency of the riskiness of the affected loans with the own funds requirements. At the same time, from a broader prudential perspective, and in line with previous EBA recommendations, the continued application of the ISF could be questioned.