Capital Requirements Regulation Articles 124 and 164

The provisions within Articles 124 and 164 of the Capital Requirements Regulation (CRR) look to ensure that from a financial stability perspective the capital requirements of the banking system relating to exposures fully secured by mortgage on immovable property adequately reflect the underlying risks. Article 124 relates to the risk weights associated with the standardised approach to credit risk assessment with Article 164 focusing on the loss given default associated with the application of the Advanced Internal Ratings Based approach to credit risk assessment.

Where the baseline criteria set out in CRR do not adequately reflect the actual risks related to these property exposures such that financial stability could be adversely affected, authorities can impose stricter criteria. Statutory Instrument 711/2020 designated the Central Bank as the authority responsible for the application of these Articles in Ireland.

In line with CRR, the Central Bank undertakes an assessment on an annual basis. The outcome of the latest assessment can be found in FSR 2021:II. On the basis of this assessment, the Central Bank did not consider there to be a financial stability basis to utilise the available discretion to apply stricter requirements than what is provided for in the CRR.