Credit risk – BaFin to adjust regulatory practice

Written By

michael juenemann module
Dr. Michael Jünemann

Partner
Germany

As co-head of the global Finance & Financial Regulation Practice Groups and head of the German Finance & Financial Regulation Practice Group, I advise on national and international finance and capital markets law as well as on commercial and corporate law. I am also a member of the international steering group of our Financial Services Sector Group.

johannes wirtz Module
Johannes Wirtz, LL.M.

Partner
Germany

As partner in our Finance & Financial Regulation Group in Frankfurt, I advise our national and international clients on banking regulatory issues and finance law.

BaFin announces to adopt EBA Guidelines

Germany’s Federal Financial Supervisory Authority (BaFin) announced through circular 3/2019 (German) to adjust its regulatory practice by implementing two Guidelines of the European Banking Authority (EBA) and adopting respective EBA definitions. EBA Guidelines are reference points specifically for credit institutions and investment firms.

BaFin gave notice to adopt EBA’s “Guidelins on the application of the definition of default under Article 178 of Regulation (EU) No 575/2013” (Capital Requirements Regulation (CRR)) (EBA/GL/2016/07) with exception only to section 25 and 26 on exposures to central governments, local authorities and public sector entities. BaFin’s regulatory practice in thuis regard remains as is.

EBA’s “Guidelines on PD estimation, LGD estimation and the treatment of defaulted exposures” (EBA/GL/2017/16) will be adopted without any qualification. PD (Probability of Default) and LGD (Loss Given Default) are parameters to rate a financial institution’s capital requirements for their respective credit risk.

BaFin’s adoption will take effect in January 2021.

Latest insights

More Insights
Curiosity line blue background

US-EU Regulatory Divergence in Crypto-Assets: The Strategic Implications of the GENIUS Act and MiCAR Framework

17 minutes Sep 11 2025

Read More
Curiosity line teal background

From Little Things Big Things IPO: Insights From FY24 and FY25

Sep 03 2025

Read More
Curiosity line pink background

FCA listens but pushes on with implementing changes to safeguarding requirements for UK payment institutions and e-money institutions

10 minutes Sep 02 2025

Read More