QIS 3 FAQ: Q. Specialised lending

1. There seems to be some inadvertent repetition between Tables 3 and 4 on Annex 4, 'Supervisory Slotting Criteria for Specialised Lending.' Is this true?

Answer: Correct. The ratings beginning with the 'Financial strength' section on the bottom of page 153 through page 156 should be ignored.

2. Where should I include Specialised Lending (SL) exposures that I can calculate a PD/LGD estimate for? Are SL exposures that I include in the corporate portfolio separately identified in the data sheet (and other QIS spreadsheets)?

Answer: SL exposures for which banks can estimate PD/LGD should be included in the corporate portfolio and treated as corporate exposures. These exposures are not separately identified in the data sheet (or other QIS spreadsheets) and should be included with corporate exposures - not in the separate SL section provided in the data sheet. The only exception to this is high volatility commercial real estate (HVCRE) lending which must be included within the SL portfolio. HVCRE exposures are only eligible for the simplified foundation IRB methodology - no other foundation or advanced treatment is available (also refer to section 13 of the QIS instructions).


      Note, however, that for QIS purposes any SL exposures that are included in the corporate portfolio are not eligible for firm-size adjustments nor should banks exempt SL exposures from the explicit maturity adjustment where it is applied (refer paragraph 13.14 of the QIS Instructions document). In other words, SL exposures should not be included in the SME spreadsheets even if some SL exposures would meet the relevant size criteria. Similarly, in the AIRB corporate spreadsheet explicit maturity adjustments should be applied to all SL exposures (even in the case of those banks whose national supervisor has exempted exposures to (smaller) corporates from the explicit maturity adjustments).

      Refer also FAQ Q.4

3. Do the supervisory categories for specialised lending have external rating equivalents?

Answer: Although banks should map their ratings to the supervisory categories for specialised lending using the slotting criteria set out in Annex 4 of the Technical Guidance, yes, each supervisory category broadly corresponds to a range of external ratings as outlined below. The Committee relied on these external rating equivalents in calibrating the associated risk weights.



BBB- or better


BB+ or BB


BB- or B+


B to C-

4. In the case of specialised lending exposures that I include in the corporate portfolio in accordance with paragraphs 240 and 241 of the Technical Guidance, what LGD should I use under each of the foundation and advanced IRB approaches?

Answer: In principle, all types of collateral that are recognised under the FIRB approach are also recognised for SL exposures included in the corporate portfolio, provided that the relevant eligibility requirements are met. Among these requirements are those set out in paragraph 455 of the Technical Guidance relating to real estate collateral. Thus, under the FIRB approach, the risk of the borrower should not be materially dependent on the performance of any real estate collateral securing the loan and the value of the real estate collateral should not be materially dependent on the performance of the borrower, if the supervisory LGD is to be reduced below 45%. As specialised lending-type real estate exposures are unlikely to meet these eligibility requirements, paragraph 456 of the Technical Guidance specifies that a supervisory LGD of 45% should be applied to such loans.


      Where a bank is applying the AIRB approach, in all cases, the appropriate internal LGD estimate should be applied.

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