The FMLC wrote to Mr Enria of the European Banking Authority, asking for guidance on some features of the European regulation which sets out a credit risk mitigation (“CRM”) framework whereby the capital adequacy requirement which a credit exposure attracts can be reduced by effective protection in the form of a third party agreement to cover losses.

In particular, the FMLC requests clarification on whether the form of a financial agreement is a key element in determining whether such agreement will qualify as CRM and the circumstances under which credit insurance can be used as a CRM technique.

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