The European Banking Authority (EBA) today published its final Guidelines on proportionate retail diversification methods under the Capital Requirements Regulation (CRR).

What are these guidelines about? Under the standardised approach for credit risk, banks can apply a preferential risk weight to retail exposures—but only if those exposures are considered sufficiently “diversified.” These newly drafted guidelines set clear, proportionate criteria to help institutions assess exactly under what circumstances their retail portfolios meet this diversification requirement.

Why does it matter? By clarifying these criteria, the EBA ensures a more harmonized and fair approach to determining capital requirements across the EU. This initiative directly stems from the 2024 recommendations made by the EBA Advisory Committee on Proportionality, ensuring that rules remain robust yet adaptable to different portfolio sizes and complexities.