Prudential Supervision & Risk
Regulatory Update: ABBL responds to EBA Credit Risk Simplification Paper
Published on 11 May 2026
The ABBL has submitted its response to the EBA Discussion Paper on Credit Risk Framework Simplification (EBA-DP-2026-01), contributing to the ongoing European discussion on the future of the credit risk framework. The response highlights key priorities for Luxembourg-based institutions, including proportionality, pragmatic use of data, measured ESG integration and operational flexibility, with the objective of supporting a framework that remains both efficient and risk-sensitive.
Summary
The ABBL continues to engage proactively with European supervisory developments and has submitted its response to the EBA Discussion Paper on Credit Risk Framework Simplification (EBA-DP-2026-01).
As the EBA seeks to streamline the current credit risk landscape, the ABBL’s feedback highlights the importance of ensuring that simplification efforts preserve appropriate risk sensitivity and prudential robustness.
Read the full position paper here:
Core industry priorities
The ABBL submission outlines several key priorities for Luxembourg-based institutions:
Advocating for proportionality
The ABBL supports the simplification of the IRB framework and the consolidation of regulatory products, provided these measures reduce complexity without compromising prudential rigour.
Pragmatic use of data
Regarding CRR Article 430a, the ABBL considers harmonised loss data to be a valuable monitoring tool, rather than a stand-alone mechanistic basis for calibrating risk weights, which should continue to reflect national market structures.
Focused ESG integration
The ABBL encourages a measured approach to ESG integration, prioritising further maturity in data and stress-testing frameworks before considering mandatory IRB parameter adjustments.
Operational flexibility
The ABBL supports the use of discretisation for validation purposes in continuous rating models, as well as the introduction of pragmatic fallbacks for non-material portfolios.
Why this matters
The proposals discussed by the EBA are expected to influence future model design, validation practices and supervisory expectations across the banking sector.
By focusing on areas where institutions already have practical experience, the ABBL response aims to support future EBA guidance that is pragmatic, reflects local specificities and remains fit for purpose in a modern banking environment.
Members are encouraged to review the full details of the ABBL position and to continue internal discussions on the potential impacts of these developments.
The ABBL also thanks all members who contributed their expertise and input to this submission and looks forward to continuing the discussion within its Credit Risk Working Group.
Marilyn Rinck
Head of Banking Supervision, Financial Markets & ESG
Published on 11 May 2026