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Supporting Factors Specification

SME supporting factor and infrastructure supporting factor under CRR.

Regulatory Reference: CRR Articles 501, 501a

Test Group: CRR-F

CRR Only

Supporting factors are not available under Basel 3.1. They are disabled automatically when using the Basel 3.1 configuration.

SME Supporting Factor (CRR Art. 501)

A tiered discount applied to RWA for qualifying SME exposures.

Eligibility

  • Turnover < EUR 50m (converted from GBP at the configured FX rate)
  • E aggregated across the SME's group of connected clients (lending_group_reference), with fallback to counterparty_reference when no lending group is mapped, per CRR Art. 501. The aggregation runs on the unified frame before the SA / IRB / slotting branch split, so siblings under any approach contribute to E — a lending group containing both SA-treated and slotting- or IRB-treated members is summed correctly for the tier threshold.
  • Claims secured on residential property collateral (e.g. BTL) are netted from E per the Art. 501 carve-out: each row's contribution to E is reduced by residential_collateral_value (capped at drawn so the contribution never goes negative), mirroring the retail-threshold treatment in CRR Art. 123(c). BTL rows additionally receive factor=1.0 via a separate eligibility gate.

Regulatory Scope vs Implementation

CRR Art. 501 applies the factor to all exposures to SMEs, including corporate, retail, and real-estate-secured classes. The implementation applies the factor only to exposures classified as CORPORATE_SME via the is_sme flag. Retail-origin entities that fail the retail qualification test are reclassified to CORPORATE_SME by the classifier and receive the factor (see CRR-F4). Retail-qualifying SMEs that remain in RETAIL_OTHER, RETAIL_MORTGAGE, or RETAIL_QRRE do not currently receive the Art. 501 discount — their 75% risk weight already provides favourable treatment compared to corporate exposures.

Tiered Application

Tier Exposure Threshold Factor
Tier 1 Up to EUR 2.5m (GBP ~2.2m) 0.7619
Tier 2 Above EUR 2.5m 0.85

Blended Formula

For exposures that span both tiers:

SF = [min(D, threshold) x 0.7619 + max(D - threshold, 0) x 0.85] / D

Where D (= E* in Art. 501) is the on-balance-sheet amount (max(0, drawn_amount) + interest) aggregated across the SME's group of connected clients (lending_group_reference, falling back to counterparty_reference when the lending group is null), with each row's contribution reduced by the residential-property collateral value (residential_collateral_value, capped at drawn) per the Art. 501 carve-out — mirroring the retail-threshold treatment in CRR Art. 123(c). threshold is EUR 2.5m (or GBP equivalent).

Infrastructure Supporting Factor (CRR Art. 501a)

A flat 0.75 factor applied to qualifying infrastructure lending exposures.

Eligibility

  • Exposure must be flagged as is_infrastructure = true
  • Applied regardless of exposure size

Combined Application

When both factors apply to an exposure, the calculator uses the minimum (most beneficial) factor.

Key Scenarios

Scenario ID Description Expected Factor
CRR-F1 Small SME — Tier 1 only (exposure ≤ EUR 2.5m) 0.7619
CRR-F2 Medium SME — blended tiers (exposure spans threshold) Blended (weighted average of 0.7619 and 0.85)
CRR-F3 Large SME — Tier 2 dominant (exposure well above EUR 2.5m) → 0.85
CRR-F4 Retail-origin SME — reclassified to CORPORATE_SME, Tier 1 factor applied 0.7619
CRR-F5 Infrastructure — flat factor (not tiered) 0.75 (Art. 501a)
CRR-F6 Large corporate — no SME factor (turnover > EUR 50m threshold) 1.0 (no discount)
CRR-F7 Boundary — exposure exactly at EUR 2.5m (GBP ~£2.18m) threshold Tier 1 factor (0.7619) applies up to threshold
CRR-F8 Lending group of two SMEs at GBP 1.5m drawn each — E* = 3m → blended factor (not pure Tier 1) Blended (E* aggregated across lending_group_reference)

Combined Factors

When both SME and infrastructure factors apply, the calculator uses the minimum (most beneficial) factor. This is validated within CRR-F5 where infrastructure exposures may also qualify as SME.

Acceptance Tests

Group Scenarios Tests Pass Rate
CRR-F: Supporting Factors F1–F8 17 94% (16/17 passing, 1 skipped — F8 pipeline fixture is a follow-up)