02 · Floor mechanics — S-TREA in practice

Single stack, and why it was the fight

Basel's floor text is one sentence; the EU fight was about where the floored number goes. Under parallel stacks, the floor would have applied only to the Basel minimum — P2R, the CBR and MREL would have kept riding on unfloored, model-based TREA, quarantining the floor's effect to a number few requirements actually reference. The adopted single stack sends floored TREA into everything: minima, P2R (recalibrated once at the switch to avoid double counting), buffers, MREL, large-exposure bases. That single design decision is why the floor is a balance-sheet event rather than a disclosure footnote — and why the transitionals were the political price. The supervisor's counterpart obligation: P2R and nominal buffer amounts must not silently double-charge risks the floor now covers; the EBA monitors, and banks argue, precisely this.

What S-TREA actually contains

The standardised tower is not "SA credit risk" alone: it is the standardised measure of every risk class — SA-CR (with the Art 465 transitional calibrations), SA-CCR, BA-/SA-CVA as applicable, SMA op risk, FRTB standardised market risk, and the securitisation hierarchy with halved p-factors. IMM, IRB and A-IMA banks therefore run two full production stacks forever. The floor is also computed at each level of application — group and relevant sub-levels — so the data must reconcile at every node.

• Sources: Art 92(3)–(7), Art 465; EBA floor-monitoring reports; Pillar 3 ITS. Extension of any transitional needs Level 1 legislation — track the Commission review, not the rumour.