X1PART THREECAPITAL REQUIREMENTS

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Editorial Information

TITLE IICAPITAL REQUIREMENTS FOR CREDIT RISK

CHAPTER 2Standardised approach

Section 1General principles

Article 113 Calculation of risk-weighted exposure amounts

1

To calculate risk-weighted exposure amounts, risk weights shall be applied to all exposures, unless deducted from own funds, in accordance with the provisions of Section 2. The application of risk weights shall be based on the exposure class to which the exposure is assigned and, to the extent specified in Section 2, its credit quality. Credit quality may be determined by reference to the credit assessments of ECAIs or the credit assessments of export credit agencies in accordance with Section 3.

2

For the purposes of applying a risk weight, as referred to in paragraph 1, the exposure value shall be multiplied by the risk weight specified or determined in accordance with Section 2.

3

Where an exposure is subject to credit protection the risk weight applicable to that item may be amended in accordance with Chapter 4.

4

Risk-weighted exposure amounts for securitised exposures shall be calculated in accordance with Chapter 5.

5

Exposures for which no calculation is provided in Section 2 shall be assigned a risk-weight of 100 %.

6

With the exception of exposures giving rise to Common Equity Tier 1, Additional Tier 1 or Tier 2 items, an institution may, subject to the prior approval of the competent authorities, decide not to apply the requirements of paragraph 1 of this Article to the exposures of that institution to a counterparty which is its parent undertaking, its subsidiary, a subsidiary of its parent undertaking or an undertaking linked by a F1common management relationship. Competent authorities are empowered to grant approval if the following conditions are fulfilled:

a

the counterparty is an institution, a financial institution or an ancillary services undertaking subject to appropriate prudential requirements;

b

the counterparty is included in the same consolidation as the institution on a full basis;

c

the counterparty is subject to the same risk evaluation, measurement and control procedures as the institution;

d

the counterparty is established in the F2United Kingdom;

e

there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities from the counterparty to the institution.

Where the institution, in accordance with this paragraph, is authorised not to apply the requirements of paragraph 1, it may assign a risk weight of 0 %.

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