Under the Standardised Approach, institutions shall use E* as calculated under Article 223(5) as the exposure value for the purposes of Article 113. In the case of off-balance sheet items listed in Annex I, institutions shall use E* as the value to which the percentages indicated in Article 111(1) shall be applied to arrive at the exposure value.

Under the IRB Approach, institutions shall use the effective LGD (LGD*) as the LGD for the purposes of Chapter 3. Institutions shall calculate LGD* as follows:

$\mathrm{LGD*}=\mathrm{LGD}\times \frac{\mathrm{E*}}{E}$

where:

LGD

the LGD that would apply to the exposure under Chapter 3 where the exposure was not collateralised;

E

the exposure value in accordance with Article 223(3);

E*

the fully adjusted exposure value in accordance with Article 223(5).