PART THREE CAPITAL REQUIREMENTS

TITLE II CAPITAL REQUIREMENTS FOR CREDIT RISK

CHAPTER 4 Credit risk mitigation

Section 4 Calculating the effects of credit risk mitigation

Sub-Section 1 Funded credit protection

Article 228 Calculating risk-weighted exposure amounts and expected loss amounts under the Financial Collateral Comprehensive method
1 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.
2 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:
LGD*=LGD ×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).
Substituted by Corrigendum to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).