X1PART THREECAPITAL REQUIREMENTS
TITLE IICAPITAL REQUIREMENTS FOR CREDIT RISK
CHAPTER 4Credit risk mitigation
Section 4Calculating the effects of credit risk mitigation
Sub-Section 1Funded credit protection
Article 230 Calculating risk-weighted exposure amounts and expected loss amounts for other eligible collateral under the IRB Approach
1.
Institutions shall use LGD* calculated in accordance with this paragraph and paragraph 2 as the LGD for the purposes of Chapter 3.
Where the ratio of the value of the collateral (C) to the exposure value (E) is below the required minimum collateralisation level of the exposure (C*) as laid down in Table 5, LGD* shall be the LGD laid down in Chapter 3 for uncollateralised exposures to the counterparty. For this purpose, institutions shall calculate the exposure value of the items listed in Article 166(8) to (10) by using a conversion factor or percentage of 100 % rather than the conversion factors or percentages indicated in those paragraphs.
Where the ratio of the value of the collateral to the exposure value exceeds a second, higher threshold level of C** as laid down in Table 5, LGD* shall be that prescribed in Table 5.
Where the required level of collateralisation C** is not achieved in respect of the exposure as a whole, institutions shall consider the exposure to be two exposures — one corresponding to the part in respect of which the required level of collateralisation C** is achieved and one corresponding to the remainder.
2.
The applicable LGD* and required collateralisation levels for the secured parts of exposures are set out in Table 5 of this paragraph.
LGD* for senior exposure | LGD* for subordinated exposures | Required minimum collateralisation level of the exposure (C*) | Required minimum collateralisation level of the exposure (C**) | |
|---|---|---|---|---|
Receivables | 35 % | 65 % | 0 % | 125 % |
Residential property/commercial immovable property | 35 % | 65 % | 30 % | 140 % |
Other collateral | 40 % | 70 % | 30 % | 140 % |
3.
As an alternative to the treatment set out in paragraphs 1 and 2, and subject to Article 124(2), institutions may assign a 50 % risk weight to the part of the exposure that is, within the limits set out in Article 125(2)(d) and Article 126(2)(d) respectively, fully collateralised by residential property or commercial immovable property situated within the territory of F1the United Kingdom where all the conditions in Article 199(3) or (4) are met.