1.5. Other eligible collateral for Articles 84 to 89

The property shall be valued by an independent valuer at or less than the market value. In those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions the property may instead be valued by an independent valuer at or less than the mortgage lending value. ‘Market value’ means the estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value shall be documented in a transparent and clear manner. ‘Mortgage lending value’ means the value of the property as determined by a prudent assessment of the future marketability of the property taking into account long-term sustainable aspects of the property, the normal and local market conditions, the current use and alternative appropriate uses of the property. Speculative elements shall not be taken into account in the assessment of the mortgage lending value. The mortgage lending value shall be documented in a transparent and clear manner. The value of the collateral shall be the market value or mortgage lending value reduced as appropriate to reflect the results of the monitoring required under Part 2, point 8 and to take account of the any prior claims on the property. The value of receivables shall be the amount receivable. The property shall be valued at its market value — that is the estimated amount for which the property would exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction. LGD* calculated as set out in points 69 to 72 shall be taken as the LGD for the purposes of Annex VII. Where the ratio of the value of the collateral (C) to the exposure value (E) is below a threshold level of C* (the required minimum collateralisation level for the exposure) as laid down in Table 5, LGD* shall be the LGD laid down in Annex VII for uncollateralised exposures to the counterparty. Where the ratio of the value of the collateral to the exposure value exceeds a second, higher threshold level of C^(**) (i.e. the required level of collateralisation to receive full LGD recognition) 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, the exposure shall be considered to be two exposures — that part in respect of which the required level of collateralisation C^(**) is achieved and the remainder. Table 5 sets out the applicable LGD* and required collateralisation levels for the secured parts of exposures. Table 5 Minimum LGD for secured parts of exposures LGD* for senior claims or contingent claims LGD* for subordinated claims or contingent claims Required minimum collateralisation level of the exposure (C*) Required minimum collateralisation level of the exposure (C^(**)) Receivables 35 % 65 % 0 % 125 % Residential real estate/commercial real estate 35 % 65 % 30 % 140 % Other collateral 40 % 70 % 30 % 140 % By way of derogation, until 31 December 2012 the competent authorities may, subject to the levels of collateralisation indicated in Table 5: allow credit institutions to assign a 30 % LGD for senior exposures in the form of Commercial Real Estate leasing; allow credit institutions to assign a 35 % LGD for senior exposures in the form of equipment leasing; and allow credit institutions to assign a 30 % LGD for senior exposures secured by residential or commercial real estate. At the end of this period, this derogation shall be reviewed. Subject to the requirements of this point and point 74 and as an alternative to the treatment in points 68 to 72, the competent authorities of a Member State may authorise credit institutions to assign a 50 % risk weight to the Part of the exposure fully collateralised by residential real estate property or commercial real estate property situated within the territory of the Member State if they have evidence that the relevant markets are well-developed and long-established with loss‐rates from lending collateralised by residential real estate property or commercial real estate property respectively that do not exceed the following limits: losses stemming from lending collateralised by residential real estate property or commercial real estate property respectively up to 50 % of the market value (or where applicable and if lower 60 % of the mortgage-lending-value) do not exceed 0,3 % of the outstanding loans collateralised by that form of real estate property in any given year; and overall losses stemming from lending collateralised by residential real estate property or commercial real estate property respectively do not exceed 0,5 % of the outstanding loans collateralised by that form of real estate property in any given year. If either of the conditions in point 73 is not satisfied in a given year, the eligibility to use this treatment shall cease until the conditions are satisfied in a subsequent year. The competent authorities, which do not authorise the treatment in point 73, may authorise credit institutions to assign the risk weights permitted under this treatment in respect of exposures collateralised by residential real estate property of commercial real estate property respectively located in the territory of those Member States the competent authorities of which authorise this treatment subject to the same conditions as apply in that Member State.

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Source: EUR-Lex (Cellar) · retrieved 2026-10-09 · Text as adopted (Official Journal); later amendments are not incorporated in this text.