1.5.2. Calculating risk‐weighted exposure amounts and expected loss amounts

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.