1.2. Risk weighted exposure amounts for retail exposures

Subject to points 12 and 13, the risk weighted exposure amounts for retail exposures shall be calculated according to the following formulae: Correlation (R) = 0.03 × (1 - EXP(-35^(*)PD)) / (1 - EXP(-35)) + 0.16^(*)1 - (1 - EXP-35^(*)PD) / (1 - EXP(-35)) Risk weighted(RW) (LGD^(*) N(1-R)^(-0.5)G(PD)+(R/(1-R))^(0.5)G(0.999)-PD^(*)12.5^(*)1.06) N(x) denotes the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x). G (Z) denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that N(x)= z). For PD = 1 (defaulted exposure), RW shall be Max {0, 12.5 *(LGD-EL_(BE))}, where EL_(BE) shall be the credit institution's best estimate of expected loss for the defaulted exposure according to point 80 of Part 4. Risk—weighted exposure amount = RW * exposure value. The risk weighted exposure amount for each exposure to small and medium sized entities as defined in Article 86(4) which meets the requirements set out in Annex VIII, Part 1, point 29 and Annex VIII, Part 2, point 22 may be calculated according to point 4. For retail exposures secured by real estate collateral a correlation (R) of 0,15 shall replace the figure produced by the correlation formula in point 10. For qualifying revolving retail exposures as defined in points (a) to (e), a correlation (R) of 0,04 shall replace the figure produced by the correlation formula in point 10. Exposures shall qualify as qualifying revolving retail exposures if they meet the following conditions: The exposures are to individuals; The exposures are revolving, unsecured, and to the extent they are not drawn immediately and unconditionally, cancellable by the credit institution. (In this context revolving exposures are defined as those where customers' outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to a limit established by the credit institution.). Undrawn commitments may be considered as unconditionally cancellable if the terms permit the credit institution to cancel them to the full extent allowable under consumer protection and related legislation; The maximum exposure to a single individual in the sub-portfolio is EUR 100000 or less; The credit institution can demonstrate that the use of the correlation of this point is limited to portfolios that have exhibited low volatility of loss rates, relative to their average level of loss rates, especially within the low PD bands. Competent authorities shall review the relative volatility of loss rates across the qualifying revolving retail sub-portfolios, as well the aggregate qualifying revolving retail portfolio, and intend to share information on the typical characteristics of qualifying revolving retail loss rates across jurisdictions; and The competent authority concurs that treatment as a qualifying revolving retail exposure is consistent with the underlying risk characteristics of the sub‐portfolio. By way of derogation from point (b), competent authorities may waive the requirement that the exposure be unsecured in respect of collateralised credit facilities linked to a wage account. In this case amounts recovered from the collateral shall not be taken into account in the LGD estimate. To be eligible for the retail treatment, purchased receivables shall comply with the minimum requirements set out in Part 4, points 105 to 109 and the following conditions: The credit institution has purchased the receivables from unrelated, third party sellers, and its exposure to the obligor of the receivable does not include any exposures that are directly or indirectly originated by the credit institution itself; The purchased receivables shall be generated on an arm's-length basis between the seller and the obligor. As such, inter-company accounts receivables and receivables subject to contra-accounts between firms that buy and sell to each other are ineligible; The purchasing credit institution has a claim on all proceeds from the purchased receivables or a pro-rata interest in the proceeds; and The portfolio of purchased receivables is sufficiently diversified. For purchased receivables, refundable purchase discounts, collateral or partial guarantees that provide first-loss protection for default losses, dilution losses, or both, may be treated as first-loss positions under the IRB securitisation framework. For hybrid pools of purchased retail receivables where purchasing credit institutions cannot separate exposures secured by real estate collateral and qualifying revolving retail exposures from other retail exposures, the retail risk weight function producing the highest capital requirements for those exposures shall apply.

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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.