3. CALCULATION OF EXPECTED LOSS AMOUNTS

Unless noted otherwise, the input parameters PD and LGD shall be determined as set out in Part 2 and the exposure value shall be determined as set out in Part 3. The expected loss amounts for exposures to corporates, institutions, central governments and central banks and retail exposures shall be calculated according to the following formulae: Expected loss (EL) = PD × LGD. Expected loss amount = EL × exposure value. For defaulted exposures (PD =1) where credit institutions use own estimates of LGDs, EL shall be EL_(BE), the credit institution's best estimate of expected loss for the defaulted exposure according to Part 4, point 80. For exposures subject to the treatment set out in Part 1, point 4, EL shall be 0. The EL values for specialised lending exposures where credit institutions use the methods set out in point 6 for assigning risk weights shall be assigned according to Table 2. Table 2 Remaining Maturity Category 1 Category 2 Category 3 Category 4 Category 5 Less than 2,5 years 0 % 0,4 % 2,8 % 8 % 50 % Equal to or more than 2,5 years 0,4 % 0,8 % 2,8 % 8 % 50 % Where competent authorities have authorised a credit institution generally to assign preferential risk weights of 50 % to exposures in category 1, and 70 % to exposures in category 2, the EL value for exposures in category 1 shall be 0 %, and for exposures in category 2 shall be 0,4 %. The expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to the methods set out in points 19 to 21, shall be calculated according to the following formula: Expected loss amount = EL × exposure value The EL values shall be the following: Expected loss (EL) = 0,8 % for private equity exposures in sufficiently diversified portfolios Expected loss (EL) = 0,8 % for exchange traded equity exposures Expected loss (EL) = 2,4 % for all other equity exposures. The expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to the methods set out in points 22 to 24 shall be calculated according to the following formulae: Expected loss (EL) = PD × LGD and Expected loss amount = EL × exposure value The expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to the methods set out in points 25 to 26 shall be 0 %. The expected loss amounts for dilution risk of purchased receivables shall be calculated according to the following formula: Expected loss (EL) = PD × LGD and Expected loss amount = EL × exposure value

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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.