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Subject to the application of the specific treatments laid down in paragraphs 2, 3 and 4, the risk weighted exposure amounts for exposures to corporates, institutions and central governments and central banks shall be calculated according to the following formulae: Risk – weighted exposure amount = RW · exposure value where the risk weight RW is defined as if PD = 0, RW shall be 0; if PD = 1, i.e., for defaulted exposures: where institutions apply the LGD values set out in Article 161(1), RW shall be 0; where institutions use own estimates of LGDs, RW shall be RW = max 0,12.5 · (LGD – EL_(BE)); where the expected loss best estimate (hereinafter referred to as 'EL_(BE)') shall be the institution's best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h); if 0 < PD < 1 RW = (LGD · N((1 / 1 – R) · G(PD) + (R / 1 – R) · G(0.999)) – LGD · PD) · (1 + (M – 2,5) · b / 1 – 1,5 · b) · 12,5 · 1,06 where: N(x)= 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) R= denotes the coefficient of correlation, is defined as R = 0.12 · (1 – e^(– 50 · PD) / 1 – e^(– 50)) + 0.24 · (1 – (1 – e^(– 50 · PD) / 1 – e^(– 50))) b= the maturity adjustment factor, which is defined as b = (0.11852 – 0.05478 · ln(PD))^(2).

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Source: EUR-Lex (Cellar) · retrieved 2026-09-25 · Text as adopted (Official Journal); later amendments are not incorporated in this text.