Section 3

The calculation of expected loss amounts shall be based on the same input figures of PD, LGD and the exposure value for each exposure as are used for the calculation of risk-weighted exposure amounts in accordance with Article 151. The expected loss amounts for securitised exposures shall be calculated in accordance with Chapter 5. The expected loss amount for exposures belonging to the 'other non credit obligations assets' exposure class referred to in point (g) of Article 147(2) shall be zero. The expected loss amounts for exposures in the form of shares or units of a CIU referred to in Article 152 shall be calculated in accordance with the methods set out in this Article. The expected loss (EL) and 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 [multiplied by] exposure value. For defaulted exposures (PD = 100 %) where institutions use own estimates of LGDs, EL shall be EL_(BE), the institution's best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h). For exposures subject to the treatment set out in Article 153(3), EL shall be 0 %. The EL values for specialised lending exposures where institutions use the methods set out in Article 153(5) 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 % The expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to simple risk weight approach 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 and expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to the PD/LGD approach shall be calculated according to the following formulae: Expected loss(EL) = PD · LGD Expected loss amount = EL · exposure value The expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to the internal models approach shall be zero. The expected loss amounts for dilution risk of purchased receivables shall be calculated according to the following formula: Expected loss(EL) = PD · LGD Expected loss amount = EL · exposure value Institutions shall subtract the expected loss amounts calculated in accordance with Article 158 (5), (6) and (10) from the general and specific credit risk adjustments and additional value adjustments in accordance with Articles 34 and 110 and other own funds reductions related to these exposures. Discounts on balance sheet exposures purchased when in default in accordance with Article 166(1) shall be treated in the same manner as specific credit risk adjustments. Specific credit risk adjustments on exposures in default shall not be used to cover expected loss amounts on other exposures. Expected loss amounts for securitised exposures and general and specific credit risk adjustments related to these exposures shall not be included in this calculation.

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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.