Recital 33

(33) It should be clarified how the effect of a guarantee should be recognised for a guaranteed exposure treated under the IRB Approach using own estimates of LGD where the guarantor belongs to a type of exposures treated under the IRB Approach but without using own estimates of LGD. In particular, the use of the substitution approach, whereby the risk parameters related to the underlying exposure are substituted with the ones of the guarantor, or of a method whereby the probability of default or LGD of the underlying obligor is adjusted using a specific modelling approach to take into account the effect of the guarantee, should not lead to an adjusted risk weight that is lower than the risk weight applicable to a comparable direct exposure to the guarantor. Consequently, where the guarantor is treated under the SA-CR, recognition of the guarantee under the IRB Approach should generally lead to assigning the SA-CR risk weight of the guarantor to the guaranteed exposure.

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Source: EUR-Lex CELLAR · retrieved 2026-09-04 · Text as adopted (Official Journal); later amendments are not incorporated in this text.