AI Summary of Article 127 Exposures in default
This document outlines the risk weight assignments for unsecured components of defaulted exposures according to Article 178. Specifically, exposures will incur a risk weight of 150% if the total of specific credit risk adjustments and applicable deductions is under 20% of the unsecured exposure value. Conversely, a risk weight of 100% applies when these adjustments and deductions meet or exceed this threshold.
Furthermore, for non-IPRE exposures secured by residential or commercial properties, the remaining exposure after adjustments will be assigned a 100% risk weight upon default. Institutions are encouraged to ensure compliance with eligibility criteria for collateral and guarantees as stipulated in Chapter 4 for effective credit risk mitigation.
Article 127 Exposures in default
1. The unsecured part of any item where the obligor has defaulted in accordance with Article 178, or in the case of retail exposures, the unsecured part of any credit facility which has defaulted in accordance with Article 178 shall be assigned a risk weight of:
(a) 150 %, where the sum of specific credit risk adjustments and of the amounts deducted in accordance with point (m) Article 36(1) is less than 20 % of the unsecured part of the exposure value if those specific credit risk adjustments and deductions were not applied;
(b) 100 %, where the sum of the specific credit risk adjustments and of the amounts deducted in accordance with point (m) Article 36(1) is no less than 20 % of the unsecured part of the exposure value if those specific credit risk adjustments and deductions were not applied.