AI Summary of Article 158 Treatment by exposure type
The calculation of expected loss (EL) amounts hinges on the input figures of Probability of Default (PD), Loss Given Default (LGD), and exposure value used for determining risk-weighted exposure amounts as per Article 151. Specific guidelines dictate that EL for various exposure classes, including securitised exposures and debt obligations, must adhere to prescribed methodologies, ensuring precision in risk assessments.
For defaulted exposures, institutions applying their own LGD estimates should reference their best estimate of expected loss. Furthermore, dedicated provisions exist for specialised lending exposures, which require EL to be assigned based on clearly defined categories and maturity periods.
Article 158 Treatment by exposure type
1. 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.
2. The expected loss amounts for securitised exposures shall be calculated in accordance with Chapter 5.
3. 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.
4. 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.