AI Summary of Article 161 Loss Given Default (LGD)
This document outlines the Loss Given Default (LGD) values applicable to various exposure types for institutions engaged in regulatory compliance. Senior exposures to central governments and corporations without eligible credit protection carry different LGD values, set at 45% and 40%, respectively, while subordinated exposures without collateral are assigned a substantially higher LGD of 75%.
Moreover, provisions allow institutions to utilise their own LGD estimates for corporate exposures, contingent upon proper authorisation and methodological robustness. Specific safeguards are also in place for exposures secured by funded credit protection, ensuring compliance with assigned LGD floors in line with the regulatory requirements.
Article 161 Loss Given Default (LGD)
1. Institutions shall use the following LGD values:
(a) senior exposures without eligible funded credit protection to central governments and central banks, to financial sector entities and to regional governments, local authorities and public sector entities: 45 %;
(aa) senior exposures without eligible funded credit protection to corporates which are not financial sector entities: 40 %;
(b) subordinated exposures without eligible collateral: 75 %;
(c) [deleted]
(d) covered bonds eligible for the treatment set out in Article 129(4) or (5) may be assigned an LGD value of 11,25 %;
(e) for senior purchased corporate receivables exposures where an institution is not able to estimate PDs or where the institution's PD estimates do not meet the requirements set out in Section 6: 40 %;