AI Summary of Article 193 Principles for recognising the effect of credit risk mitigation techniques
The provisions outlined indicate that institutions must ensure that any credit risk mitigation applied does not yield a higher risk-weighted exposure amount than similar exposures without such mitigation. Institutions must treat defined collateral types as eligible even for undrawn facilities, provided conditions surrounding collateral purchase are met.
Furthermore, if multiple forms of credit risk mitigation are in play for a single exposure, institutions are required to subdivide the exposure and calculate risk-weighted amounts for each part according to established guidelines. This method applies equally when differing maturities from a single protection provider are involved.
Article 193 Principles for recognising the effect of credit risk mitigation techniques
1. No exposure in respect of which an institution obtains credit risk mitigation shall produce a higher risk-weighted exposure amount or expected loss amount than an otherwise identical exposure in respect of which an institution has no credit risk mitigation.
2. Where the risk-weighted exposure amount already takes account of credit protection under Chapter 2 or Chapter 3, as applicable, institutions shall not take into account that credit protection in the calculations under this Chapter.
3. Where the provisions in Sections 2 and 3 are met, institutions may amend the calculation of risk-weighted exposure amounts under the Standardised Approach and the calculation of risk-weighted exposure amounts and expected loss amounts under the IRB Approach in accordance with the provisions of Sections 4, 5 and 6.