Article 158 Treatment by Exposure Type
1.
Institutions shall calculate expected loss amounts 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.
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2.
Institutions shall calculate the expected loss amounts for securitised exposures in accordance with Chapter 5.
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3.
For exposures belonging to the 'other non credit obligations assets' exposure class referred to in point (g) of Article 147(2) institutions shall apply an expected loss amount of zero.
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4.
Institutions shall calculate the expected loss amounts for exposures in the form of shares or units of a CIU referred to in Article 152 in accordance with the methods set out in this rule.
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5.
Institutions shall calculate the expected loss (EL) and expected loss amounts for exposures to corporates, institutions, central governments and central banks and retail exposures in accordance with the following formulae:
Expected loss (EL) = PD * LG
Expected loss amount = EL [multiplied by] exposure value.
For defaulted exposures (PD = 100%) where institutions use own estimates of LGDs, EL shall be ELBE, the institution's best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h).
For exposures subject to the treatment set out in Article 153(3), EL shall be 0%.
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6.
Institutions shall assign the EL values for specialised lending exposures where institutions use the methods set out in Article 153(5) for assigning risk weights in accordance with Table 2.
Table 2:
| Remaining Maturity | Category 1 | Category 2 | Category 3 | Category 4 | Category 5 |
| Less than 2.5 years | 0% | 0.4% | 2.8% | 8% | 50% |
| Equal to or more than 2.5 years | 0.4% | 0.8% | 2.8% | 8% | 50% |
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7.
Institutions shall calculate the expected loss amounts for equity exposures where the risk-weighted exposure amounts are calculated in accordance with the simple risk weight approach in accordance with the following formula:
Expected loss amount = EL . exposure value
The EL values shall be the following:
Expected loss (EL) = 0.8% for private equity exposures in sufficiently diversified portfolios
Expected loss (EL) = 0.8% for exchange traded equity exposures
Expected loss (EL) = 2.4% for all other equity exposures.
- 01/01/2022
8.
Institutions shall calculate the expected loss and expected loss amounts for equity exposures where the risk-weighted exposure amounts are calculated in accordance with the PD/LGD approach in accordance with the following formula:
Expected loss (EL) = PD . LGD
Expected loss amount = EL . exposure value
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9.
For equity exposures where the risk-weighted exposure amounts are calculated in accordance with the internal models approach institutions shall apply an expected loss amount of zero.
- 01/01/2022
10.
Institutions shall calculate expected loss amounts for dilution risk of purchased receivables in accordance with the following formula:
Expected loss (EL) = PD . LGD
Expected loss amount = EL . exposure value
[Note: This rule corresponds to Article 158 of the CRR as it applied immediately before revocation by the Treasury.]
[Note: Articles 159 to 191 remain in the CRR]
- 01/01/2022