119. Any sale of credit obligations in accordance with point (d) of paragraph 115 should be …

Any sale of credit obligations in accordance with point (d) of paragraph 115 should be included in the LGD estimation in a manner appropriate to the LGD estimation methodology taking into account all of the following conditions:

• (a) where institutions regularly sell credit obligations as part of their recovery processes, they should appropriately reflect the observations related to credit obligations subject to the sale in the model development process;
• (b) where institutions do not regularly sell credit obligations as part of their recovery processes and the allocation of the part of the price related to collaterals is too burdensome to make or too unreliable, they may decide not to take these observations into account in the process of model development;
• (c) institutions should not treat recoveries from the sales of the secured credit obligations as recoveries realised without the use of collaterals unless they can demonstrate that the recoveries related to these collaterals are immaterial;
• (d) in any case institutions should include all observations, including the sales of credit obligations, in the calculation of long-run average LGD.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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