+6.3 LGD calibration
---+6.3.1.1 Definition of economic loss and realised LGD
------+131. For the purpose of LGD estimation as referred to in Article 181(1)(a) of Regulation (EU) No …
------+132. For the purpose of paragraph 131, institutions should calculate the economic loss realised on …
------+133. For the purpose of calculation of the economic loss realised on an exposure in accordance with …
------+134. Where, relating to a default event, any part of exposure has been forgiven or written off …
------+135. In the case of exposures that return to non-defaulted status, institutions should calculate …
------+136. Where institutions open new facilities to replace previously defaulted facilities as part of …
---+6.3.1.2 Treatment of fees, interest and additional drawings after default
------+137. For the purpose of Article 181(1)(i) of Regulation (EU) No 575/2013, institutions should take …
------+138. Institutions should apply the treatment specified in paragraph 137 to any interest capitalised …
------+139. In accordance with Article 182(1)(c) of Regulation (EU) No 575/2013 institutions that obtained …
------+140. Where institutions include additional drawings by the obligor after the moment of default in …
------+141. For retail exposures, where institutions do not include additional drawings by the obligor …
------+142. Irrespective of whether institutions reflect future drawings in their conversion factors or in …
---+6.3.1.3 Discounting rate
------+143. For the purpose of the calculation of economic loss, in accordance with point (2) of Article 5 …
---+6.3.1.4 Direct and indirect costs
------+144. For the purpose of the calculation of the realised LGDs, institutions should take into account …
------+145. Direct costs should include the costs of outsourced collection services, legal costs, the cost …
------+146. Indirect costs should include all costs stemming from the running of the institution’s …
---+6.3.2.1 Historical observation period
------+147. The historical observation period should be as broad as possible and should contain data from …
------+148. In assessing whether the RDS includes a sufficient number of closed recovery processes in …
---+6.3.2.2 Calculation of long-run average LGD
------+149. In accordance with letter (a) of Article 181(1) of Regulation (EU) No 575/2013 institutions …
------+150. Without prejudice to Article 181(2) of Regulation (EU) No 575/2013 institutions should …
------+151. Where institutions do not give equal importance to all historical data for retail exposures in …
------+152. In specifying the weights in accordance with paragraph 151 institutions should take into …
---+6.3.2.3 Treatment of incomplete recovery processes
------+153. For the purposes of letter (a) of Article 181(1) of Regulation (EU) No 575/2013, in relation …
------+154. Institutions should calculate the observed average LGD for each facility grade or pool and at …
------+155. Institutions should clearly specify in their internal policies the moment of closing the …
------+156. Institutions should define the maximum period of the recovery process for a given type of …
------+157. For the purpose of the calculation of the observed average LGD, institutions should recognise …
------+158. Institutions should obtain the long-run average LGD by adjusting the observed average LGD …
------+159. The estimation referred to in paragraph 158(b) should comply with the following principles …
---+6.3.2.4 Treatment of cases with no loss or positive outcome
------+160. Where institutions observe that they realised profit on their observations of defaults, the …
------+161. Institutions should calibrate their LGD estimates to the long run average LGD calculated in …
------+162. Where institutions observe extremely high values of realised LGDs much above 100%, especially …
------+163. In order to comply with the requirement of Article 181(1)(a) of Regulation (EU) No 575/2013 to …
------+164. In the analysis of the representativeness of data in accordance with section 4.2.4 …

6.3 LGD calibration

6.3.1 Calculation of economic loss and realised LGD

1. Overview

,
6.3.1.1 Definition of economic loss and realised LGD

6.3.1.1 Definition of economic loss and realised LGD
6.3.1.2 Treatment of fees, interest and additional drawings after default

6.3.1.2 Treatment of fees, interest and additional drawings after default
6.3.1.3 Discounting rate

6.3.1.3 Discounting rate
6.3.1.4 Direct and indirect costs

6.3.1.4 Direct and indirect costs
6.3.2.1 Historical observation period

6.3.2.1 Historical observation period
6.3.2.2 Calculation of long-run average LGD

6.3.2.2 Calculation of long-run average LGD
6.3.2.3 Treatment of incomplete recovery processes

6.3.2.3 Treatment of incomplete recovery processes
6.3.2.4 Treatment of cases with no loss or positive outcome

6.3.2.4 Treatment of cases with no loss or positive outcome

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

Requirements

3. Related Standards

Standards
  • EBA - Published by the European Banking Authority at https://www.eba.europa.eu/