30. For the purposes of recognising the credit risk mitigation effects of collateral in accordance …

For the purposes of recognising the credit risk mitigation effects of collateral in accordance with Article 181(1) of Regulation (EU) No 575/2013, the criteria specified by institutions for adjusting LGD estimates should:

• (a) not lead to a decrease in the value of the LGD estimates when the collateral is a liability of the obligor that ranks either lower than or pari passu with the obligation the obligor has to the institution;
• (b) for other than first rank claims, appropriately consider the effects on LGD estimates of the subordinated position of the institution in relation to the collateral;
• (c) for other physical collateral, appropriately consider the likely location of the collateral during the lifetime of the loan and the influence it may have on the potential inability of institutions to expeditiously gain control of their collateral and liquidate it in accordance with Article 181(1)(e) of Regulation (EU) No 575/2013;

1. Overview

1.1 References

• Article 181 1.

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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