34. Where institutions adopt the modelling approach specified in paragraph 31(a)(i), they should …

Where institutions adopt the modelling approach specified in paragraph 31(a)(i), they should consider and, if relevant, take into account in the LGD estimates in a conservative manner the following elements:

• (a) any currency mismatch between the underlying obligation and the unfunded credit protection;
• (b) the degree to which the guarantor’s ability to fulfil the contractual obligation under the unfunded credit protection agreement is correlated with the obligor’s ability to repay;
• (c) the defaulted status of the guarantor and its resulting reduced ability to fulfil the contractual obligation under the unfunded credit protection.

1. Overview

1.1 References

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/