39. Where institutions adopt the substitution of risk parameters approach and the obligor has …

Where institutions adopt the substitution of risk parameters approach and the obligor has defaulted, the following applies:

• (a) The risk weight of the guaranteed part of the exposure should be that of the comparable direct exposure to the non-defaulted guarantor.
• (b) The expected loss of the guaranteed part of the exposure should be that of the comparable direct exposure to the non-defaulted guarantor.
• (c) Where the guarantor remains in a non-defaulted status, the guaranteed part of the exposure should be considered defaulted for the purposes of the calculation of the IRB shortfall or excess in accordance with Article 159 of Regulation (EU) No 575/2013 and Section 8.4 of the EBA GL on PD and LGD estimation.

1. Overview

1.1 References

• Article 159 Treatment of expected loss amounts, IRB shortfall and IRB excess

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/