31. Institutions may recognise the credit risk mitigation effects of unfunded credit protection …

Institutions may recognise the credit risk mitigation effects of unfunded credit protection using one of the following methods:

• (a) adjustment of PD or LGD estimates in accordance with Article 160(5), 161(3) and 164(2) of Regulation (EU) No 575/2013, on the basis of the criteria specified by institutions in accordance with Article 183(2) and (3) of Regulation (EU) No 575/2013 by using, in particular, one of the following approaches:
• (i) regardless of the approach applied to comparable direct exposures to the guarantor, adjustment of grades, pools or LGD estimates, including LGD in default and EL BE , by considering the unfunded credit protection in the estimation of risk parameters as further specified in these guidelines (i.e. the modelling approach);
• (ii) when comparable direct exposures to the guarantor are, or would be, treated under the IRB approach with or without own estimates of LGD and conversion factors, substitution of both the PD and LGD risk parameters of the underlying exposure with the corresponding PD and LGD of a comparable direct exposure to the guarantor as further specified in these guidelines (i.e. the substitution of risk parameters approach);
• (iii) regardless of the approach applied to comparable direct exposures to the guarantor, adjustment of grades, pools or LGD estimates, including LGD in default and EL BE , in the application of risk parameters by overriding the grade assignment process in accordance with Article 172(3) of Regulation (EU) No 575/2013 and Section 8.2 of the EBA GL on PD and LGD estimation (i.e. the override);
• (b) if the institution applies the Standardised approach for comparable direct exposures to the guarantor, and does not recognise the credit risk mitigation effects of the UFCP in the PD and LGD estimates in accordance with point (a), use of the risk weight applicable under the Standardised approach in accordance with Article 183(4) of Regulation (EU) No 575/2013 (i.e. the substitution of risk weight approach);
• (c) calculation of the risk-weighted exposure amount in accordance with Article 153(3), Article 154(2), Article 161(4) and Article 164(3), of Regulation (EU) No 575/2013 (i.e. the double default treatment).

1. Forbhreathnú

1.1 Tagairtí

• Airteagal 160 Dóchúlacht mainneachtana (PD)
• Airteagal 161 3.
• Airteagal 164 2.
• Airteagal 172 3.
• Airteagal 183 4.

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

3. Caighdeáin ghaolmhara

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