Article 154
1.
The risk-weighted exposure amounts for retail exposures shall be calculated in accordance with the following formulae:
Risk – weighted exposure amount = RW · exposure value
where the risk weight RW is defined as follows:
(i)
if PD = 1, i.e., for defaulted exposures, RW shall be
where ELBE shall be the institution's best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h);
(ii)
if 0 < PD < 1, i.e., for any possible value for PD other than under (i)
where:
|
N(x) |
= |
the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x); |
|
G(Z) |
= |
the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that N(x) = z); |
|
R |
= |
the coefficient of correlation defined as
|
2.
3.
For retail exposures secured by immovable property collateral a coefficient of correlation R of 0,15 shall replace the figure produced by the correlation formula in paragraph 1.
4.
For qualifying revolving retail exposures in accordance with points (a) to (e), a coefficient of correlation R of 0,04 shall replace the figure produced by the correlation formula in paragraph 1.
Exposures shall qualify as qualifying revolving retail exposures if they meet the following conditions:
(a)
the exposures are to individuals;
(b)
the exposures are revolving, unsecured, and to the extent they are not drawn immediately and unconditionally, cancellable by the institution. In this context revolving exposures are defined as those where customers' outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to a limit established by the institution. Undrawn commitments may be considered as unconditionally cancellable if the terms permit the institution to cancel them to the full extent allowable under consumer protection and related legislation;
(c)
the maximum exposure to a single individual in the sub-portfolio is EUR 100 000 or less;
(d)
(e)
the treatment as a qualifying revolving retail exposure shall be consistent with the underlying risk characteristics of the sub-portfolio.
By way of derogation from point (b), the requirement to be unsecured does not apply in respect of collateralised credit facilities linked to a wage account. In this case amounts recovered from the collateral shall not be taken into account in the LGD estimate.
Competent authorities shall review the relative volatility of loss rates across the qualifying revolving retail sub-portfolios, as well the aggregate qualifying revolving retail portfolio, and shall share information on the typical characteristics of qualifying revolving retail loss rates across Member States.
5.
To be eligible for the retail treatment, purchased receivables shall comply with the requirements set out in Article 184 and the following conditions:
(a)
the institution has purchased the receivables from unrelated third party sellers, and its exposure to the obligor of the receivable does not include any exposures that are directly or indirectly originated by the institution itself;
(b)
the purchased receivables shall be generated on an arm's-length basis between the seller and the obligor. As such, inter-company accounts receivables and receivables subject to contra-accounts between firms that buy and sell to each other are ineligible;
(c)
the purchasing institution has a claim on all proceeds from the purchased receivables or a pro-rata interest in the proceeds; and
(d)
the portfolio of purchased receivables is sufficiently diversified.
6.
For purchased retail receivables, refundable purchase price discounts, collaterals or partial guarantees that provide first loss protection for default losses, dilution losses, or both, may be treated as a first loss protection by the purchaser of the receivables or by the beneficiary of the collateral or of the partial guarantee in accordance with Subsections 2 and 3 of Section 3 of Chapter 5. The seller providing the refundable purchase price discount and the provider of a collateral or a partial guarantee shall treat those as an exposure to a first loss position in accordance with Subsections 2 and 3 of Section 3 of Chapter 5.
7.
For hybrid pools of purchased retail receivables where purchasing institutions cannot separate exposures secured by immovable property collateral and qualifying revolving retail exposures from other retail exposures, the retail risk weight function producing the highest capital requirements for those exposures shall apply.