Calculating risk-weighted exposure amounts and expected loss amounts in the case of mixed pools of collateral
Article 231
1. An institution shall calculate the value of LGD* that it shall use as the LGD for the purposes of Chapter 3 in accordance with paragraphs 2 and 3 where both the following conditions are met: (a) the institution uses the IRB Approach to calculate risk-weighted exposure amounts and expected loss amounts; (b) an exposure is collateralised by both financial collateral and other eligible collateral. 2. Institutions shall be required to subdivide the volatility-adjusted value of the exposure, obtained by applying the volatility adjustment as set out in Article 223(5) to the value of the exposure, into parts so as to obtain a part covered by eligible financial collateral, a part covered by receivables, a part covered by commercial immovable property collateral or residential property collateral, a part covered by other eligible collateral, and the unsecured part, as applicable. 3. Institutions shall calculate LGD* for each part of the exposure obtained in paragraph 2 separately in accordance with the relevant provisions of this Chapter.