CA-5.4.3

For exposures defined in paragraph CA-5.2.18 that are not in default and are secured or partly secured⁴⁵ by residential mortgages, risk weights will be assigned based on the following formula:

Correlation (R) = 0.15

Capital requirement (K) = LGD × N[(1 - R)^-0.5 × G(PD) + (R / (1 - R))^0.5 × G(0.999)] - PD x LGD

Risk-weighted assets = K x 12.5 x EAD

The capital requirement (K) for a defaulted exposure is equal to the greater of zero and the difference between its LGD (described in paragraph CA-5.8.79) and the bank's best estimate of expected loss (described in paragraph CA-5.8.82). The risk-weighted asset amount for the defaulted exposure is the product of K, 12.5, and the EAD.

⁴⁵ This means that risk weights for residential mortgages also apply to the unsecured portion of such residential mortgages.