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  • 1. Calculation of Expected Losses

    • CA-5.7.2

      A bank must sum the EL amount (defined as EL multiplied by EAD) associated with its exposures (excluding the EL amount associated with equity exposures under the PD/LGD approach and securitisation exposures) to obtain a total EL amount. While the EL amount associated with equity exposures subject to the PD/LGD approach is excluded from the total EL amount, paragraphs CA-5.7.3 and CA-5.7.13 apply to such exposures. The treatment of EL for securitisation exposures is described in paragraph CA-6.4.4.

      Apr 08

    • (i) Expected Loss for Exposures other than SL Subject to the Supervisory Slotting Criteria

      • CA-5.7.3

        Banks must calculate an EL as PD x LGD for corporate, sovereign, bank, and retail exposures both not in default and not treated as hedged exposures under the double default treatment. For corporate, sovereign, bank, and retail exposures that are in default, banks must use their best estimate of expected loss as defined in paragraph CA-5.8.82 and banks on the foundation approach must use the CBB's LGD. For SL exposures subject to the supervisory slotting criteria EL is calculated as described in paragraphs CA-5.7.4 and CA-5.7.5. For equity exposures subject to the PD/LGD approach, the EL is calculated as PD x LGD unless paragraphs CA-5.5.13 to CA-5.5.16 apply. Securitisation exposures do not contribute to the EL amount, as set out in paragraph CA-6.4.4. For all other exposures, including hedged exposures under the double default treatment, the EL is zero.

        Apr 08

    • (ii) Expected Loss for SL Exposures Subject to the Supervisory Slotting Criteria

      • CA-5.7.4

        For SL exposures subject to the supervisory slotting criteria, the EL amount is determined by multiplying 8% by the risk-weighted assets produced from the appropriate risk weights, as specified below, multiplied by EAD.

        Apr 08

      • Supervisory Categories and EL Risk Weights for other SL Exposures

        • CA-5.7.5

          The risk weights for SL, other than HVCRE, are as follows:

          Strong Good Satisfactory Weak Default
          5% 10% 35% 100% 625%
          Apr 08

      • Supervisory Categories and EL Risk Weights for HVCRE

        • CA-5.7.6

          The risk weights for HVCRE are as follows:

          Strong Good Satisfactory Weak Default
          5% 5% 35% 100% 625%
          Apr 08