in force 2025-01-01 MODIFIED+1,216 −1,371§
Amended by Regulation (EU) 2024/1623 32024R1623 · Regulation (EU) 2024/2987 32024R2987 · Regulation (EU) 2024/2795 32024R2795
applies from: unchanged
Paragraph 1 no longer sets a flat 0,03% PD floor for corporate and institution exposures generally, but instead sets a 0,05% PD input floor applicable specifically to exposures assigned to the exposure classes referenced in Article 147(2), point (b) or point (c)(i), (ii) or (iii), for use in the risk-weighted exposure amount and expected loss calculations under the specified articles.
A new paragraph 1a introduces a separate 0,03% PD input floor for exposures assigned to the exposure classes referenced in Article 147(2), point (aa)(i) or (ii), for the same calculation purposes.
Paragraph 4 has been rewritten so that recognition of unfunded credit protection in the PD now applies only where an institution uses own LGD estimates under Article 143 for both the protected exposure and comparable direct exposures to the protection provider, and is recognised in accordance with Article 183, removing the prior wording on dilution risk conditions and the eligibility of the seller of purchased receivables and corporate entities as protection providers, with paragraphs 6 and 7 also dropping the references to those seller and corporate-entity eligibility provisions from paragraph 4.
Cited: Art. 160, v2 · Art. 160, v1
text before / after
02013R0575-20240709 → 02013R0575-20250101
Article 160
Probability of default (PD)
1. The For exposures assigned to the exposure classes referred to in Article 147(2), point (b), or point (c)(i), (ii) or (iii), for the sole purpose of calculating risk-weighted exposure amounts and the expected loss amounts of those exposures, in particular for the purposes of Articles 153 and 157, and Article 158(1), (5) and (10), the PD value that is used for each exposure as an input of the risk-weighted exposure amounts and expected loss formulae shall not be less than the following PD input floor value: 0,05 %.
1a. For exposures assigned to the exposure classes referred to in Article 147(2), point (aa)(i) or (ii), for the sole purpose of calculating risk-weighted exposure amounts and the expected loss amounts of those exposures, the PD value that is used for each exposure as an input of the risk-weighted exposure to a corporate or an institution amounts and expected loss formulae shall not be at least less than the following PD input floor value: 0,03 %.
2. For purchased corporate receivables in respect of which an institution is not able to estimate PDs or an institution's PD estimates do not meet the requirements set out in Section 6, the PDs for these exposures shall be determined in accordance with the following methods:
(a) for senior claims on purchased corporate receivables PD shall be the institutions estimate of EL divided by LGD for these receivables;
(b) for subordinated claims on purchased corporate receivables PD shall be the institution's estimate of EL;
(c) an institution that has received the permission of the competent authority to use own LGD estimates for corporate exposures pursuant to Article 143 and that can decompose its EL estimates for purchased corporate receivables into PDs and LGDs in a manner that the competent authority considers to be reliable, may use the PD estimate that results from this decomposition.
3. The PD of obligors in default shall be 100 %.
4. Institutions For an exposure covered by an unfunded credit protection, an institution using own estimates of LGD under Article 143 for both the exposure that is covered by the unfunded credit protection and for comparable direct exposures to the protection provider may take into account recognise the unfunded credit protection in the PD in accordance with the provisions of Chapter 4. For dilution risk, in addition to the protection providers referred to in Article 201(1)(g) the seller of the purchased receivables is eligible if the following conditions are met:
(a) the corporate entity has a credit assessment by an ECAI which has been determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Chapter 2;
(b) the corporate entity, in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts under the IRB Approach, does not have a credit assessment by a recognised ECAI and is internally rated as having a PD equivalent to that associated with the credit assessments of ECAIs determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Chapter 2. 183.
5. Institutions using own LGD estimates may recognise unfunded credit protection by adjusting PDs subject to Article 161(3).
6. For dilution risk of purchased corporate receivables, PD shall be set equal to the EL estimate estimates of the institution for dilution risk. An institution that has received permission from the competent authority pursuant to Article 143 to use own estimates of LGD estimates for corporate exposures that can decompose its EL estimates for dilution risk of purchased corporate receivables into PDs and LGDs in a manner that the competent authority considers to be reliable, may use the PD estimate estimates that results result from this that decomposition. Institutions may recognise unfunded credit protection in the PD in accordance with the provisions of Chapter 4. For dilution risk, in addition to the protection providers referred to in Article 201(1)(g), the seller of the purchased receivables is eligible provided that the conditions set out in paragraph 4 are met.
7. By way of derogation from Article 201(1)(g), the corporate entities that meet the conditions set out in paragraph 4 are eligible.
An institution that has received the permission of the competent authority pursuant to Article 143 to use own estimates of LGD estimates for dilution risk of purchased corporate receivables, receivables may recognise unfunded credit protection by adjusting PDs subject to Article 161(3).