Document ID: chunk:federal_register_of_legislation:F2024L01074:body:0:p16
Version: federal_register_of_legislation:F2024L01074
Segment Type: other
Provision Reference: 
Character Range: 42301–45179

the unsecured portion of SME retail exposures that are partly secured by residential real estate.
 1.          For all other non-defaulted SME retail exposures, the calculation of RWA for UL is:
    Correlation (R) =
                   Capital requirement (K) =
    Risk-weighted assets (RWA) = K × 12.5 × EAD

Other retail exposures
 1.          For all other non-defaulted retail exposures, the calculation of RWA for UL is:
              Correlation (R) =
                   Capital requirement (K) =
    Risk-weighted assets (RWA) = K × 12.5 × EAD

Risk-weighted assets for lease exposures
 1.          Lease exposures are defined in APS 112. Leases, other than those that expose an ADI to residual value risk, may be treated in the same manner as exposures secured by the relevant collateral.[6] The ADI may use its own estimates of LGD if it uses the AIRB approach. Where the ADI uses the FIRB approach, the minimum requirements in relation to eligible collateral must be met as detailed in Attachment E to this Prudential Standard.
 2.          For leases that expose an ADI to residual value risk, the discounted lease payment stream must be risk weighted according to the PD and LGD the ADI assigns to the lessee, and the aggregate residual value of all lease exposures must be risk weighted according to Table 2.

 1.              Risk weights for residual value under lease exposures
                             Risk weight (%) applying to the portion of aggregate residual value ≤ 10% of Tier 1 capital   Risk weight (%) applying to the portion of aggregate residual value > 10% of Tier 1 capital
Exposures to residual value  100                                                                                           250

Risk-weighted assets for defaulted exposures
 1.          K in respect of UL for a defaulted exposure under the AIRB or retail IRB approach is equal to the greater of zero and the amount by which the LGD estimate for that exposure exceeds an ADI's best estimate of EL given current economic circumstances and the facility's status. The calculation of RWA for UL is:
    RWA = K × 12.5 × EAD
 1.          RWA and K in respect of UL for a defaulted exposure under the FIRB or supervisory slotting approach is zero.

Attachment B – Risk components for each asset class
 1.              An ADI must calculate the risk components PD, LGD, EAD and M in accordance with the requirements detailed in this Attachment. An ADI that uses its own PD, LGD and EAD estimates for Regulatory Capital purposes must also meet the minimum requirements detailed in Attachment D to this Prudential Standard.
 2.              Where an exposure is guaranteed by a sovereign, and the guarantee meets the requirements set out in Attachment E to this Prudential Standard, the floors that apply to the risk components do not apply to the portion of the exposure that