Document ID: chunk:federal_register_of_legislation:F2024L01074:body:0:p20
Version: federal_register_of_legislation:F2024L01074
Segment Type: other
Provision Reference: 
Character Range: 54519–57436

and the collateral. The sum of ESi across all collateral types must be capped at the value of .
      For the purpose of determining ESi for an exposure with a junior lien, the ADI must apply the appropriate haircuts to the value of the collateral and then reduce it by the sum of all exposures with liens that rank higher than the junior liens. In cases where liens are held by third parties that rank pari passu with the lien of the ADI, only the proportion of the value of the collateral (after the application of haircuts and reductions due to exposures with liens that rank higher than the lien of the ADI) that is attributable to the ADI may be recognised.
        * . The terms EU and ESi are only used to calculate the LGD applicable to the collateralised transaction. The ADI must continue to calculate EAD without taking into account the presence of any collateral, unless specified otherwise.
        * LGDU is the LGD applicable to an unsecured exposure as set out in paragraphs 8 to 10 and 13 of this Attachment.
        * LGDSi is the LGD applicable to an exposure secured by that type of collateral as set out in paragraphs 11 and 14 of this Attachment.
 1.          Where eligible collateral is denominated in a different currency to that of the exposure, an ADI must apply a haircut for currency risk (Hfx) in accordance with the requirements for the comprehensive approach as detailed in Attachment G to APS 112.
 2.          For the purpose of calculating the LGD applicable to a sovereign exposure that is secured by eligible collateral, where applicable, an ADI is permitted to adopt the lower of the:
        1.           relevant LGD specified in paragraph 9 of this Attachment; and
        2.           LGD determined in accordance with paragraph 16 to 17 of this Attachment.

Corporate exposures under the AIRB approach
 1.          For corporate exposures subject to the AIRB approach, the LGD for each secured or partially secured exposure that is used as an input to the risk-weight function and the calculation of EL must not be less than the floors detailed in Table 6. However, the floor does not apply to the best estimate of EL for defaulted exposures.

            1.              LGD floors for corporate exposures
Collateral type                            LGD
                                           (%)
Secured
    Financial collateral                   0
    Receivables                            10
    Commercial or residential real estate  10
    Other physical collateral              15
    All other collateral                   25
Unsecured                                  25

 1.          The LGD floors for secured exposures specified in Table 6 must be applied where an exposure is fully secured (i.e. the value of collateral after applying the haircuts specified in Table 5 exceeds the value of the exposure).
 2.          The LGD floor for a partially secured