CRR › Article 235
Article 235 Calculating risk-weighted exposure amounts under the substitution approach where the guaranteed exposure is treated under the Standardised Approach
official text, verbatim
For the purposes of Article 113(3), institutions shall calculate the risk-weighted exposure amounts for exposures with unfunded credit protection to which those institutions apply the Standardised Approach, irrespective of the treatment of comparable direct exposure to the protection provider, in accordance with the following formula:
max {0, E – GA} · r + GA · g
where:
| E | = the exposure value calculated in accordance with Article 111; for that purpose, the exposure value of an off-balance-sheet item listed in Annex I shall be 100 % of its value rather than the exposure value indicated in Article 111(2); |
| GA | = the amount of credit protection adjusted for foreign exchange risk (G*) as calculated under Article 233(3) further adjusted for any maturity mismatch as laid down in Section 5 of this Chapter; |
| r | = the risk weight of exposures to the obligor as specified in Chapter 2; |
| g | = the risk weight applicable to a direct exposure to the protection provider as specified in Chapter 2. |
Where the protected amount (GA) is less than the exposure (E), institutions may apply the formula specified in paragraph 1 only where the protected and unprotected parts of the exposure are of equal seniority.
Institutions may extend the preferential treatment set out in Article 114(4) and (7), to exposures or parts of exposures guaranteed by the central government or the central bank as if those exposures were direct exposures to the central government or the central bank, provided that the conditions set out in Article 114(4) or (7), as applicable, are met for such direct exposures.