The rule in plain words
PD/LGD approach: total, exposure weighted average LGD (%) must be at least 0.65.
How the Line4 Check report words itShowHide
Word for word as the report shows it when the rule fails.
Exposure weighted average LGD (%): PD/LGD approach: Total >= 0.65
What to do if your filing fails it
- 01Open the template below and find the cells the rule reads.
- 02Look for a value outside the limit in these cells.
- 03If the value is a percentage, EBA expects it as a decimal: 12% is reported as 0.12.
- 04EBA compares the values exactly here: there is no rounding tolerance.
- 05It runs only when your filing indicators mark C 10.01 as reported.
- 06This is a warning. It does not stop the filing on its own, but your authority may ask you to explain it.
The cells it reads
Credit risk: equity - IRB approaches to capital requirements - TOTAL (C 10.01)
Row
- 0020PD/LGD approach: Total
Column
- 0070Exposure weighted average LGD (%)
A worked example
The first of its checks, with simple numbers.
What the rule then expects
PD/LGD approach: total, exposure weighted average LGD (%) must then be at least 0.65.
0.65Passes
0.55Fails
A file that reports 0.65 passes. One that reports 0.55 fails, by 0.1.
The numbers are illustrative.
Show the rule as writtenShowHide
EBA's formula. Cells are written as {template, row, column, sheet}.
{C_10.01,r0020,c0070,} >= 0.65Other rules on C 10.01
- Substitution of the exposure due to CRM total outflows must equal the sum of its two parts (v0480_m)Warning
- Simple risk weight approach: total must equal 190% plus 290% plus 370% (v0483_m)Warning
- Risk weighted exposure amount must equal 1.9 times exposure value (v0484_m)Warning
- Memorandum item: expected loss amount must equal 0.008 times exposure value (row 0070, v0485_m)Warning
- Risk weighted exposure amount must equal 2.9 times exposure value (v0486_m)Warning
- Memorandum item: expected loss amount must equal 0.008 times exposure value (row 0080, v0487_m)Warning
- Risk weighted exposure amount must equal 3.7 times exposure value (v0488_m)Warning
- Memorandum item: expected loss amount must equal 0.024 times exposure value (v0489_m)Warning
Every COREP own funds rule, by template
Checks like this one, run at the point of submission, are the first step to real-time supervision.