Counterparty Type 1 Exposure LGD

Overview

Article 200 Type 1 default risk requires an exposure-level loss-given-default before Article 201 single-name grouping, variance, and Article 200 risk selection.^[1][2]

Input Terms

• Exposure at Default: The gross Type 1 exposure amount.^[1]
• Eligible Collateral Value: The collateral value prepared before the standard 85% recognition factor.^[3]

Technical Rationale

Article 200 Type 1 default risk depends on loss-given-default after eligible collateral has been recognized, while Article 201 also requires single-name grouping before variance is measured.^[1][2] A separate exposure-level LGD basis keeps collateral evidence and counterparty grouping auditable at their own levels.

Recognized collateral is capped at EAD after applying the Article 192 collateral haircut. The resulting exposure LGD can be grouped by single-name counterparty before the Article 201 variance calculation.

Important Notes

• Evidence over collateral eligibility, legal enforceability, and basis risk remains internal audit scope.
• Detailed collateral recognition belongs in the collateral/CRM calculator when eligibility and haircut controls are material.
• The prepared exposure LGD supports Type 1 counterparty default risk evidence and S.25.01.01 standard-formula reporting where that risk is disclosed.[[ref: qrt-s2501]]