Standards for corporate, sovereign, and bank exposures where own estimates of LGD are used and standards for retail exposures.
In this section "counterparty" is used to denote a party to whom a bank has an on- or off-balance sheet credit exposure or a potential credit exposure.
More detailed information on specific components of the calculations is contained in subsequent chapters.
The LGD applied to the remaining portion of this exposure will be set at 45%.
The Capital Adequacy Requirements (CAR) for banks (including federal credit unions), bank holding companies, federally regulated trust companies, federally regulated loan companies and cooperative retail associations are set out in nine chapters, each of which has been issued as a separate document.
This document, Chapter 5 – Credit Risk Mitigation, should be read in conjunction with the other CAR chapters which include: it may use the net exposure of loans and deposits as the basis for its capital adequacy calculation in accordance with the formula in paragraph 46.
Assets deducted from capital are risk-weighted at 0%.
Such assets include goodwill, investments in unconsolidated subsidiaries, and back-to-back securities.
Recognition of collateral in reducing the credit risk of claims is limited to cash or securities issued by OECD central governments, OECD central banks, OECD public sector entities (reference section 3.5 for definition of Canadian public sector entities), and specified multilateral development banks.