• Calculation of RWA for Credit Risk Exposures (CR Exposures)

    • PRU 4.8.2

      An Authorised Person must include in its calculation of RWA for CR Exposures:

      (a) any on-balance sheet asset; and
      (b) any off-balance sheet item; but excluding:
      (c) any SE Exposure;
      (d) any securitised Exposure that meets the requirements for the recognition of risk transference in a Traditional Securitisation set out in Section 4.14; or
      (e) any Exposure classified as a position or instrument in the Trading Book in accordance with Section A2.1.

    • PRU 4.8.3

      To calculate its RWA for CR Exposures, an Authorised Person must:

      (a) calculate the value of the Exposure (represented as "E") for every on-balance sheet and every off-balance sheet asset in accordance with the Exposure measurement methodology specified in Section 4.9 and recognising the effects of any applicable CRM;
      (b) categorise that Exposure in accordance with the Rules in Section 4.10;
      (c) allocate an applicable Credit Quality Grade and risk weight for that Exposure in accordance with the Rules in Section 4.11 and 4.12;
      (d) calculate the RWA amount for that Exposure using the following formula:
      RWA(CR) = E x CRW
      where:
      (i) "RWA(CR)" refers to the risk-weighted Exposure amount for that CR Exposure;
      (ii) "E" refers to the Exposure value or amount, for that CR Exposure; and
      (iii) "CRW" refers to the applicable risk weight for that CR Exposure determined in accordance with (b) and (c); and
      (e) add the RWA amounts calculated in accordance with (d) for all its CR Exposures.