Other Exposure Classes¶
This page covers exposure classes not detailed in previous sections: Equity, Defaulted, PSE, MDB, RGLA, and other specialized categories.
Equity Exposures¶
Definition¶
Equity exposures include: - Direct equity holdings - Investments in funds - Private equity - Venture capital investments - Subordinated debt with equity characteristics
SA Risk Weights¶
CRR assigns a flat 100% SA risk weight to all equity under Art. 133(2), with higher weights under IRB Simple (Art. 155: 290% exchange-traded, 370% other). Basel 3.1 removes IRB equity approaches and significantly increases SA weights to 250% (standard, Art. 133(3)) and 400% (higher risk: unlisted + business < 5 years, Art. 133(4)), with a transitional phase-in from 2027.
Basel 3.1
IRB approaches for equity are removed under Basel 3.1. Only SA is permitted.
Details: See Key Differences — Equity Exposures for the complete risk weight tables and transitional schedule.
Calculation Example¶
Exposure: - £10m listed equity portfolio - Mix of exchange-traded and private equity
CRR SA (Art. 133):
# Exchange-traded: £7m (flat 100%)
RWA_exchange = £7,000,000 × 100% = £7,000,000
# Private equity: £3m (flat 100%)
RWA_private = £3,000,000 × 100% = £3,000,000
# Total
Total_RWA = £10,000,000
Basel 3.1 SA (Art. 133, fully phased from 2030):
# Exchange-traded: £7m (standard listed: 250%)
RWA_exchange = £7,000,000 × 250% = £17,500,000
# Private equity: £3m (higher risk — unlisted, business < 5yr: 400%)
RWA_private = £3,000,000 × 400% = £12,000,000
# Total
Total_RWA = £29,500,000
Transitional weights (2027–2029)
Standard equity weights phase in from 160% (2027) to 250% (2030+), and higher-risk from 220% (2027) to 400% (2030+). See Key Differences for the full schedule.
Defaulted Exposures¶
Definition¶
An exposure is classified as defaulted when: - Past due > 90 days on a material amount - Unlikely to pay in full without recourse to collateral - Subject to distressed restructuring - Bankruptcy or insolvency proceedings initiated - Similar credit quality deterioration
SA Risk Weights¶
Defaulted exposures receive 100%–150% depending on provision coverage. Basel 3.1 introduces a 50% RW for the secured portion of exposures with ≥50% specific provisions.
IRB Treatment¶
Under IRB, defaulted exposures use PD = 100% and "best estimate LGD" (ELGD). The K formula still applies, producing RWA reflecting unexpected loss only.
Details: See Key Differences — Defaulted Exposures for the full CRR vs Basel 3.1 comparison.
Calculation Example¶
Exposure: - £5m defaulted corporate loan - Specific provision: £1.5m (30% coverage) - Collateral value: £2m
SA Calculation:
# Net exposure
Net_EAD = £5,000,000 - £1,500,000 = £3,500,000
# Provision coverage 30% → 100% RW
Risk_Weight = 100%
RWA = £3,500,000 × 100% = £3,500,000
Public Sector Entities (PSE)¶
Definition¶
PSEs are non-commercial administrative bodies responsible to, or owned by, central governments, regional governments, or local authorities (CRR Art. 4(1)(8)):
- Transport authorities (e.g., Transport for London)
- Water and utility boards
- Public health bodies (e.g., NHS trusts)
- Government-owned enterprises
- Administrative bodies exercising public functions
PSE vs RGLA
Regional governments and local authorities themselves are classified as RGLA (Art. 115), not PSE. PSEs are entities subordinate to or owned by governments, not the governments themselves.
Treatment Methods (CRR Art. 116)¶
| Method | Condition | Paragraph | Basis |
|---|---|---|---|
| Sovereign-derived | No own ECAI rating | Art. 116(1), Table 2 | Sovereign CQS |
| Own-rating | Has own ECAI rating | Art. 116(2), Table 2A | PSE's own CQS |
| Competent-authority equivalence | Exceptional circumstances + appropriate government guarantee | Art. 116(4) | Guarantor's sovereign/RGLA RW |
| Third-country equivalence | Third-country supervisor uses para 1 or 2, and UK Treasury has determined equivalence | Art. 116(5) | Art. 116(1)/(2) applied to home-country sovereign (else 100%) |
CRR Art. 116(4) — Blanked under Basel 3.1
The Art. 116(4) competent-authority equivalence route — allowing, in exceptional circumstances, a PSE to be treated as its central government / regional government / local authority where an appropriate guarantee exists — is live under CRR but omitted from PRA PS1/26 (ps126app1.pdf p.38: "Provision left blank"). From 1 January 2027, any guarantee-based RGLA/sovereign override must be routed through the general CRM guarantee substitution regime (CRR/PS1/26 Art. 235), not the Art. 116(4) carve-out.
CRR Art. 116(5) — Third-Country PSEs
Where a third country applies supervisory and regulatory arrangements at least equivalent to the UK's and treats its own PSEs under para 1 or 2, UK institutions may risk weight third-country PSEs the same way; otherwise a flat 100% applies. PRA PS1/26 retains this gate by explicit cross-reference in Art. 116(3A), so the Art. 116(5) equivalence test continues to apply under Basel 3.1.
Art. 116(4)/(5) Not Implemented
The SA calculator routes PSE exposures only through Art. 116(1)/(2) (Tables 2/2A) plus the Art. 116(3) short-term preferential. Firms relying on Art. 116(4) guarantee- backed equivalence or Art. 116(5) third-country equivalence must apply the substitution upstream of the engine.
Risk Weight Tables¶
Table 2 — Sovereign-Derived (Art. 116(1))
Used when the PSE has no own ECAI rating — look up the sovereign's CQS:
| Sovereign CQS | PSE Risk Weight |
|---|---|
| 1 | 20% |
| 2 | 50% |
| 3 | 100% |
| 4 | 100% |
| 5 | 100% |
| 6 | 150% |
| Unrated | 100% |
Table 2A — Own-Rating (Art. 116(2))
Used when the PSE has its own ECAI rating:
| CQS | Risk Weight |
|---|---|
| 1 | 20% |
| 2 | 50% |
| 3 | 50% |
| 4 | 100% |
| 5 | 100% |
| 6 | 150% |
Key difference: CQS 3
Under sovereign-derived treatment (Table 2), CQS 3 receives 100%. Under own-rating treatment (Table 2A), CQS 3 receives 50%. Having an own ECAI rating can materially reduce RWA at CQS 3.
Short-Term Preferential Treatment (Art. 116(3))¶
PSE exposures with original effective maturity ≤ 3 months receive a flat 20% risk weight regardless of CQS. No domestic currency condition is required for PSEs (unlike RGLAs under Art. 115(5)).
Basel 3.1 Changes¶
CRR vs Basel 3.1
PSE risk weight tables are unchanged under Basel 3.1 — Tables 2/2A and the short-term 20% preferential continue to apply. The key structural change is:
- Art. 147A(1): PSEs receiving 0% SA risk weight are mandatorily SA — no IRB permission is available.
- All other PSEs remain eligible for IRB (mapped to sovereign or institution class
depending on
entity_type).
Details: See SA Risk Weights — PSE for the full specification including test scenarios.
Calculation Examples¶
Example 1 — Sovereign-derived (UK PSE):
# £50m loan to Transport for London (no own ECAI rating)
# UK sovereign CQS = 1 → Table 2 row 1
Risk_Weight = 20%
RWA = £50,000,000 × 20% = £10,000,000
Example 2 — Own-rating:
# £30m bond issued by a rated European PSE (own CQS 3)
# Table 2A, CQS 3
Risk_Weight = 50%
RWA = £30,000,000 × 50% = £15,000,000
# Note: if sovereign-derived, CQS 3 would give 100% (Table 2)
Example 3 — Short-term:
# £20m 60-day deposit with a UK PSE (any CQS)
# Art. 116(3): maturity ≤ 3 months → flat 20%
Risk_Weight = 20%
RWA = £20,000,000 × 20% = £4,000,000
Multilateral Development Banks (Art. 117)¶
Named MDBs at 0% (Art. 117(2))¶
The following 16 MDBs receive a 0% risk weight unconditionally. Set entity_type = "mdb_named"
in the counterparty data for these institutions.
| # | Institution | Abbreviation |
|---|---|---|
| a | International Bank for Reconstruction and Development | IBRD |
| b | International Finance Corporation | IFC |
| c | Inter-American Development Bank | IDB |
| d | Asian Development Bank | ADB |
| e | African Development Bank | AfDB |
| f | Council of Europe Development Bank | CEB |
| g | Nordic Investment Bank | NIB |
| h | Caribbean Development Bank | CDB |
| i | European Bank for Reconstruction and Development | EBRD |
| j | European Investment Bank | EIB |
| k | European Investment Fund | EIF |
| l | Multilateral Investment Guarantee Agency | MIGA |
| m | International Finance Facility for Immunisation | IFFIm |
| n | Islamic Development Bank | IsDB |
| o | International Development Association | IDA |
| p | Asian Infrastructure Investment Bank | AIIB |
CRR2 additions
Items (o) IDA and (p) AIIB were added by CRR2 (Regulation (EU) 2019/876). The list is unchanged in PRA PS1/26 Art. 117(2).
Other MDBs (Art. 117(1))¶
MDBs not on the 0% list receive risk weights based on their external credit assessment.
Set entity_type = "mdb" in the counterparty data for these institutions.
Under CRR Art. 117(1), non-named MDBs are treated "in the same manner as exposures to institutions" — they use the institution risk weight tables (Art. 120 Table 3 for ECAI-rated, Art. 121 Table 5 for sovereign-derived). No separate MDB table exists in the CRR.
Short-term preferential treatment — Art. 120(2) Table 4 (rated), Art. 121(3) (unrated 20%), and the national-currency channel of Art. 119(2)/(3) — is excluded for MDB exposures.
See Institution for the CRR institution risk weight tables.
PRA PS1/26 Art. 117(1) introduces a dedicated MDB risk weight table (Table 2B), replacing the CRR "treated as institution" approach:
| CQS | Risk Weight |
|---|---|
| 1 | 20% |
| 2 | 30% |
| 3 | 50% |
| 4 | 100% |
| 5 | 100% |
| 6 | 150% |
| Unrated | 50% |
Notable differences from CRR institution treatment: Table 2B CQS 2 = 30% (vs CRR institution Table 3 CQS 2 = 50%). Unrated = 50% (fixed, vs CRR institution sovereign-derived treatment which varies by the institution's home sovereign rating).
Code Divergence (D3.39)
The code applies Table 2B values (CQS 2 = 30%) under both frameworks. Under CRR, non-named
MDBs should use institution risk weight tables (Art. 120/121), giving CQS 2 = 50%. The
separate MDB_RISK_WEIGHTS_TABLE_2B in engine/sa/crr_risk_weight_tables.py (a pack-binding
shim that now reads its value from the rulepack pack) is the Basel 3.1 table misattributed to
CRR. See D1.40.
Art. 117(1) also names four MDBs that are not on the 0% list: Inter-American Investment Corporation, Black Sea Trade and Development Bank, Central American Bank for Economic Integration, and CAF — Development Bank of Latin America.
Calculation Examples¶
Named MDB (0% RW):
- £25m bond issued by IBRD (World Bank)
Non-named MDB (rated):
- £10m loan to a CQS 3 rated development bank not on the Art. 117(2) list
# entity_type = "mdb" → institution treatment (CRR) or Table 2B (B31)
# CQS 3 = 50% under both frameworks (identical at this CQS)
risk_weight = 0.50
rwa = 10_000_000 * 0.50 # = £5,000,000
Regional Governments and Local Authorities (RGLA)¶
Definition¶
RGLAs are sub-national government entities (CRR Art. 115):
- Devolved administrations (Scotland, Wales, Northern Ireland)
- County, district, unitary, and metropolitan councils
- City of London Corporation
- Combined authorities and mayors' offices
Treatment Methods (CRR Art. 115)¶
| Method | Condition | Table | Basis |
|---|---|---|---|
| Sovereign-derived | No own ECAI rating | Table 1A (Art. 115(1)(a)) | Sovereign CQS |
| Own-rating | Has own ECAI rating | Table 1B (Art. 115(1)(b)) | RGLA's own CQS |
Risk Weight Tables¶
Table 1A — Sovereign-Derived (Art. 115(1)(a))
Used when the RGLA has no own ECAI rating — look up the sovereign's CQS:
| Sovereign CQS | RGLA Risk Weight |
|---|---|
| 1 | 20% |
| 2 | 50% |
| 3 | 100% |
| 4 | 100% |
| 5 | 100% |
| 6 | 150% |
| Unrated | 100% |
Table 1B — Own-Rating (Art. 115(1)(b))
Used when the RGLA has its own ECAI rating:
| CQS | Risk Weight |
|---|---|
| 1 | 20% |
| 2 | 50% |
| 3 | 50% |
| 4 | 100% |
| 5 | 100% |
| 6 | 150% |
| Unrated | 100% |
Key difference: CQS 3
As with PSEs, CQS 3 receives 100% under sovereign-derived (Table 1A) but only 50% under own-rating (Table 1B).
UK-Specific PRA Designations¶
UK RGLAs benefit from PRA-specific treatments that override the CQS tables above:
| Entity Type | Risk Weight | Basis |
|---|---|---|
| UK devolved administrations (Scotland, Wales, NI) | 0% | PRA designation (sovereign-equivalent) |
| UK local authorities (GBP exposures) | 20% | PRA designation |
| Domestic-currency RGLA exposures | 20% | Art. 115(5) |
Practical effect for UK banks
Most UK RGLA exposures receive 0% (devolved administrations) or 20% (local authorities). The CQS-based Tables 1A/1B primarily apply to foreign RGLA exposures.
Basel 3.1 Changes¶
CRR vs Basel 3.1
RGLA risk weight tables are unchanged under Basel 3.1 — Tables 1A/1B, the domestic-currency 20%, and UK PRA designations all continue to apply. Key structural changes:
- Art. 147A(1): RGLAs receiving 0% SA risk weight (e.g., UK devolved administrations) are mandatorily SA — no IRB permission is available.
- All other RGLAs remain eligible for IRB (mapped to sovereign or institution
class depending on
entity_type).
Details: See SA Risk Weights — RGLA for the full specification. See Key Differences for the CRR vs Basel 3.1 comparison.
Calculation Examples¶
Example 1 — UK devolved administration:
# £100m exposure to Scottish Government
# PRA designation: sovereign-equivalent
Risk_Weight = 0%
RWA = £100,000,000 × 0% = £0
Example 2 — UK local authority:
# £25m loan to Manchester City Council (GBP)
# PRA designation: UK local authority → 20%
Risk_Weight = 20%
RWA = £25,000,000 × 20% = £5,000,000
Example 3 — Foreign RGLA (sovereign-derived):
# £15m bond issued by a German Länder (no own ECAI)
# Germany sovereign CQS = 1 → Table 1A row 1
Risk_Weight = 20%
RWA = £15,000,000 × 20% = £3,000,000
International Organisations¶
0% Risk Weight¶
| Organisation |
|---|
| European Union |
| International Monetary Fund (IMF) |
| Bank for International Settlements (BIS) |
| European Stability Mechanism (ESM) |
Calculation Example¶
Exposure: - £100m deposit with BIS
Covered Bonds¶
Definition¶
Debt securities secured by a dedicated pool of assets (cover pool): - Residential mortgages - Public sector exposures - Ship mortgages
Risk Weights¶
Covered bond risk weights range from 10% (CQS 1) to 100% (CQS 6) for rated bonds (Art. 129(4), Table 6A). Unrated covered bonds are derived from the issuing institution's senior unsecured RW via Art. 129(5), producing values from 10% to 100%. Eligibility requires the issuer to be a regulated credit institution with special public supervision, qualifying cover pool, and investor transparency requirements (Art. 129(7)).
Details: See Key Differences — Covered Bonds for the full CQS table.
Securitisation Positions¶
Definition¶
Exposures to tranched credit risk: - Asset-backed securities - Mortgage-backed securities - Collateralized loan obligations
Treatment¶
Securitisation has dedicated rules (outside scope of this calculator): - SEC-IRBA (IRB approach) - SEC-SA (Standardised approach) - SEC-ERBA (External ratings-based)
Items Associated with High Risk¶
Art. 128 Omitted from UK CRR — Active Under Basel 3.1 Only
Art. 128 was omitted from UK CRR by SI 2021/1078, reg. 6(3)(a), effective 1 January 2022. Under current UK CRR, there is no separate high-risk exposure class — these exposures are classified under their standard counterparty class (e.g., equity at 100% per Art. 133(2), or corporate at the applicable CQS weight).
Art. 128 is re-introduced under Basel 3.1 (PRA PS1/26, effective 1 January 2027), but with paragraph 2 left blank (the original EU CRR list of specific categories is not carried forward). Institutions must assess high risk per Art. 128(3): (a) high risk of loss from obligor default; (b) impossible to adequately assess whether (a) applies.
Under Basel 3.1 Art. 128(1), exposures assessed as particularly high risk receive a flat 150% risk weight.
Exposure Class Waterfall
Under Art. 112 Table A2, equity (priority 3) takes precedence over high-risk items (priority 4). Private equity, venture capital, and speculative unlisted equity are classified as equity under Art. 133 (250% standard / 400% higher risk), not as high-risk items. Art. 128 applies to non-equity exposures such as speculative immovable property financing.
Art. 128 High-Risk Items (Basel 3.1 only)¶
| Type | Risk Weight | Reference |
|---|---|---|
| Speculative immovable property financing | 150% | Art. 128(1) |
| Other PRA-designated high-risk items | 150% | Art. 128(1), (3) |
Other Items¶
Tangible Assets¶
| Item | Risk Weight |
|---|---|
| Property, plant & equipment | 100% |
| Other tangible assets | 100% |
Deferred Tax Assets¶
| Type | Treatment |
|---|---|
| DTAs from temporary differences | 250% RW or deduction |
| DTAs from tax loss carry-forward | Deduction |
Cash Items in Collection¶
| Item | Risk Weight |
|---|---|
| Cash in collection | 20% |
| Items in process | 100% |
Summary Table¶
| Exposure Class | SA RW Range | IRB Available |
|---|---|---|
| Equity (exchange) | 100–250% | No (Basel 3.1) |
| Equity (private/VC) | 100–400% | No (Basel 3.1) |
| Defaulted | 50-150% | Yes |
| PSE | 0–150% | Yes (SA-only if 0% RW under B31) |
| MDB (named, Art. 117(2)) | 0% | N/A |
| MDB (other, Art. 117(1)) | 20–150% | N/A |
| RGLA | 0–150% | Yes (SA-only if 0% RW under B31) |
| International Org | 0% | N/A |
| Covered Bonds | 10–100% | Varies |
| High Risk Items (B31 only) | 150% | No |
Regulatory References¶
| Topic | CRR Article | BCBS CRE |
|---|---|---|
| Equity | Art. 133 | CRE20.60-65 |
| Defaulted | Art. 127 | CRE20.80-85 |
| PSE | Art. 116 | CRE20.15-20 |
| MDB | Art. 117 | CRE20.12-14 |
| RGLA | Art. 115 | CRE20.8-10 |
| Covered bonds | Art. 129 | CRE20.27-30 |
| High risk | Art. 128 | CRE20.90 |