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Collateral Value Simplification

Calculate the Risk-Adjusted Collateral Value instantly.

€

Risk-Adjusted Collateral Value

€11 900 000

1Step 1

Counterparty and Third-Party Case Value

Counterparty and Third-Party Case Value=Collateral Value×0.85\textit{Counterparty and Third-Party Case Value} = \textit{Collateral Value} \times 0.85
2Step 2

Third-Party Requirement Not Met Case Value

Third-Party Requirement Not Met Case Value=Collateral Value×0.75\textit{Third-Party Requirement Not Met Case Value} = \textit{Collateral Value} \times 0.75
3Step 3

Selected Recognition Factor

Selected Recognition Factor={0.85if Recognition Case=10.75if Recognition Case=2\textit{Selected Recognition Factor} = \begin{cases} 0.85 & \text{if } \textit{Recognition Case} = 1 \\ 0.75 & \text{if } \textit{Recognition Case} = 2 \end{cases}
4Step 4

Risk-Adjusted Collateral Value

Risk-Adjusted Collateral Value=Collateral Value×Selected Recognition Factor\textit{Risk-Adjusted Collateral Value} = \textit{Collateral Value} \times \textit{Selected Recognition Factor}

Understand the Collateral Value Simplification

Overview

This calculator implements the simplified risk-adjusted collateral value used in the Solvency II counterparty risk module.[1] The selected recognition case determines whether the collateral value is multiplied by the higher recognition percentage or the lower recognition percentage required when the third-party requirement is not met.

Input Terms

  • Collateral Value (C): The current market value of the assets held as collateral against counterparty exposure.[1]
  • Recognition Case: The documented Article 112 condition set that selects either the counterparty-and-third-party case or the case where the third-party requirement is not met.[1]

Technical Rationale

The Counterparty Collateral Simplification captures the collateral value recognised for Article 197 loss-given-default purposes when the Article 112 simplification is available. The recognition percentage depends on whether the third-party requirement is met, so the economic boundary is the documented Article 112 condition set rather than a discretionary choice of the higher collateral value.[1]

Article 109 proportionality is the reason this simplification exists: it preserves a conservative collateral-recognition proxy while reducing the evidence and modelling burden of a full collateral valuation where that burden would be disproportionate.[2] The output remains a simplified collateralized contribution to Counterparty Default Risk and should not replace the full calculation where the simplification conditions are not met.

Important Notes

  • Regulatory deviation: Material deviation from the standard-formula assumptions or from the conditions supporting this simplification may support a capital add-on or a move toward a fuller or internal-model approach where justified.[3]
  • Reporting: The simplified result is intended to support the corresponding standard-formula component for the S.25.01.01 standard-formula reporting view, not to replace the full article-based result where the simplification is not justified.[4]

Sources

  1. Delegated Regulation (EU) 2015/35 - Art. 112 (Simplified calculation of the risk adjusted value of collateral to take into account the economic effect of the collateral) - EIOPA
  2. Delegated Regulation (EU) 2015/35 - Art. 109 (Simplified calculations for pooling arrangements) - EIOPA
  3. Directive 2009/138/EC - Art. 37 (Capital add-on) - EIOPA
  4. Commission Implementing Regulation (EU) 2023/894 - QRT S.25.01.01 (SCR standard formula) - EUR-Lex

Default values are illustrative sample inputs for navigation, training, and QA. Replace them with controlled data before using the result in capital analysis, governance, or reporting decisions.