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Single-Name Grouping Simplification

Counterparty Risk

Calculate the Group-Assigned Probability of Default instantly.

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Group-Assigned Probability of Default

0.8%

1Step 1

Group-Assigned Probability of Default

Group-Assigned Probability of Default=max⁡(Single-Name Exposure 1 Probability of Default,Single-Name Exposure 2 Probability of Default,Single-Name Exposure 3 Probability of Default,Single-Name Exposure 4 Probability of Default,Single-Name Exposure 5 Probability of Default)\textit{Group-Assigned Probability of Default} = \max(\textit{Single-Name Exposure 1 Probability of Default}, \textit{Single-Name Exposure 2 Probability of Default}, \textit{Single-Name Exposure 3 Probability of Default}, \textit{Single-Name Exposure 4 Probability of Default}, \textit{Single-Name Exposure 5 Probability of Default})
2Step 2

Grouped PD x LGD

Grouped PD x LGD=Grouped Loss-Given-Default×Group-Assigned Probability of Default\textit{Grouped PD x LGD} = \textit{Grouped Loss-Given-Default} \times \textit{Group-Assigned Probability of Default}

Understand the Single-Name Grouping Simplification

Overview

This calculator implements the simplified capital requirement for Single Name Grouping within the Solvency II standard formula.[1] This simplified approach is intended for undertakings where the standard-formula calculation is disproportionately complex relative to the risk. The requirement is defined as the economic capital necessary to provide a 1-in-200 year level of protection using proxy variables for loss-given-default (LGD) across grouped counterparties.[2]

Input Terms

  • Group Exposure (E_group): The total value of assets exposed to a single group of related counterparties.[1]
  • Weighted Average CQS: The credit quality step proxy used for the entire group concentration.

Technical Rationale

The Counterparty Single Name Grouping Simplification is calibrated to a 99.5% confidence level over a one-year horizon. It captures the sensitivity of the undertaking’s basic own funds to a default within a cluster of related counterparties (e.g., a banking group and its subsidiaries). Unlike a full article-by-article revaluation, which may require a granular mapping of individual legal entities and intra-group guarantees, this simplification uses a single name-group proxy where the requirement is a function of the total group exposure.[1]

This method is governed by the principle of proportionality (Article 109), ensuring that smaller undertakings can calculate their solvency capital requirements without the operational burden of a full-scale grouping engine. The result represents the simplified grouping contribution to the total Counterparty Default Risk.

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 feeding the S.25.01 standard-formula reporting view, not to replace the connected article-chain result where the simplification is not justified.[4]

Sources

  1. Delegated Regulation (EU) 2015/35 - Art. 112 (Counterparty default type 1 simplification conditions) - EUR-Lex
  2. Directive 2009/138/EC - Art. 101 (99.5% VaR / 1-in-200 calibration) - EIOPA
  3. Directive 2009/138/EC - Art. 37 (Capital add-on) - EIOPA
  4. Commission Implementing Regulation (EU) 2015/2450 - QRT S.25.01 - 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.