Definition of exposures arising from mortgage lending

According to Article 402 (1) CRR, institutions may for the calculation of exposure values for the purposes of Article 395, except where prohibited by applicable national law, reduce the value of an exposure or any part of an exposure that is fully secured by residential property in accordance with Article 125(1) by the pledged amount of the market value or mortgage lending value of the property concerned, but by not more than 50 % of the market value or 60 % of the mortgage lending value in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions, provided that all conditions in Article 402(1) (a)-(c) are met.   If the market value is applied, the maximum amount which can be deducted from the exposure or any part of the exposure that is fully secured by residential property in accordance with Article 125(1) CRR is the pledged amount of the market value or 50 % of the market value, whichever amount is smaller. Therefore, the minimum between the pledged amount of the market value and half of market value has to be calculated. The resulting amount may be deducted from the exposure or any part of the exposure that is fully secured by residential property in accordance with Article 125(1) CRR.  This corresponds to the calculation referred to as “case 1” by the submitter.  Analogously, if the mortgage lending value is applied, the maximum amount which can be deducted from the exposure or any part of the exposure that is fully secured by residential property in accordance with Article 125(1) CRR is the pledged amount of the mortgage lending value or 60 % of the mortgage lending value, whichever amount is smaller. Therefore, the minimum between the pledged amount of the mortgage lending value and 60 % of the mortgage lending value has to be calculated. The resulting amount may be deducted from the exposure or any part of the exposure that is fully secured by residential property in accordance with Article 125(1) CRR.