Equity Exposures¶

Equity exposures receive dedicated risk weight treatment separate from credit risk. Under CRR, the calculator supports SA (Article 133) and IRB Simple (Article 155). Under Basel 3.1, only SA applies.

Overview¶

Equity exposures are routed directly from classification to the equity calculator, bypassing CRM processing (collateral is not applied to equity holdings).

flowchart LR
    A[Classified Exposures] --> B{Exposure Class}
    B -->|Equity| C[Equity Calculator]
    B -->|Other| D[CRM Processor]
    C --> E[Aggregator]
    D --> E

Article 133 - Standardised Approach (SA)¶

The default approach for firms without IRB approval. Risk weights are based on equity type:

Equity Type	Risk Weight	Description
Central bank	0%	Central bank equity holdings
Listed / Exchange-traded	100%	Publicly traded on recognised exchanges
Government-supported	100%	Government-backed equity investments
Unlisted / Private equity	250%	Non-publicly traded equities
Speculative	400%	Venture capital, high-risk investments

Calculation:

RWA = EAD x Risk Weight

Article 155 - IRB Simple Risk Weight Method¶

For firms with IRB permission, a different risk weight schedule applies:

Equity Type	Risk Weight	Description
Central bank	0%	Central bank equity holdings
Private equity (diversified)	190%	Diversified portfolio treatment
Government-supported	190%	Government-backed equity investments
Exchange-traded / Listed	290%	Publicly traded equities
Unlisted / Private equity	370%	Non-publicly traded equities
Speculative / CIU	370%	Venture capital, collective investments
Other equity	370%	All other equity holdings

Diversified Portfolio Treatment¶

Private equity holdings in a diversified portfolio receive a reduced risk weight of 190% (vs 370% for non-diversified). This is flagged via the is_diversified_portfolio attribute.

CRR Only

The IRB Simple Risk Weight Method (Article 155) applies only under CRR. Under Basel 3.1, all equity exposures use Article 133 SA treatment.

Approach Determination¶

The equity approach depends on the regulatory framework and IRB permissions:

Framework	IRB Permission	Equity Approach
CRR	SA only	Article 133 (SA)
CRR	IRB permitted	Article 155 (IRB Simple)
Basel 3.1	Any	Article 133 (SA) — IRB equity removed

Example¶

Equity holding: Listed shares, £2m

SA Treatment (Article 133):

RWA = £2,000,000 x 100% = £2,000,000

IRB Simple Treatment (Article 155):

RWA = £2,000,000 x 290% = £5,800,000

Regulatory References¶

Topic	Reference
SA equity treatment	CRR Art. 133
IRB simple risk weight	CRR Art. 155
Strategic equity treatment	EBA Q&A 2023_6716