The application of value adjustments to either the secured or the unsecured component of an exposure secured on residential property may be illustrated on the basis of a £110,000 loan on a property valued at £100,000, where £80,000 of the loan is secured, £30,000 of the exposure is unsecured and a value adjustment of £20,000 is taken.
Value adjustment applied to unsecured component:
Value adjustment of £20,000 taken on £30,000 unsecured exposure.
Value adjustment applied to secured component:
Value adjustment of £20,000 taken on £80,000 secured exposure.
Value adjustment applied to unsecured component (MIPRU 4.2F.51 R)
Value adjustment to secured component (MIPRU 4.2F.55 R)
Unsecured component of £30,000
£30,000 risk weighted at 150%
£10,000 risk weighted at 100%
£80,000 risk weighted at 100%
Secured component of £80,000
£60,000 risk weighted at 50%