(3)A distinction should be made between transactions where all investors rank pari passu such as collective investment undertakings, and other transactions, such as securitisations, which can involve tranching where exposures can rank differently in seniority. For the former, the resulting exposure to an underlying asset is solely dependent on the pro-rata ratio of the investor’s exposure in relation to the exposures of all investors. For the latter, losses are attributed first to certain tranches depending on their seniority and then, in case of more than one investor into the same tranche, amongst the investors on a pro rata basis. All tranches in a securitisation should be treated equally as, in a worst case scenario, subordinated tranches may disappear very quickly. In particular, the maximum loss to be suffered by all investors in a certain tranche in case of a total loss on an underlying asset should be recognised since no mitigation should be recognised from subordinated tranches. The institution’s exposure to an underlying asset of a transaction should not exceed the total exposure value of this tranche (since the loss for an investor in a given tranche that stems from the default of an underlying asset can never be higher than the total exposure value of the tranche) and the exposure value of the exposure formed by the underlying asset (since the institution can never lose more than the amount of the underlying asset). This limitation of maximum loss should be reflected by using the lower of the two exposure values and then applying the procedure for recognising the pro-rata distribution of losses amongst all exposures that rank pari passu in this tranche, in case of more than one investor in this tranche.