1.Where the standard deviation of the loss distribution of type 1 exposures is lower than or equal to 7 % of the total losses-given-default on all type 1 exposures, the capital requirement for counterparty default risk on type 1 exposures shall be equal to the following:
\mathrm{SCR}_{\mathrm{def},1} = 3 \cdot \sigma
where σ denotes the standard deviation of the loss distribution of type 1 exposures, as defined in paragraph 4.
2.Where the standard deviation of the loss distribution of type 1 exposures is higher than 7 % of the total losses-given-default on all type 1 exposures and lower or equal to 20 % of the total losses-given-default on all type 1 exposures, the capital requirement for counterparty default risk on type 1 exposures shall be equal to the following:
\mathrm{SCR}_{\mathrm{def},1} = 5 \cdot \sigma
where σ denotes the standard deviation of the loss distribution of type 1 exposures.
3.Where the standard deviation of the loss distribution of type 1 exposures is higher than 20 % of the total losses-given-default on all type 1 exposures, the capital requirement for counterparty default risk on type 1 exposures shall be equal to the total losses-given-default on all type 1 exposures.
4.The standard deviation of the loss distribution of type 1 exposures shall be equal to the following:
\sigma = \sqrt{V}
where V denotes the variance of the loss distribution of type 1 exposures.