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Risk

Loss Given Default (LGD)

The share of an exposure a lender expects to lose if a borrower defaults, after any recoveries.

Loss Given Default measures how much is actually lost when a default happens, as a percentage of the exposure. If collateral or recoveries cover part of the debt, the LGD is lower.

It combines with the probability of default and the exposure at default to estimate expected loss, so it drives both capital and provisions.

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