Exposure at Default (EAD) refers to the total risk exposure of on-balance-sheet and off-balance-sheet items when the debtor defaults, including used credit balance, unpaid interest receivable, estimated withdrawal amount of unused credit line and possible related expenses. According to the requirements of the New Basel Capital Accord, IRB adopts the same risk-weighted asset calculation method for the risk exposure of countries, banks and companies. This method relies on four aspects of data: one is the probability of default (PD), the other is the loss of default (LGD), the third is the risk exposure of default (M), and the fourth is the maturity date (M). Default risk is the amount of loan that may be withdrawn in case of default of loan commitment. As far as credit risk is concerned, the exposure to default risk (EAD) is closely related to the unpaid balance that the borrower should repay to the bank. Therefore, even if the recovery rate is assumed to be constant, if the change of credit balance is a random process, the recovery rate is the same as the distribution of credit balance. The total content risk exposure in exposure at default is measured by the amount owed by the borrower to the bank in the legal sense, and special preparation or partial write-off is not considered. This rule also applies to assets purchased from outside at a price different from that stipulated by law. If the risk exposure is greater than the net amount, the difference between the purchased asset exposure and the net amount recorded on the bank's balance sheet is regarded as impairment. If the risk exposure is less than the net amount, it is counted as value-added. (1) The measurement of on-balance-sheet risk exposure is the same as the standard method, and the conditions for net deduction of on-balance-sheet items for loans and deposits are the same. If there is currency or term mismatch in the net deduction in the table, the treatment method follows the standard method. (II) Measurement of risk exposure of off-balance-sheet items (except foreign exchange, interest rate, stocks and derivatives related to commodities) For off-balance-sheet items, the calculation method of risk exposure is to multiply the amount promised but not mentioned by the credit risk conversion coefficient. There are two methods to estimate the conversion coefficient of credit risk: primary method and advanced method. (3) The risk exposure types of default instruments and the applicable credit risk conversion coefficients in the main methods are the same as those in the standard methods, except for commitments, bill issuing instruments (NIF), revolving underwriting instruments (RUF) and short-term trade letters of credit. Regardless of the maturity date of these instruments, the credit risk conversion coefficient of commitments, bill issuance instruments and revolving credit instruments is 75%. This standard does not apply to instruments that are uncommitted, can be cancelled unconditionally or can be cancelled automatically by the bank at any time without prior notice due to the deterioration of the borrower's credit. Their credit risk conversion coefficient is 0%. The credit risk conversion coefficient is the lower value between the promised unused loan and another value (such as the upper limit of potential loan, which is related to the cash flow reported by the borrower). This value reflects the potential limitations of credit instruments. If there are such restrictions on credit instruments, banks must have sufficient quota monitoring and management procedures to support them. In order to use a 0% credit risk conversion factor for corporate overdrafts and other instruments that are unconditionally cancelled and cancelled immediately, banks must prove that they are actively monitoring the financial situation of borrowers and that their internal control system is sufficient to ensure that credit instruments provided by banks can be cancelled if the credit quality of borrowers deteriorates. For short-term self-payment trade letters of credit related to the transfer of goods (such as documentary letters of credit mortgaged by sea goods), the credit risk conversion factor of 20% is adopted for the issuing bank and the accepting bank. According to IRB level 1 method, the lower value of credit risk conversion coefficient is used for other off-balance sheet risk exposure commitment banks. (IV) Advanced Method exposure at default If the credit risk conversion coefficient 100% is not applicable to the primary method exposure at default, banks that can meet the minimum requirements for their own estimation of exposure at default can use the internally estimated credit risk conversion coefficient for different product categories. (5) The risk exposure of foreign exchange, interest rate, stocks, credit and commodity derivatives shall be measured in accordance with the provisions of IRB Law, and the risk exposure of such instruments shall be calculated in accordance with the rules for calculating credit equivalent, that is, according to the replacement cost plus the added value of potential risk exposure of different product categories and different maturities.