Helpful A-Z glossary listing key Lloyds Banking Group terms and their definition

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Embedded equity conversion feature

An embedded equity conversion feature is a derivative contained within the terms and conditions of a debt instrument that enables or requires the instrument to be converted into equity under a particular set of circumstances. The Group’s Enhanced Capital Notes (ECN s) contain such a feature whereby these notes convert to ordinary shares in the event that the consolidated core tier 1 ratio of the Group falls below 5 per cent.

Enhanced Capital Notes (ECNs)

The Group’s ECNs are subordinated notes issued by the Group that contain an embedded equity conversion feature.

Expected loss

This is the amount of loss that can be expected by the Group calculated in accordance with PRA rules.  In broad terms it is calculated by multiplying the Default Frequency by the Loss Given Default by the Exposure at Default.

Exposure at Default

An estimate of the amount expected to be owed by a customer at the time of the customer’s default.

Encumbered assets

Assets recognised on the Group's balance sheet which have been pledged as collateral against an existing liability, and as a result are assets which are unavailable to the Group to secure funding, satisfy collateral needs or be sold to reduce potential future funding requirements.