Response to consultation paper on ITS on amending Commission Implementing Regulation on benchmarking of internal models

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Question 1: For the purpose of reporting the above-mentioned fields, would you make use of the possibility to report the default and loss rate in template C 103 of Annex III with respect to a consistent but back-simulated definition of default or would you report these fields with respect to the definition of default that was in production at the time of the event? Please shortly explain the underlying reasons and your motivation.

The Belgian banking sector would not be inclined to report the default and loss rate in C103 with a backwards simulated definition of default because of the significant additional workload. The new definition of default has been backwards simulated on the available data history in the context of redesign of IRB models. However, it would be quite burdensome to derive default and loss rates based on a backwards simulated definition of default for each of the benchmarking portfolios in C103, as these C103 benchmarking portfolios are very detailed and do not match with the model boundaries. Moreover, we believe the added value of such a voluntary reporting would be very limited as the extent to which the default definition can be simulated backwards can differ from bank to bank or even from model to model.

a) Please comment on the expected operational burden if a reporting of realised losses/realised LGDs with respect to closed cases would be required (e.g., either by benchmarking portfolio as specified in c103 of Annex 1 or by LGD model as specified in C105 of Annex III).

The Belgian banking sector is not in favour of reporting realized losses/LGDs as this is not readily available in the reporting systems of the banks. Retrieving such data from the historical databases will be very burdensome, especially if these realized losses/LGDs then need to be reported by C103 benchmarking portfolio.

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Name of the organization

Belgian Financial Sector Federation (Febelfin)