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

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IFRS Q1: Do you see any issues or lack of clarity in the definition of the scope of the exercise?

No issue.

IFRS Q2: Do you agree with the proposed list of benchmarking portfolios relevant for IFRS9? Do you believe that other dimensions should be used in the level 2 split? Do you have concerns on the alignment with the IRB benchmarking portfolios?

No concerns.

IFRS Q3: Do you agree with the proportionate approach taken for the geographical area envisaged by the exercise? How should the materiality thresholds be defined?

Threshold should not focus on exposure only, but on allocated provisions as well.

IFRS Q4: For the sake of allowing meaningful benchmarking observations, do you see any issue in not considering any combination of split at this stage? Or do you see merits in combining some dimension? If yes, which combination of split should be considered?

We believe that the current proposal of the split should be implemented. If there are any requirements to split/merge, this can be implemented later.

IFRS Q5: Do you see any issues or lack of clarity in the definition of the data points of template 115.00? Is the definition of IFRS 9 PD TTC/unconditional sufficiently clear?

0100 PD - 12 months IFRS 9, in the description, there is written that ‘This shall be the PD used to compute the 12-month expected credit loss (ECL amount – 12 months IFRS 9) and associated with the economic scenario 0 in template C.116.00.’ Does it mean that the General Instructions, point 7 (Annex 8) shall be applied as well for the PDs reported in C.115.00? It means as it is for the purpose of template C.116.00, where the facility expires before the year considered for a specific data point, the facility’s PD shall not be included in the exposure weighted average PD.

IFRS 9 PD TTC/unconditional is defined sufficiently.

IFRS Q6: Do you see any issues or lack of clarity in the definition of the data points of template 116.00 and 118.00?

Table C.116.00 contains the request to provide ECL amounts for stage 1, stage 2 and stage 3. Moreover, in Annex 8, there is written that ‘The ECL amount associated with the economic scenario 0 shall be the weighted average of the ECL reported for the economic scenario 1 to 5, …’. Considering that SICR assessment is done based on weighted average PDs, we expect material differences between booked ECL amount (SICR assessment based on probability weighted PD) and amount calculated as the weighted average of the ECL reported for the economic scenario 1 to 5 (SICR assessment based on scenario PD).

IFRS Q7: Do you agree to the envisaged approach to collect the whole set of information only to limited subset of portfolios (L2 geographical split and aggregated asset classes)? Do you see any issue in reporting the PD curves?

We do not see any issue in PD curves reporting.

IFRS Q8: Do you see any issues or lack of clarity in the definition of the data points of template 117.00? Would you see merits in collecting information on more granular quantitative triggers and relevant thresholds used for SICR assessment? If yes, in which ways?

In the description of the columns 0120 and 0130 letter a), we would propose to replace column 0050 and column 0051 by column 0053. We suppose that the nominator should contain the exposure value of stage 3 facilities as of reporting date (only those which were in stage 1 or 2 at the beginning of the period).

Regarding the column 0140, is it expected that it is the sum of exposures considered in columns 0120 and 0130?

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WSBI-ESBG