EBA E-mail alert February 23, 2024

Given the definition of PD calibration provided in EBA/GL/2017/16 section 2.4 paragraph 8, and the requirements for the calibration sample provided in section 5.3.5, paragraph 88 of the same guidelines, for developing a TTC model, clarification is needed on the expectation on the implementation of the back-testing performed in the validation phase.:

1. Shall the back-testing at portfolio level verify that the average PD over historical observation period is aligned with LRA DR or, instead, shall the comparison be made between PD estimates current at the validation date and the LRA DR? Does it change according to the rating philosophy? Shall the back-testing always be performed on a 1-year validation sample, regardless the type of TTC calibration philosophy and regardless the length of the calibration sample?
2. How shall the rating philosophy be taken into consideration when assessing the outcome of back-testing at grade level?
3. Provided that the main aim of the calibration is to reflect the LRA DR, is the any case where the alignment to 1-year default rate should get a higher weight in validation assessment, although in a TTC calibration philosophy?

1. In CA1 (own funds), should treasury shares (holdings of own shares that were bought back with the prior permission from the CA) be reported in as ‘(-) Direct holdings of CET1 instruments’ (row 80) or should they be reported as part of the ‘Accumulated other comprehensive income’ (row 180) or ‘Other reserves’ (row 200) if they are already included in one of these accounts according to the accounting rules?
2. In case treasury shares are to be reported as a deduction in row 80 in CA1 (hence this deduction is reversed in the NSFR own funds - see Q&A 2021_6016), should treasury shares require any stable funding?

1) How should be presented "Loans and receivables" or "Deposits" which are granted earlier than Reporting date, but which will be matured/repaid on the day following Reporting date?

2) Should “calendar" or “business" day be used  for Overnight deposits?

In case of off-balance sheet exposures from factoring contracts (with or without recourse), who should be considered as the immediate counterparty when reporting these exposures in F 09.01.01?

Should these off-balance sheet exposures be reported as loan commitments given or other commitments given?