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Response to consultation on Guidelines for the estimation of LGD appropriate for an economic downturn
Go backQuestion 1: Do you think that additional guidance around the estimation of LGD in-default, which reflect downturn conditions, is needed? If yes, could you provide examples of sound methodologies for transposing downturn LGD estimates from performing to non-performing exposures?
Please see response from the ESBG and the Swedish Bankers' AssociationQuestion 2: Do you share the concern that the proposed policy in paragraph 15 could create an undue burden if applied to every downturn period identified? If yes, in order to better balance the accuracy of the estimations and its operational complexity what evidence should be provided by institutions in order to justify the exemption of identified downturn periods from the proposed policy in paragraph 15?
Please see response from the ESBG and the Swedish Bankers' AssociationQuestion 3: Do you agree with the proposed level of downturn LGD estimation set out in paragraph 14? In particular, do you support the concept that the downturn LGD estimates of different calibration segments could be based on different downturn periods? Is the policy on the level of downturn LGD estimation as well as the relation between the level of downturn LGD estimation and the relevant downturn periods sufficiently clear?
Please see response from the ESBG and the Swedish Bankers' AssociationQuestion 4: Do you consider the description of the approaches to be sufficiently clear?
Please see response from the ESBG and the Swedish Bankers' AssociationQuestion 5: Do you agree to the limitation of approaches for quantification of downturn LGD estimates? If not, which other approaches should be considered? Would you prefer the alternative policy considered – if yes how should a minimum MoC be established in this case?
Please see response from the ESBG and the Swedish Bankers' AssociationQuestion 6: Do you expect that the total exposure amount or share which is treated with the policy proposed in Section 7 is material?
Please see response from the ESBG and the Swedish Bankers' AssociationQuestion 7: Do you have specific examples of types of exposures which will fall under the policy proposed in Section 7?
Please see response from the ESBG and the Swedish Bankers' AssociationQuestion 8: Do you agree to require a minimum MoC quantified via a fixed add-on to the long-run average LGD? If not, which of the alternatives should be considered? Do you see reasons for differentiating the fixed add-on according to exposure classes?
Please see response from the ESBG and the Swedish Bankers' AssociationQuestion 9: Do you agree to the minimum MoC as the max(0,min(20%, 105% - LRAVLGD)?
Please see response from the ESBG and the Swedish Bankers' AssociationQuestion 10: Is the policy regarding the reference value sufficiently clear? Alongside with the potentially limited applicability of the reference value to the downturn LGD estimation according to paragraphs 18-19, for what reasons could the reference value feasibly be omitted? Do you agree to the proposed clarification of the role of the reference value?
Please see response from the ESBG and the Swedish Bankers' AssociationName of organisation
Swedbank
