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European Federation of Building Societies

Concerning the nature of an economic downturn (Article 2), fulfilling the requirement to take external historical time series of aggregate default rates and credit losses into account as well is virtually impossible in many cases. External default or loss time series which are sufficiently representative and cover a sufficiently long timescale are often non-existent. In particular, external time series for retail or other specialised portfolios are often not representative.
Concerning the severity of an economic downturn (Article 3), the requirement to analyse periods of at least 20 years will lead to institutions in a large number of cases having to have recourse to estimation procedures and being unable to use any, or not exclusively internally observed, time series. From experience, this is likely to negatively impact the quality of the results.
Kathrin Holler