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The European Banking Authority (EBA) today published four principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using internal ratings based (IRB) models. These principles will be part of a supervisory handbook, which the EBA will publish later in 2022 with the objective to ensure a harmonised approach in the use of COVID-19 data, especially where the use of moratoria and other public measures may have led to changes in default rates.

The European Banking Authority (EBA) published today a discussion paper on machine learning used in the context of internal ratings-based (IRB) models to calculate regulatory capital for credit risk. The aim of the discussion paper is to set supervisory expectations on how new sophisticated machine learning models can coexist with and adhere to the Capital Requirements Regulation (CRR) when used in the context of IRB models. The discussion paper seeks stakeholders’ feedback on many practical aspects related to the use of machine learning in the context of IRB with the aim of providing clarity on supervisory expectations on their use. The consultation runs until 11 February 2022.

The European Banking Authority (EBA) published today an Opinion on the treatment of credit insurance in the prudential framework, in response to the extensive feedback received in its public consultations on draft Guidelines on credit risk mitigation for institutions applying the Internal Ratings-Based Approach (IRB Approach) with own estimates of Loss Given Default (LGD). In this Opinion the EBA calls for the implementation of the final Basel III framework as agreed by the Basel Committee on Banking Supervision.

The European Banking Authority (EBA) launched today a consultation on its Guidelines on Credit Risk Mitigation in the context of the advanced internal rating-based (A-IRB) approach, aim to eliminate the remaining significant differences in approaches in the area of credit risk mitigation (CRM), which are either due to different supervisory practices or bank-specific choices. These draft Guidelines complement the EBA Report on CRM, which focused on the standardised approach (SA) and the foundation-IRB approach (F-IRB). The consultation runs until 25 May 2019.

The European Banking Authority (EBA) launched today two consultations on draft regulatory technical standards (RTS) specifying an economic downturn and on a set of Guidelines related to the estimation of loss given default (LGD) appropriate for conditions of an economic downturn. The draft RTS specify the nature, severity and duration of an economic downturn, while the Guidelines focus on the appropriate estimation of the LGD in a situation of economic downturn. This package is part of the EBA’s broader work on the review of the IRB approach aiming at reducing the unjustified variability in the outcomes of internal models, while preserving the risk sensitivity of capital requirements. The consultations run until 22 June 2018.