What should we do if the value of RWA-- gets negative? Should we do nothing or should the value change to example 0?
When calculation the RWA with a confidence interval, some of the calculated value of RWA-- may be negative. p-- is the smallest negative value which affect the value of RWA--.
According to template C 103 of Annex IV to Regulation (EU) 2016/2070 (ITS on Supervisory Benchmarking) – Details on exposures in High Default Portfolio, column 270, “for each obligor grade, p−− shall be the smallest positive value satisfying the equation”.
In this sense, p-- should not be negative and, consequently, the RWA-- should also not be negative.
Update 26.03.2021: This Q&A has been archived in the light of the most recent amendments to the ITS 2016/2070 on Supervisory Benchmarking.