In the latest update of the instructions for completing the COREP reports, a change has been introduced in report C.08.05 regarding the PD range. The instructions now request that the substitution effect due to the application of credit risk mitigation (CRM) techniques be considered, unlike previous versions in which such effects were not to be considered (Annex II):

“Exposures shall be allocated to an appropriate bucket of the fixed PD range based on the PD estimated at the beginning of the reporting period for each obligor assigned to this exposure class (without considering any substitution effects due to CRM). Institutions shall map exposure by exposure to the PD range provided in the template, also taking into account continuous scales. All defaulted exposures shall be included in the bucket representing PD of 100%.” 

However, in the Pillar III instructions, no changes have been introduced (Annex XXII), and the criterion remains to report the PD range corresponding to clients before applying substitution:

“Exposures shall be allocated to an appropriate bucket of the fixed PD range based on the PD estimated at the beginning of the disclosure period for each obligor assigned to this exposure class (without considering any substitution effects due to CRM). All defaulted exposures shall be included in the bucket representing PD of 100%.”

Since, according to the EBA’s mapping tool, table CR-9 derives its values from COREP C08.05, we understand that the PD range allocation criterion should be the same for both reports.