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Assignment to grades or pools

Do the requirements in Article 171(2) CRR refer to the Estimation of Risk Parameters or to the Application of Risk Parameters?

Legal act: Regulation (EU) No 575/2013 (CRR)

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2021_5761 | Topic: Model validation | Date of submission: 03/03/2021 | Date of publication: 11/02/2022

Issues related to para (89) of the EBA/GL/2017/16 with regards to the calibration procedure of the PD models to be conducted “after taking into account any overrides applied in the assignment of obligors to grades or pools”

With regards to the interpretation of the requirement reported in paragraph (89) of the Guidelines on PD estimation, LGD estimation and the treatment of defaulted exposures (EBA/GL/2017/16), is it correct that if a ranking method or overrides policy has changed over time, the institutions cannot “conduct the calibration after taking into account any overrides applied in the assignment of obligors to grades or pools”, because the relevant data is not available (e.g. in case of a model change the rating produced by the new PD model cannot include the override process)? With regards to the interpretation of the requirement reported in par. 89 of the GLs, is it correct that if a ranking method or overrides policy has changed over time, the institutions should “analyse the effects of these changes on the frequency and scope of overrides and take them into account appropriately” in the annual review of estimates framework, once the relevant data becomes available, meaning that the new rating attribution process has been fully deployed and used by the analysts of the Supervised Entity?

Legal act: Regulation (EU) No 575/2013 (CRR)

COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2017/16 - Guidelines on PD estimation, LGD estimation and the treatment of defaulted exposures

ID: 2019_5029 | Topic: Credit risk | Date of submission: 21/10/2019 | Date of publication: 11/02/2022