Question ID
2017_3150
Legal act
Directive 2013/36/EU (CRD)
Topic
Supervisory reporting - Supervisory Benchmarking
Article
78
Paragraph
2
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Draft ITS on reporting and disclosure requirements for investment firms
Article/Paragraph
Annex IV
Type of submitter
Credit institution
Subject matter
Annex IV, template C 105.01, c060, interpretation of term "case weighted" in column 060 (Case Weighted average default rate for calibration)
Question

We are seeking for a clarification regarding the term "case weighted" in column 060 - Case Weighted average default rate for calibration. Is the requirement to weight default rates by default occurrences in each year (1st interpretation) or to weight default rates by non-default obligor observations at the start of each year?

Background on the question

Template C 105.01 collects information on the models used for obligor PD and LGD calculation. PD calibration is usually based on the average of annual default rates across years with relevant and representative data.

Submission date
Final answer

In the calculation of the case-weighted average default rate for calibration as reported in c060 of template C 105.01 of Annex III of Regulation (EU) 2016/2070 (ITS on Supervisory Benchmarking), the weight to be used is the number of years used in the calibration; each year being weighted as one. As such, this case-weighted average default rate for calibration corresponds to the observed average default rate as referred to in the Guidelines on

PD estimation, LGD estimation and the treatment of defaulted exposures, and calculated as specified in paragraph 81 of those Guidelines.

 

Disclaimer:

The present Q&A on Supervisory reporting is provisional. It will be reviewed after the Implementing Regulation is in force and published in the Official Journal. The text of the Implementing Regulation may differ from the text of the draft ITS to which this Q&A refers.

Status
Archive
Answer prepared by
Answer prepared by the EBA.
Note to Q&A

Update 26.03.2021: This Q&A has been archived in the light of the most recent amendments to the ITS 2016/2070 on Supervisory Benchmarking.