Calculation of PD and PD

A case-weighted approach shall be used as defined in the instructions on columns 230 and 240 of template C 103.00 of Annex III of the Draft ITS on Supervisory Reporting for Institutions for benchmarking the internal approaches (ITS on benchmarking).   The calculation of PD* and PD** shall be performed at rating grade level. These values shall then be used for the calculation of RWA* and RWA** which are required at portfolio level. See also Q&A 2016_2782 .   According to Q&A 2015_2297 , the default rate as reported in c190 of Template C 103.00 of Annex IV of the ITS on benchmarking shall be calculates as the observed new defaults for the last year divided by the amount of the non-defaulted assets existing exactly one year before the reference date. For the calculation of the default rate at rating grade level, the rating assigned exactly one year before the reference date is relevant, i.e. a change of rating after that date is disregarded. Equally, only the obligors / exposures being part of the portfolio as of one year before the reference date shall be considered, not obligors / exposures included afterwards.   According to the instruction on the calculation of RWA** (column 240 of template C 103.00 of the ITS on benchmarking), for the purposes of the calculation of PD**, “n” shall be the number of non-defaulted debtors at the beginning of the period.   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.