Sliding scale method

Following paragraphs 42, 45 and 47 of EBA/GL/2015/10 (Guidelines on methods for calculating contributions to deposit guarantee schemes) the consequence of using a linear sliding scale formula to translate ARS (aggregate risk score) results into ARW (aggregate risk weights) is that it is unlikely that institutions will be spread out across the full spectrum of the ARW chosen by the authorities. In line with paragraph 42, the authorities should decide whether the sliding scale is, therefore, the appropriate method for the relevant banking sector reflecting the differences in risk incurred by different institutions, as per paragraph 45 of EBA/GL/2015/10. Taken together with paragraph 19 of Annex 1 of EBA/GL/2015/10, the Guidelines allow the use of a different formula to translate the ARSs into the ARWs, with regard to the general requirement in paragraphs 42, 45 and 47 of the Guidelines. It is not the intention that the 'sliding scale' method in practice should use just half of the defined scale, in particular in the case described in the background to this question. EBA/GL/2015/10 paragraph 20 of Annex 1 sets out a linear formula that can be used to translate ARS into the ARW. It may be possible to adjust this formula in order to use more of the defined scale. Such an adjustment is at the discretion of the national competent authority, provided that it remains compliant with the general sense of the prescribed formula. The last sentence of EBA/GL/2015/10 paragraph 47 which states that " this does not imply that in each year the DGS should necessarily use the full interval and assign institutions to the ARW corresponding to the lowest and the highest points of the interval ", should also be taken into account.