EBA · 2018_4293 Archive

Definition of numerator for loss rate

Regulation
Directive 2013/36/EU (CRD)
Article
78, para. 2
Topic
Supervisory reporting - Supervisory Benchmarking
Submitted by
Competent authority
Submitted
2018-09-25
Answer provided by
ESAs (EBA, ESMA, EIOPA)
Browse ECB SSM Register → More Q&As on this regulation →

Question

How should the numerator of the loss rate be computed when some credit adjustments are applied to the exposure before the default date.

Background

Ensure that there is no other interpretation.

Answer

In order to ensure a meaningful benchmarking analysis where the loss rate is compared with the LGD, it is necessary that the numerator of the loss rate incorporates all the credit risk adjustments and write-offs related to the exposures that defaulted within the year preceding the reference, including the credit risk adjustments applied before the default date.

Original source: European Banking Authority, Q&A ID 2018_4293

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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