EBA · 2021_6062 Rejected question

Calculation of exposure-weighted average PD (column 0050 in C08.03)

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
Annex 2, Solvency
Topic
Supervisory reporting - COREP (incl. IP Losses)
Submitted by
Competent authority
Submitted
2021-06-29

Question

It is not clear from the instructions how the exposure-weighted average PD in template C08.03 (Breakdown by PD ranges) should be calculated.

Background

According to Annex II to Regulation (EU) 451/2021 (ITS on Reporting), exposures shall be allocated to an appropriate bucket of the fixed PD range of the rows specified in the template, based on the PD estimated for each obligor assigned to this exposure class (without considering any substitution effects due to CRM). Then, in column 0050 institutions shall provide, for all exposures included in each bucket of the fixed PD range, the average PD estimate of each obligor, weighted by the exposure value post conversion factors and CRM as reported in column 0040. In the following example, which would be the correct PD to be reported in column 0050?: The institution has only one exposure of 1000 EUR to a corporate client, to which it has assigned a 20% PD. Half of this exposure (500 EUR) is guaranteed by a central government, to which the institution has assigned a 0% PD. What is the correct PD to be reported in column 0050?
No answer published yet.

Original source: European Banking Authority, Q&A ID 2021_6062

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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