Own-conversion factor estimation for fully-drawn facilities

Are observed defaults of credit facilities that are fully-drawn at reference date in scope for estimation of own-conversion factors?

Article CRR 182 (1) (a) states that “ all observed defaults within the data sources ” are to be used in the estimation of own-conversion factors (hereafter CCFs). However, in the case of observed defaults of credit facilities that were fully-drawn at reference date, the realised CCF as defined in CRR 4(1)(56) cannot be calculated. This is because the denominator of the realised CCF, namely the “ currently undrawn amount of the commitment ”, is zero. Similarly during model application, the entire exposure of a fully-drawn credit facility is on-balance, and there is no  “c ommitted  but undrawn amount ” on which a CCF could be applied as per CRR 166(8).   At the same time, leaving defaults of fully-drawn credit facilities outside the scope of CCF model estimation could result in 'missed' additional drawings. This is because these facilities can still exhibit additional drawings in the lead-up to the default event. This can happen for a variety of reasons, for example due to the accrual of interest arrears and fees, or due to a limit increase between reference and default date.