Question
If bank applies AIRB models to RWA calculation (according with the decision of the competent authority) for a period shorter than 5 years, what time series should be used for calculation of 5-year average values when calculating default rates and loss rates ?
Background on the question
example: Bank has obtained approval for using AIRB method to RWA calculation 4 years ago and its subsidiary - 2 years ago, so full 5-year history of data for the period when AIRB method was used in the group to RWA calculation is not available.
Answer
For the reporting of column 200, 220 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), at least the longest time series aligned with COREP should be used for calculating "Default rate past 5 years" and "Loss rate past 5 years", irrespective of the starting year of application of the IRB model, if the IRB model has been approved in the last 5 years. This applies to all IRB banks. In the case that the COREP time series does not cover 5 years, the bank should highlight the affected clusters by listing the related portfolio IDs in an extra file together with the length of time series used. This file should be provided to the CA together with the final benchmarking data according to the instructions in Annex IV for C 103.00 c200 and c220. 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, which may differ from the text of the draft ITS to which this Q&A relates.