Question
Regarding the treatment of continuous ratings, the former description of RWA*/** stated: "An institution using continuous PD shall first determine the PD* for the average PD of each obligor grade and subsequently apply by obligor grade the same relative deviation between PD and PD* at counterpart level as for the average PD and PD* at obligor grade level." This paragraph has been deleted for RWA-/--/+/++. Shall the rating grade used for reporting requirements by the bank be used for the caclulation of p-/--/+/++?
Background on the question
Ensure that there is no other interpretation.
Answer
The COREP reporting scale (column 005 of COREP template C 08.02 of Annex I to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) should be used for the calculation of p-/--/+/++. Consequently, the RWA-/--/+/++ metrics should be computed at the grade level.