Commission Delegated Regulation (EU) 2017/180 Article 8: Assessment standards for internal approaches for credit risk specific to the LDP

Article 8 - Assessment standards for internal approaches for credit risk specific to the LDP

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Article 8

Assessment standards for internal approaches for credit risk specific to the LDP

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1. When carrying out an assessment referred to in Article 3(1) relating to the LDP counterparties set out in template 101 of Annex I of Implementing Regulation (EU) 2016/2070, competent authorities shall assess whether the differences between the own funds requirements for credit risk of an institution and those of its peers are driven by any of the following:

((a))

different rank ordering of the counterparties included in the LDP samples or different PD levels assigned to each grade;

((b))

specific facility types, collateral instruments or location of the counterparties;

((c))

heterogeneity in the PDs, LGDs, maturities or conversion factors;

((d))

collateralisation practices;

((e))

level of independency from external ratings assessment and frequency in the internal rating update.

2. Where an institution classifies a counterparty as ‘defaulted’ while other institutions classify it as ‘performing’, or vice versa, competent authorities shall apply the approach referred to in paragraph 1 to that counterparty.