Recital 1

(1)Article 181(1), point (b), of Regulation (EU) No 575/2013 requires institutions, in quantifying the risk parameters to be associated with rating grades or pools, to use own-LGD estimates that are appropriate for an economic downturn if those estimates are more conservative than the long-run average. Similarly, Article 182(1), point (b), of that Regulation requires institutions to use own-conversion factor (‘CF’) estimates that are appropriate for an economic downturn if those estimates are more conservative than the long-run average.