1. Institutions shall determine the stress period for the non-modellable risk factors in a broad category of risk factors by identifying the 12-month observation period maximising the value obtained in accordance with following formula:
\sum_{j \in i} \mathrm{RSS}^{j}
where:
— | i denotes the broad risk factor category; |
— | j is the index denoting the non-modellable risk factors or the non-modellable standardised buckets for which the institution calculates the stress scenario risk measure belonging to the broad risk factor category i; |
— | \mathrm{RSS}^{j} is the rescaled stress scenario risk measure for the non-modellable risk factor or the non-modellable standardised bucket j calculated in accordance with Article 16. |
2. By way of derogation from paragraph 1, institutions may determine the stress period for the non-modellable risk factors in a broad risk factor category by identifying the 12-month observation period maximising the partial expected shortfall measure \mathrm{PES}^{\mathrm{RS}, i} referred to in Article 325bb(1) of Regulation (EU) No 575/2013. Where institutions apply this derogation, they shall provide evidence that the stress period identified represents a period of financial stress for its non-modellable risk factors. Institutions shall take into account how their portfolio is exposed to the non-modellable risk factors in the broad category of risk factors.
3. When determining the stress period, institutions shall use an observation period starting at least from 1 January 2007, to the satisfaction of the competent authorities.
4. Institutions shall review the stress period identified at least with a quarterly frequency.