Article 3, Paragraph 2. · Commission Delegated Regulation (EU) 2023/1578

Contents

2.By way of derogation from paragraph 1, an institution’s internal methodology, or a part of it, for estimating losses given default shall fulfil the requirements set out in paragraphs 3 or 4, as applicable, where, in relation to a given position, all of the following conditions are met on a quarterly basis:

(a)no external sources fulfilling the requirements set out in Article 4 are already available for estimating losses given default for that position;

(b)the use of an internal methodology, or a part of it, fulfilling the requirements set out in paragraph 1 is either:

(i)not feasible due to a lack of input data for that position; or

(ii)disproportionate in relation to the materiality or the holding period of that position, based on the trading strategy adopted for that position;

(c)the value of ‘m’, calculated in accordance with the formula laid down in paragraph 5, is any of the following:

(i)lower than or equal to 10 %;

(ii)higher than 10 %, and the institution investigates whether additional external sources fulfilling the requirements set out in Article 4 are available and uses those sources to reduce the value of ‘m’ to a value which is lower than or equal to 10 %.