The rule in plain words
Observed average default rate (%) cannot be more than 1.
EBA checks it for 17 rows, from to <0.15 (0010) to 100 (default) (0170). That makes 17 checks. A failure names the one that failed.
How the Line4 Check report words itShowHide
The first of its checks, word for word as the report shows it when it fails. The others read the same, with their own column, row or sheet.
Observed average default rate (%): 0.15 to <0.25 <= 1
What to do if your filing fails it
- 01Open the template below and find the cells the rule reads.
- 02Look for a value outside the limit in these cells.
- 03If the value is a percentage, EBA expects it as a decimal: 12% is reported as 0.12.
- 04EBA compares the values exactly here: there is no rounding tolerance.
- 05It runs only when your filing indicators mark C 08.05 as reported.
- 06This is a warning. It does not stop the filing on its own, but your authority may ask you to explain it.
The cells it reads
Credit risk and free deliveries: IRB approach to capital requirements: back-testing of PD (CR IRB 5) (C 08.05)
Rows
- 00100.00 to <0.15
- 00200.00 to <0.10
- 00300.10 to <0.15
- 00400.15 to <0.25
- 00500.25 to <0.50
- 00600.50 to <0.75
- 00700.75 to <2.5
- 00800.75 to <1.75
- 00901.75 to <2.5
- 01002.5 to <10
- 01102.5 to <5
- 01205 to <10
- 013010 to <100
- 014010 to <20
- 015020 to <30
- 016030 to <100
- 0170100 (Default)
Column
- 0040Observed average default rate (%)
A worked example
The first of its checks, with simple numbers.
To <0.25, observed average default rate (%) can then be at most 1.
A file that reports 1 passes. One that reports 1.1 fails, by 0.1.
The numbers are illustrative.
Show the rule as writtenShowHide
EBA's formula, as written out for the first of its checks. Cells are written as {template, row, column, sheet}.
{C_08.05,r0040,c0040,} <= 1The next five:
{C_08.05,r0010,c0040,} <= 1{C_08.05,r0090,c0040,} <= 1{C_08.05,r0140,c0040,} <= 1{C_08.05,r0020,c0040,} <= 1{C_08.05,r0110,c0040,} <= 1And 11 more, the same formula for the other cells it covers.
Other rules on C 08.05
- Arithmetic average PD cannot be more than 1 (v09763_m)Warning
- Average historical annual default rate cannot be more than 1 (v09765_m)Warning
- To <100 (under ) must equal to <20 plus to <30 plus to <100 (under 10 to <100) (v09760_m)Warning
- To <10 (under ) must equal to <5 plus to <10 (under 2.5 to <10) (v09759_m)Warning
- To <2.5 (under ) must equal to <1.75 plus to <2.5 (under 0.75 to <2.5) (v09758_m)Warning
- To <0.15 (under ) must equal to <0.10 plus to <0.15 (under 0.00 to <0.15) (v09757_m)Warning
- Number of obligors at the end of the previous year cannot be less than defaulted during the year (v09780_m)Warning
Every COREP own funds rule, by template
Checks like this one, run at the point of submission, are the first step to real-time supervision.