The rule in plain words
Each of the values it checks in definition of internal models cannot be more than 1.
EBA checks it for two columns: long-run PD and cure rate for defaulted assets. That makes two 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.
Cure rate for defaulted assets: Cure rate for defaulted assets <= 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 105.01 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
Definition of internal models (C 105.01)
Columns
- 0070Long-run PD
- 0080Cure rate for defaulted assets
A worked example
The first of its checks, with simple numbers.
Cure rate for defaulted assets 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_105.01,,c0080,} <= 1The next one:
{C_105.01,,c0070,} <= 1Other rules on C 105.01
Every SBP credit risk rule, by template
Checks like this one, run at the point of submission, are the first step to real-time supervision.