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2 min readWarningBank of England banking taxonomy 4.1.1Updated 11 November 2026

Backtesting of PD ranges should be greater than or equal to zero (OF08.05.01.01, Bank of England check boe_b0318)

A warning on the credit risk and free deliveries: IRB approach to capital requirements: back-testing of PD according to point (f) of article 180(1) (CR IRB 5) template (OF08.05.01.01), in the own funds (PRA001) return.

Line4 Check runs it on the own funds (PRA001) return, proven on test files, check by check: the same outcome on all three test files of that return.

Check your file for this ruleWhat to do if it fails

The rule in plain words

Backtesting of PD ranges should be greater than or equal to zero

In Credit risk and free deliveries: IRB approach to capital requirements: back-testing of PD according to point (f) of article 180(1) (CR IRB 5) (OF08.05.01.01): every value in the cells it covers must be zero or more.

What to do if your return fails it

  1. 01Open the table below and find the cells the rule reads.
  2. 02Look for a value below zero in these cells, such as an amount entered as a negative number.
  3. 03It runs only when your filing indicators mark OF08.05.01 as reported.
  4. 04This is a warning. It does not stop the return on its own, but your supervisor may ask you to explain it.

The cells it reads

Credit risk and free deliveries: IRB approach to capital requirements: back-testing of PD according to point (f) of article 180(1) (CR IRB 5) (OF08.05.01.01)

Columns

  • C0010Arithmetic average PD (post-input floor) (%)
  • C0020Number of obligors at the end of the previous year
  • C0030Of which: defaulted during the year
  • C0040Observed average default rate (%)
  • C0050Average historical annual default rate (%)

Sheets

  • S0001Total (AIRB approach)
  • S0002Total (FIRB approach and slotting approach)
  • S0006Institutions (FIRB approach)
  • S0009Corporates - Specialised Lending (AIRB approach)
  • S0010Corporates - Specialised Lending (FIRB approach or slotting approach)
  • S0011Corporates - Other general corporates - non-SME (AIRB approach)
  • S0012Corporates - Other general corporates - non-SME (FIRB approach)
  • S0015Retail - Qualifying revolving (AIRB approach)
  • S0016Retail - Other SME (AIRB approach)
  • S0017Retail - Other non-SME (AIRB approach)
  • S0018Retail - Secured by commercial immovable property SME (AIRB approach)
  • S0019Retail - Secured by commercial immovable property non-SME (AIRB approach)
  • S0020Retail - Secured by residential immovable property - SME (AIRB approach)
  • S0021Retail - Secured by residential immovable property non-SME (AIRB approach)
  • S0022Corporates - Financial corporates and large corporates (FIRB approach)
  • S0023Corporates - Other general corporates - SME (AIRB approach)
  • S0024Corporates - Other general corporates - SME (FIRB approach)

Which returns it applies to

Line4 Check runs it on the own funds (PRA001) return on Bank of England banking taxonomy 4.1.1. The Bank of England applies it to own funds (PRA001) returns, as a warning.

The Bank’s own words and formula

The first paragraph of the plain words above is the Bank of England’s own, word for word, from its list of validations. The second spells out its formula, with each cell named from its templates.

Show the formulaShow

The Bank of England's formula. Cells are written as {t: table, r: row, c: column}.

{t: OF08.05.01.01} >= 0

Where it applies, in the Bank's words (its scope):

scope({t: OF08.05.01.01, c:0010;0020;0030;0040;0050,z:0001;0002;0006;0009;0010;0011;0012;0015;0016;0017;0018;0019;0020;0021;0022;0023;0024, f: banking, fv: banking_reporting})

Every PRA banking rule on OF08.05.01.01

Checks like this one, run at the point of submission, are the first step to real-time supervision. Line4 builds SupTech software for financial regulators that runs checks like these as each return arrives.