EBA publishes final Guidelines on the estimation of LGD under an economic downturn

06 March 2019

The Guidelines focus on requirements for the quantification of the calibration target used for downturn LGD estimation. The Guidelines complete the EBA's broader work on the review of the IRB approach aiming at reducing the unjustified variability in the outcomes of internal models, while preserving the risk sensitivity of capital requirements.

Starting from the relevant downturn period(s) identified in accordance with the related Regulatory Technical Standard (RTS), the final Guidelines set out requirements for the appropriate quantification of the calibration target used for downturn LGD estimates and include three types of approaches:

Finally, a reference value is put in place that acts as a non-binding challenger to the final downturn LGD estimation.

Press release

Final report


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