Commission Delegated Regulation (EU) 2017/72Show full title

Article 1 Subject matter

This Regulation lays down the mandatory conditions under which competent authorities may grant institutions the permissions to use data covering a period of two rather than five years for probability of default (‘PD’), own loss given default (‘own-LGD’) and own-conversion factor estimates as set out in point (h) of Article 180(1), point (e) of Article 180(2), and Articles 181(2) and 182(3) of Regulation (EU) No 575/2013 (‘data waiver permissions’).

Article 2 Conditions for eligibility of exposures

1. Subject to paragraphs 2 and 3, any type of exposures other than exposures to central governments, central banks and institutions as set out in points (a) and (b) of Article 147(2) of Regulation (EU) No 575/2013 shall be eligible for data waiver permissions.

2. Exposures to corporates as set out in point (c) of Article 147(2) of Regulation (EU) No 575/2013 shall be eligible for data waiver permissions where they are not structurally characterised by few or no observed defaults.

3. Types of exposures which were not included in the institution's portfolio at the time when an institution started to implement the Internal Ratings Based Approach (IRB Approach) shall not be eligible for a data waiver permission.

Article 3 Quantitative conditions

1. Competent authorities may only grant data waiver permissions where the following quantitative conditions are met in respect of an institution:

(a) the total exposure value of the data waiver permission requested and all its data waiver permissions which have been granted but not revoked or expired (‘data waiver permissions in force’) do not exceed 5 % of the institution's total exposure value;

(b) the total risk-weighted exposure amount of the data waiver permission requested and all its data waiver permissions in force do not exceed 5 % of the institution's total risk-weighted exposure amount.

2. For the purposes of point (a) of paragraph 1, the total exposure value shall be the aggregate exposure value of all types of exposures measured for credit and dilution risk, before reduction of specific credit risk adjustments, additional value adjustments in accordance with Articles 34 and 110 of Regulation (EU) 575/2013 and of other own funds reductions.

3. For the purposes of point (b) of paragraph 1, total risk-weighted exposure amount shall be the aggregate risk exposure amount of all types of exposures, risk-weighted for credit and dilution risk in accordance with the approach applied by the institution

Article 4 Qualitative conditions

Competent authorities may only grant the data waiver permission to an institution that provides well-documented evidence that all the following conditions are met in respect of every type of exposure:

(a)

longer time series data are unavailable or unsuitable due to lack of accuracy, completeness or appropriateness;

(b)

an appropriate margin of conservatism is applied, in accordance with point (a) of Article 179(1) of Regulation (EU) No 575/2013 to adequately compensate for the expected range of estimation errors arising from the use of shorter historic data series;

(c)

the data input vetting process referred to in point (b) of Article 174 of Regulation (EU) No 575/2013 is enhanced for the shorter time series.

Article 5 Time period

Competent authorities may only grant waiver permissions for the first five years after the date when an institution was first permitted to calculate its risk-weighted exposure amounts using the IRB Approach in accordance with Article 143 of Regulation (EU) No 575/2013.

Article 6 Transitional Provision

Data waiver permissions granted by the competent authorities before the entry into force of this Regulation shall not be subject to this Regulation.

Article 7 Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 23 September 2016.

For the Commission

The President

Jean-Claude Juncker