The Capital Requirements Regulation (CRR) requires the European Banking Authority (EBA) to develop draft regulatory technical standards (RTS) to specify the conditions under which competent authorities may grant permission to institutions to apply for a
data waiver, when they implement the internal rating based approach.
The consultation paper on the draft RTS specifies the conditions to be met by institutions when asking competent authorities permission to apply the data waiver. This will enable the institution to use data covering a period of two years rather than five
years for estimation of risk parameters. The conditions reflect the increased uncertainty on the estimation of risk parameters as a consequence of using a shorter data history and set a number of safeguards including requiring institutions to ensure that:
· they operate an enhanced data vetting process; and
· can prove that relevant datasets covering longer time series are not available.
Comments are requested by 7 June 2014.
© Finextra Research 2014