(b)

paragraph 2 is amended as follows: point (a) is replaced by the following: ; institutions shall estimate PDs by obligor or facility grade or pool from long run averages of one-year default rates, and default rates shall be calculated at facility level only where the definition of default is applied at individual credit facility level pursuant to Article 178(1), second subparagraph;’ point (e) is replaced by the following: ; irrespective of whether an institution is using external, internal or pooled data sources, or a combination of the three, for its PD estimation, the length of the underlying historical observation period used shall be at least five years for at least one source;’ the following subparagraphs are added: ‘For the purposes of the first subparagraph, point (a), the PD shall be based on the observed historical average one-year default rate. For the purposes of the first subparagraph, point (e), where the available observation spans a longer period for any source, and where those data are relevant, that longer period shall be used. The data shall include a representative mix of good and bad years of the economic cycle relevant for the type of exposures. Subject to the permission of the competent authorities, institutions may use, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall be increased by one year each year until relevant data cover at least five years.’

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Source: EUR-Lex CELLAR · retrieved 2026-09-04 · Text as adopted (Official Journal); later amendments are not incorporated in this text.