Regulatory Technical Standards on default probabilities and losses given default for default risk model under the Fundamental Review of the Trading Book
- Status: Final draft RTS/ITS adopted by the EBA and submitted to the European Commission
These draft Regulatory Technical Standards (RTS) on default probabilities (PDs) and losses given default (LGDs) for default risk model for institutions using the new Internal Model Approach (IMA) under the Fundamental Review of the Trading Book (FRTB) clarify that any internal methodology used to calculate PDs and LGDs under the default risk model should meet all requirements applied for the Internal ratings-based (IRB) approach. In addition, these RTS specify the requirements that external sources are to fulfil for their use under the default risk model, thus reflecting similar qualitative requirements as those applicable to an internal methodology.