We are seeking for a clarification regarding the term "case weighted" in column 060 - Case Weighted average default rate for calibration. Is the requirement to weight default rates by default occurrences in each year (1st interpretation) or to weight default rates by non-default obligor observations at the start of each year?
Template C 105.01 collects information on the models used for obligor PD and LGD calculation. PD calibration is usually based on the average of annual default rates across years with relevant and representative data.
In the calculation of the case-weighted average default rate for calibration as reported in c060 of template C 105.01 of Annex III of Regulation (EU) 2016/2070 (ITS on Supervisory Benchmarking), the weight to be used is the number of years used in the calibration; each year being weighted as one. As such, this case-weighted average default rate for calibration corresponds to the observed average default rate as referred to in the Guidelines on
PD estimation, LGD estimation and the treatment of defaulted exposures, and calculated as specified in paragraph 81 of those Guidelines.
The present Q&A on Supervisory reporting is provisional. It will be reviewed after the Implementing Regulation is in force and published in the Official Journal. The text of the Implementing Regulation may differ from the text of the draft ITS to which this Q&A refers.