On 10 June 2021, there was published in the Official Journal of the EU Commission Delegated Regulation (EU) 2021/930 of 1 March 2021 supplementing the Capital Requirements Regulation (CRR) with regard to regulatory technical standards (RTS) specifying the nature, severity and duration of an economic downturn referred to in Article 181(1), point (b) and Article 182(1), point (b), of that Regulation.
The RTS specify the nature, severity and duration of an economic downturn to be taken into account in downturn loss given default and downturn conversation factors estimation, where these parameters are estimated under the Internal Ratings Based Approach. The RTS set out a notion of economic downturn, which may encompass one or several disjunctive downturn periods. The nature of an economic downturn is specified by a set of economic factors relevant for the underlying businesses, sectors and jurisdictions. The severity is specified in relation to these economic factors by the worst value observed in the past 20 years on each economic factor. The duration is specified in relation to the downturn periods, which are identified as periods in time where one or several economic factors show their most severe values. Some exemptions are possible for the specification of the severity and duration where the macroeconomic conditions are better captured by these.
The Delegated Regulation will enter into force on 30 June 2021. It will apply from 1 January 2021.