+56. In this method, for each institution ‘I’ and for each risk indicator ‘ j ’ , the DGS should …

56. In this method, for each institution ‘I’ and for each risk indicator ‘ j ’ , the DGS should …

In this method, for each institution ‘I’ and for each risk indicator ‘ j ’ , the DGS should calculate an IRS based on the value ‘ A ’ of the risk indicator. The DGS should define an upper boundary ‘ 𝑎 𝑗 ’ and a lower boundary ‘ 𝑏 𝑗 ’ for each indicator. If the indicator’s value is between the defined boundaries, the DGS should assign the value of the IRS between 0 and 100 according to the following two formulas:

  • a. When a higher indicator value indicates a higher risk and the indicator is above the upper boundary ‘ 𝑎 𝑗 ’ , the DGS should fix the value of the IRS at 100. Similarly, when the indicator’s value is below the lower boundary ‘ 𝑏 𝑗 ’ , the DGS should fix the value of the IRS at 0. The corresponding formula is:
𝐼𝑅𝑆 𝑖𝑗 ={100 0 𝐴 𝑎𝑖𝑓 𝐴 𝑖𝑗 > 𝑎 𝑗 𝑖𝑓 𝐴 𝑖𝑗 < 𝑏 𝑗 𝑖𝑗 −𝑏 𝑗 𝑗 −𝑏 𝑗 ∗ 100, 𝑖𝑓𝑏 𝑗 ≤ 𝐴 𝑖𝑗 ≤ 𝑎 𝑗

where j = indicator ‘j’, ranging from 1 to ‘m’ .

  • b. Analogously, if a lower indicator indicates a higher risk and the indicator is below the lower boundary ‘ 𝑏 𝑗 ’ , the DGS should fix the value of the IRS at 100. Correspondingly, when the indicator value is above the upper boundary ‘ 𝑎 𝑗 ’ , the DGS should fix the value of the IRS at 0. The corresponding formula is:
𝐼𝑅𝑆 𝑖𝑗 ={0 𝑖𝑓 𝐴 𝑖𝑗 > 𝑎 𝑗 100 𝑖𝑓 𝐴 𝑖𝑗 < 𝑏 𝑗 𝑎 𝑗 −𝐴 𝑖𝑗 𝑎 𝑗 −𝑏 𝑗 ∗ 100, 𝑖𝑓𝑏 𝑗 ≤ 𝐴 𝑖𝑗 ≤ 𝑎 𝑗

1. Overview

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1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

Requirements

3. Related Standards

Standards
  • EBA - Published by the European Banking Authority at https://www.eba.europa.eu/