5.1 General requirements specific to PD estimation

For the purpose of assigning obligors to an obligor grade as part of the credit approval process in accordance with Article 172(1)(a) of Regulation (EU) No 575/2013 as well as for the purpose of the review of those assignments, in accordance with Article 173(1)(b) of that Regulation, institutions should ensure that each and every natural or legal person towards whom an IRB exposure exists is rated by the institution with the model approved to be used on a given type of exposures. This model should fit the single original obligor within the applicable rating system, including exposures secured by unfunded credit protection as referred to in Article 161(3) of that Regulation.

For the purpose of assigning retail exposures to a grade or pool as part of the credit approval process in accordance with Article 172(2) of Regulation (EU) No 575/2013 as well as for the purpose of the review of those assignments in accordance with Article 173(2) of that Regulation, institutions should ensure that each and every IRB exposure is rated by the institution with the model approved to be used on a given type of exposures. This model should fit the single original obligor or exposure within the applicable rating system, including exposures secured by unfunded credit protection as referred to in Article 164(2) of that Regulation.

A PD model can contain several different methods for ranking the obligors or exposures as well as various calibration segments.