26. Where an institution uses Beta approximations or other random data-generating approaches for …

Where an institution uses Beta approximations or other random data-generating approaches for the purpose of determining the scenarios of future shocks, in order for the data inputs used in those Beta approximations or other random data-generating approaches to be accurate, the values of the Beta coefficients or the parameters of the random data-generating approaches should be determined exclusively on the basis of the data inputs calibrated to historical data referred to in Article 325bc of Regulation (EU) No 575/2013. Where, in exceptional cases, the institution does not determine the values of the Beta coefficients or the parameters of the random data-generating approaches exclusively on the basis of those data inputs, but adjustments are made to the values of those Beta coefficients or parameters, the data inputs used in those Beta approximations or other random data-generating approaches should be considered accurate only where all of the following conditions are met:

• (a) the Beta coefficients or parameters of the random data-generating approaches cannot be determined exclusively on the basis of the data inputs calibrated to historical data referred to in Article 325bc of Regulation (EU) No 575/2013;
• (b) the institution describes in its policies the methodology used in this case to obtain the values of the Beta coefficients or parameters of the random data-generating approaches, including any adjustments made to the values of the Beta coefficients or parameters determined exclusively on the basis of the data inputs calibrated to historical data referred to in Article 325bc of Regulation (EU) No 575/2013;
• (c) the choice of the values for the Beta coefficients or parameters of the random data-generating approaches does not underestimate risk. 4.1.4 Data inputs used for combinations of risk factors

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