Margin of conservatism
Article 44
1. Competent authorities shall assess whether an appropriate margin of conservatism is included in the values of risk parameters used in the calculation of capital requirements as referred to in point (f) of Article 179(1) of Regulation (EU) No 575/2013, in the following situations: (a) the methods and data do not provide sufficient certainty of the risk parameter estimates, including where there are high estimation errors; (b) relevant deficiencies in the methods, information and data have been identified by the credit risk control unit, validation function or internal audit function or any other function of the institution; (c) relevant changes to the standards of underwriting or recovery policies or changes in the institution’s risk appetite. 2. Competent authorities shall assess whether the institutions do not use the margin of conservativism as a substitute to any corrective action applied by the institution under Article 146 of Regulation (EU) No 575/2013.