194. In the application of the PD or LGD model and where institutions receive new information with respect to a relevant risk driver or rating criterion, they should take this information into account in the rating assignment in a timely manner, in particular by ensuring both of the following:

(a) that the relevant IT systems are updated as soon as possible and that the corresponding rating and PD or LGD assignment is reviewed as soon as possible;

(b) where the new information relates to the default of an obligor, that the PD of the obligor is set to 1 in all relevant IT systems in a timely manner and in accordance with paragraph 108 of the Guidelines on the application of the definition of default under Article 178 of Regulation (EU) No 575/2013.

8.1 Conservatism in the application of risk parameters

195. For the purpose of Article 171(2) of Regulation (EU) No 575/2013 institutions should apply additional conservatism to the outcomes of the rating assignment where any deficiencies are identified related to the implementation of the model in the IT system or to the process of assignment of risk parameters to obligors or facilities in the current portfolio (application of risk parameters), especially when those deficiencies relate to data used in the rating assignment process. They should do so by establishing a framework that consists of the following phases: