The impact assessment analyses the potential related costs and benefits of the policy provided in the draft RTS. This analysis shall provide the reader with an overview of the findings as regards identifying the problem, the options identified to remove the problem and their potential impacts.

A. Problem identification

The primary problem that the current RTS aim to address is the lack of common institutions and supervisory practices regarding the definition of downturn economic conditions for the purpose of the estimation of downturn LGD and CF. All issues that have been considered while developing these RTS and the GL on LGD downturn estimation refer to the identification and/or limitation of drivers of unjustified RWA variability.

B. Policy objectives

The RTS aim to define common criteria in the major policy fields including:

• general approach to identify economic downturn conditions (Article 1);

• nature of an economic downturn (Article 2);

• severity of an economic downturn (Article 3);

• duration of an economic downturn (Article 4).

C. Baseline scenario