17.1 The PRA expects a firm to have a validation process that includes the following:

(a) standards of objectivity, accuracy, stability and conservatism that it designs its ratings systems to meet and processes that establish whether its rating systems meet those standards;

(b) standards of accuracy of calibration (ie whether outcomes are consistent with estimates) and discriminative power (ie the ability to rank-order risk) that it designs its rating systems to meet and processes that establish whether its rating systems meet those standards;

(c) policies and standards that specify the actions to be taken when a rating system fails to meet its specified standards of accuracy and discriminative power;

(d) a mix of developmental evidence, benchmarking and process verification and policies on how this mixture varies between different rating systems;

(e) use of both quantitative and qualitative techniques;

(f) policies on how validation procedures are expected to vary over time; and

(g) ensuring independent input into and review of its rating systems.

(CRR Article 185)

17.2 In the paragraph above: