37. Institutions should calculate a reference value in accordance with the following sequence of steps:

(a) Using all available loss data, institutions should select the two individual years with the highest observed economic loss by:

(i) grouping all defaults according to the year in which the defaults occurred;

(ii) for each year as identified in (i) calculating for the defaults that occurred in the considered year the ratio of total economic loss as specified in Section 6.3.1 of the [EBA GL on PD and LGD estimation] to the total outstanding amount of the according credit obligations at the moment of default;

(iii) selecting the two individual years with the highest annual ratio of total economic loss to total outstanding amount resulting from (ii) as the two individual years with the highest observed economic losses.