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Version date: 20 November 2017 - onwards

4.4 Treatment of deficiencies and margin of conservatism

4.4.1 Identification of deficiencies

36. Institutions should identify all deficiencies related to the estimation of risk parameters that lead to a bias in the quantification of those parameters or to an increased uncertainty that is not fully captured by the general estimation error, and classify each deficiency into one of the following categories:

(a) Category A: Identified data and methodological deficiencies;

(b) Category B: Relevant changes to underwriting standards, risk appetite, collection and recovery policies and any other source of additional uncertainty.

37. For the purposes of identifying and classifying all deficiencies referred to in paragraph 36 institutions should take into account all relevant deficiencies in methods, processes, controls, data or IT systems that have been identified by the credit risk control unit, validation function, internal audit function or any other internal or external review and should analyse at least all of the following potential sources of additional uncertainty in risk quantification:

(a) under category A: