General requirements on downturn LGD estimation

15.1 The PRA expects that for the purpose of quantifying downturn LGD, a firm should apply the following expectations specific to downturn LGD estimates by facility grade or pool:

(a) calibrate downturn LGD at least at the same level at which the firm calculates the corresponding long-run average LGD for the purpose of calibrating LGD in accordance with paragraph 14.15; and

(b) split the set of facilities covered by the same LGD model into as many different calibration segments as needed, where each calibration segment carries a significantly different loss profile and might thus be affected differently by different downturn periods. For this purpose, the firm should at least consider the appropriateness of introducing calibration segments that cover material shares of exposure in different geographical areas, in different industry sectors and, for retail exposures, of different product types.