New information

19.1 The PRA expects that in the application of a PD or LGD model, and where firms receive new information with respect to a relevant risk driver or rating criterion, they should take this information into account in rating assignments in a timely manner, particularly by ensuring both of the following:

(a) that the relevant IT systems are updated in a timely manner and that the corresponding rating and PD or LGD assignment is reviewed as soon as possible; and

(b) where the new information results in the obligor or exposure being classified as being in default according to Article 178 of the Credit Risk: Internal Ratings Based Approach (CRR) Part, that the PD of the obligor or exposure as applicable is set equal to 1 in all relevant IT systems in a timely manner.

Conservatism in the application of risk parameters

19.2 The PRA expects that, for the purpose of Article 171(2) of the Credit Risk: Internal Ratings Based Approach (CRR) Part, firms should apply additional conservatism to the outcomes of the rating assignment where any deficiencies are identified related to the implementation of the model in the IT system or to the process of assignment of risk parameters to obligors or facilities in the current portfolio (application of risk parameters), especially when those deficiencies relate to data used in the rating assignment process.

19.3 The PRA expects that, for the purpose of applying paragraph 19.2, firms should establish a framework that covers all of the following: