Article 1
Specification of the nature, severity and duration of an economic downturn
1. For the purposes of Article 181(1), point (b), or 182(1), point (b) of Regulation (EU) No 575/2013, an economic downturn shall be identified for each type of exposure, as defined in Article 142(1), point (2), of that Regulation.
2. In identifying an economic downturn for a given type of exposures, the following specification rules shall apply:
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(a) |
the nature of an economic downturn is characterised by a set of economic indicators that are classified as relevant for exposures within that type of exposures in accordance with the rules laid down in Article 2 (‘the relevant indicator set’); |
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(b) |
in terms of severity, an economic downturn is indicated by the most severe value relating to a 12-month period (‘the most severe 12-month value’) that is observed, for each economic indicator in the relevant indicator set, over a historical time-span determined for that economic indicator in accordance with Article 3 (‘the applicable time-span’); |
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(c) |
an economic downturn is comprised of one or more distinct downturn periods covering the peaks and troughs related to the most-severe 12-month values for the economic indicators in the relevant indicator set, each such period being of a duration determined in accordance with Article 4 (‘the duration of a downturn period’). |
3. For the purposes of paragraph 2, point (b), the 12-month periods to which values for an economic indicator relate may start at any point in time within the applicable time-span.
4. For the purposes of paragraph 2, point (c):
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(a) |
a downturn period is a period in which an economic indicator reaches its most severe 12-month value; |
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(b) |
where, for different, significantly correlated economic indicators, the peaks or troughs related to the most severe 12-month values are reached simultaneously or shortly after each other, the downturn periods in which those indicators reach their most severe 12-month value are to be treated as one single downturn period covering the most severe 12-month values for all those indicators. |