Article 39 | Delegated Regulation 2022/439

Article 39 - Human judgement

Article 39

Human judgement

When assessing whether the statistical model or another mechanical method is complemented by human judgement in accordance with Article 174(e) of Regulation (EU) No 575/2013 and whether human judgement is applied in a proportionate and adequate manner in the development of the rating model and in the process of assigning exposures to grades or pools, competent authorities shall verify that:

(a)	the manner in which human judgement is applied is justified and fully documented and that the impact of human judgement on the rating system is assessed, if possible also by means of a computation of the marginal contribution of human judgement to the performance of the rating system;

(b)	all relevant information not considered in the model is taken into account and an adequate level of conservatism is applied;

(c)

where the process of assignment of exposures to grades or pools in a rating system requires the application of human judgement in the form of subjective input data or where the credit policy allows for overrides of inputs or outputs of the model, all of the following applies:

(i)	the manual for model users clearly defines the input data and the situations where the input data can be adjusted by human judgement;

(ii)	the situations where the input data have actually been adjusted are limited;

(iii)

the manual for model users clearly defines the situations where the input or output of rating models may be overridden and the procedures for overriding the input or output of the models;

(iv)	all data regarding the application of human judgement and the situations where the inputs or outputs of the rating models have been overridden are stored and analysed periodically by the credit risk control unit or by the validation function in order to ascertain its impact on the rating model;

(d)	the application of human judgement is appropriately managed and proportionate to the type of exposures for each rating system.

Recitals

CHAPTER 1 - GENERAL PROVISIONS ON THE ASSESSMENT METHODOLOGY (Article 1-5)

CHAPTER 2 - ASSESSMENT METHODOLOGY FOR SEQUENTIAL IMPLEMENTATION PLANS AND PERMANENT PARTIAL USE OF THE STANDARDISED APPROACH (Article 6-8)

CHAPTER 3 - ASSESSMENT METHODOLOGY FOR THE FUNCTION OF VALIDATION OF INTERNAL ESTIMATES AND OF THE INTERNAL GOVERNANCE AND OVERSIGHT OF AN INSTITUTION (Article 9-17)

CHAPTER 4 - ASSESSMENT METHODOLOGY FOR USE TEST AND EXPERIENCE TEST (Article 18-22)

CHAPTER 5 - ASSESSMENT METHODOLOGY FOR ASSIGNMENT OF EXPOSURES TO GRADES OR POOLS (Article 23-25)

CHAPTER 6 - ASSESSMENT METHODOLOGY FOR IDENTIFICATION OF DEFAULTS (Article 26-29)

CHAPTER 7 - ASSESSMENT METHODOLOGY FOR RATING SYSTEMS DESIGN, OPERATIONAL DETAILS AND DOCUMENTATION (Article 30-40)

SECTION 1 - General (Article 30)

SECTION 2 - Methodology for assessing the documentation on the rationale, design and operational details of rating systems (Article 31-32)

SECTION 3 - Methodology for assessing the structure of rating systems (Article 33-36)

SECTION 4 - Methodology for assessing specific requirements for statistical models or other mechanical methods (Article 37-40)Article 37 - Data requirements Article 38 - Model design Article 39 - Human judgement Article 40 - Model performance

CHAPTER 8 - ASSESSMENT METHODOLOGY FOR RISK QUANTIFICATION (Article 41-58)

CHAPTER 9 - ASSESSMENT METHODOLOGY FOR ASSIGNMENT OF EXPOSURES TO EXPOSURE CLASSES (Article 59-62)

CHAPTER 10 - ASSESSMENT METHODOLOGY FOR STRESS TEST USED IN ASSESSMENT OF CAPITAL ADEQUACY (Article 63-66)

CHAPTER 11 - ASSESSMENT METHODOLOGY FOR THE CALCULATION OF OWN FUNDS REQUIREMENTS (Article 67-71)

CHAPTER 12 - ASSESSMENT METHODOLOGY FOR DATA MAINTENANCE (Article 72-75)

CHAPTER 13 - ASSESSMENT METHODOLOGY OF INTERNAL MODELS FOR EQUITY EXPOSURES (Article 76-82)

CHAPTER 14 - ASSESSMENT METHODOLOGY FOR MANAGEMENT OF CHANGES TO RATING SYSTEMS (Article 83-84)

CHAPTER 15 - FINAL PROVISION (Article 85)

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Article 39 - Human judgement

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