Title[ Part 3: The Second Pillar - Supervisory Review Process
Section[ 2. Definition of default
766. A bank must use the reference definition of default for its internal estimations of PD and/or LGD and EAD. However, as detailed in paragraph 454, national supervisors will issue guidance on how the reference definition of default is to be interpreted in their jurisdictions. Supervisors will assess individual banks’ application of the reference definition of default and its impact on capital requirements. In particular, supervisors will focus on the impact of deviations from the reference definition according to paragraph 456 (use of external data or historic internal data not fully consistent with the reference definition of default).
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