In order to ensure consistency in the assessments while allowing the responsible supervisor to tailor those assessments to institutions’ idiosyncrasies, we follow a so-called “constrained judgement” approach that limits the extent to which judgement can push qualitative results towards a predefined range around the anchor points. One example of the combination of quantitative and qualitative supervision is our pillar 2 addon quantification methodology.
Although at first glance a purely quantitative concept, qualitative elements play a key role in this methodology. Under the so-called “block 1” of element 3, we assess risk levels and risk controls for credit, market, operational risk and interest rate risk in the banking book.