Implementation of a more gradual transition timetable is justified in part by a recognition that banks need more time to prepare - and that we as supervisors need more time to analyze transition information and ensure that there are no unintended consequences.
As you are aware, the QIS4 exercise identified some areas requiring further clarification by regulators and additional work by bankers on risk models and databases. One of the key areas in the NPR influenced by these results pertains to banks’ estimates of loss given default (LGD).