The definition of default is a truly sensitive element: proposals need to be thoroughly calibrated to avoid disconnecting the prudential status of the default from the economic reality of the counterparty. This would conflict the "use test" of the Basel framework. It would be more risk-sensitive to keep a flexibility expert judgment for specific cases. In addition, while harmonization of supervisory rules and practices can be a justified goal in the Banking Union, not all definitions and practices can be harmonized due to national peculiarities and legislative differences.
Moreover, such harmonisation should not disregard developments coming from other regulatory streams to ensure consistency also within institutions.
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