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Basel 4: Credit Risk - IRB approach

Basel 4: Credit Risk - IRB approach

Closing in on consistency?


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The revised standards published by the Basel Committee in December 2017 included new rules regarding the use of the IRB approach for the calculation of risk weighted credit exposures. While the changes are not as severe as some banks had feared, they represent a further erosion of the benefits of internal models and need careful consideration by banks who either have IRB approval or are considering applying for it.

Basel 4 is expected to force banks to re-examine their portfolio management practices to reflect changes to their capital requirements. In particular banks using the IRB approach should consider the impact to their risk exposure calculations, processes, data and systems.

This article is a companion paper to our earlier CR-SA article and part of our Basel 4: The way ahead series discussing the Basel 4 standards. To assess the full impact of these final rules, we are leveraging the insights of our global network to publish a series of articles that focus on specific areas affected by the standards. Find the latest articles online here.

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