European Banking Authority Publishes Progress Report on Repair of Internal Ratings Based Models
07/08/2019The European Banking Authority has published a progress report on its 2016 roadmap designed to address concerns about the variability of own funds requirements arising from the internal models that firms use to calculate their minimum credit risk capital requirements under the Capital Requirements Regulation. The report focuses on the EBA's review of the regulatory regime governing credit risk mitigation and, in particular, internal ratings based approaches adopted by firms subject to the requirements of the CRR. It also sets out deadlines for implementation of the Regulatory Technical Standards and the EBA's guidelines on credit risk mitigation.
The EBA's roadmap was published in 2016 with the purpose of:
- Reviewing the regulatory framework of the IRB approach adopted by firms for the purpose of calculating their credit risk;
- Ensuring supervisory consistency of the IRB approach; and
- Increasing transparency of the IRB approach using standardized and comparable templates.
The EBA's Report focuses on the first of these purposes and provides some insight into the EBA's plans for addressing the second and third purposes.
With respect to the first purpose, the Report sets out the status of the RTS and guidelines, specifying credit risk mitigation standards and techniques and when the various measures are expected to come into force, if they have not already done so. The EBA also discusses how its regulatory review of the IRB approach may be impacted by the implementation in the EU of Basel III.
View the EBA's Progress Report on the IRB Roadmap.
View the 2016 IRB Roadmap.
View details of the EBA's Consultation Paper on the IRB Approach for LGDs.
View details of Basel III.
View details of the EBA Guidelines on the definition of default.
View details of the RTS on the materiality threshold for credit obligations that are past due.
View details of the EBA Guidelines on probability of default.
View details of the RTS on economic downturn.
View details of the report on the CRM Framework.
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