On February 4, 2016, the European Banking Authority published an Opinion on the implementation of the regulatory review of the Internal Ratings Based approach to calculating risk weighted exposure amounts for credit risk. The Opinion sets out the general principles and timelines for implementation and aims to provide clarity for national regulators and relevant firms. The EBA has also published a report on the future of the IRB approach. Both the Opinion and Report aim to address concerns raised over the lack of comparability of capital requirements determined under the IRB approach across firms as well as identify the main drivers of variability in the implementation of IRB models. The IRB framework will be made up of Regulatory Technical Standards and Guidelines which will be introduced in 2016 and 2017 in four phases: (i) the IRB assessment methodology will be introduced in the first quarter of 2016; (ii) a definition of “default” will be introduced by mid 2016; (iii) estimation of risk parameters and treatment of defaulted assets will be introduced by mid 2017; and (iv) credit risk mitigation will be introduced by the end of 2017. The EBA expects that the effective implementation in all areas will be finalized by the end of 2020.
The EBA’s Opinion and Report are available at: http://www.eba.europa.eu/-/eba-sets-out-roadmap-for-theimplementation-of-the-regulatory-review-of-internal-models.