The Basel Committee is consulting on proposed changes to the advanced and foundation internal ratings-based approaches (IRB). The proposals:

  • remove the option to use the IRB approaches for certain exposure categories, such as loans to financial institutions. In the Committee’s view the model inputs cannot be estimated with sufficient reliability;
  • adopt exposure-level, model-parameter floors to ensure a minimum level of conservatism for portfolios where the IRB approaches remain available; and
  • provide greater specification of parameter estimation practices to reduce variability in risk-weighted assets for portfolios where the IRB approaches remain available.

Comments on the proposals are sought until 24 June. (Source: Basel Committee consults on reducing variation in credit risk-weighted assets)