Impact Of BCBS Proposals On IRB Banks

The Basel Committee on Banking Supervision recently published wide-reaching proposals for reducing variation in Credit Risk Weighted Assets, with a call for responses by the end of June. The Credit Benchmark submission aims to quantify some of the possible positive and negative impacts of the BCBS proposals. This report is based on the monthly Ex Ante Probability of Default and Senior Unsecured Loss Given Default data contributed to Credit Benchmark by IRB banks.
In particular, the report identifies:

1. Areas where the application of internal models has led banks to adopt a conservative stance but where they may become less so as result of the proposals.
2. Asset types where banks may be able to reduce their capital requirements as well as those where capital requirements may increase.
3. Possible distortions which may arise from the use of market-implied measures.
4. The value to banks and regulators of pooled credit risk datasets.

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