Trade associations launch IRB survey

The International Swaps and Derivatives Association, the Risk Management Association and the British Bankers' Association today launched a survey of the validation of banks' internal credit ratings, a key element underlying the internal ratings-based (IRB) approach in the proposed new Basel capital Accord.

The associations said they decided to undertake the survey after the Basel Committee on Banking Supervision, in its second consultative package, set out the minimum requirements financial institutions must meet in order to use the IRB approach. One of the requirements will be for banks to demonstrate their capabilities to validate their estimates of default probabilities and the techniques used to assign internal ratings. Specific standards for validation, however, will be left to the