Fitch Ratings releases special report on Basel IA

Report explores the analytical challenges of the various capital methodologies

Fitch Ratings has published a special report that outlines the proposed revisions to US risk-based capital regulations, the so-called Basel IA introduced in December of 2006 as a simpler and less expensive alternative to Basel II.

'Basel IA: A Fork in the Road' explores the analytical challenges of the various capital methodologies and which approaches are most likely to be chosen by various types of banks. While the final version of Basel IA is yet to be published, it is expected to be provided in advance of the US version of Basel II, which is currently slated for January 1, 2009.

Basel IA, as proposed, modifies the Basel I method of assigning risk-weighted assets (RWA) in several key ways, including: increasing the number of risk weight categories; introducing greater granularity into the stratification of asset classes; and expanding the role of external ratings in determining risk weights for direct exposures, collateral, guarantees and securitizations.