A-IRB to lose credit risk reach under Basel III

Americas banks expected to generate just 40% of RWAs using internal models, from 67% currently

A far smaller share of banks’ credit risk capital and exposures is set to be calculated using their own internal models under the fully loaded Basel III rules, as the new framework disqualifies some exposure classes from the advanced internal ratings-based (A-IRB) approach, data from the Basel Committee on Banking Supervision shows.

Across 107 banks sampled globally, the A-IRB approach captured an average of 62% of exposure at default (EAD) and 47% of risk-weighted assets (RWAs) at end-2021 –

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