Basel Proposes Revised Standardized Approach For Credit Risk

The Basel Committee on Banking Supervision (BCBS) published its second consultative document on “Revisions to the Standardised Approach to Credit Risk” on Thursday. These new standards would primarily apply to large, internationally active banking organizations and not to community banks.

Basel’s revised proposals outlined in the latest consultation paper aim to address the issues raised by respondents with respect to the initial proposals, published in December 2014.

Basel Committee’s proposal to reintroduce use of external credit ratings

As outlined by ValueWalk, in its December 2014 BCBS proposed swapping explicit references to external credit ratings with risk drivers, bank and corporate exposures would be weighted using a lookup table.

The second and latest consultative document details a revised version of...