Revisions to the standardised approach for credit risk

Basel Committee on Banking Supervision Consultative Document Standards Revisions to the Standardised Approach for credit risk Issued for comment by 27 March 2015 A revised version of this report was published in December 2015. http://www.bis.org/bcbs/publ/d347.htm This publication is available on the BIS website (www.bis.org). © Bank for International Settlements <2014>. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN 978-92-9197-020-9 (print) ISBN 978-92-9197-019-3 (online) A revised version of this report was published in December 2015. http://www.bis.org/bcbs/publ/d347.htm Contents Executive summary ........................................................................................................................................................................... 1 Section 1: Background..................................................................................................................................................................... 3 (1. 1) Objectives of the review ............................................................................................................................................... 3 (1.2) Weaknesses of the current standardised approach for credit risk .............................................................. 3 (1.3) Principles and rationale for the review ................................................................................................................... 4 Section 2: Proposed revisions to the standardised approach for credit risk ............................................................. 5 (2.1) Exposures to banks ........................................................................................................................................................ 5 (2.2) Exposures to corporates ............................................................................................................................................. 10 (2.3) Subordinated debt, equity and other capital instruments ........................................................................... 13 (2.4) Retail portfolio ............................................................................................................................................................... 13 (2.5) Claims secured by real estate................................................................................................................................... 14 (2.6) Risk weight add-on for exposures with currency mismatch ........................................................................ 17 (2.7) Off-balance sheet exposures .................................................................................................................................... 18 (2.8) Past-due loans................................................................................................................................................................ 19 (2.9) Exposures to multilateral development banks .................................................................................................. 19 (2.10) Other assets ........................................................................................................................................................... 20 Section 3: Proposed revisions to the credit risk mitigation framework for exposures risk-weighted under the standardised approach .......................................................................................................................... 20 (3.1) Approaches to be excluded ...................................................................................................................................... 21 (3.2) Eligible financial collateral ......................................................................................................................................... 22 (3.3) Eligible credit protection providers ....................................................................................................................... 24 (3.4) Treatment of credit derivatives ............................................................................................................................... 25 (3.5) Treatment of repo and OTC derivative transactions ....................................................................................... 25 Section 4: Quantitative impact study ...................................................................................................................................... 25 Annex 1 .............................................................................................................................................................................................. 27 Proposals on exposure classes and credit risk mitigation ........................................................................................