The European Banking Authority (EBA) has published an opinion specifying the general principles and timelines for the implementation of the regulatory review of the internal ratings-based (IRB) approach under the Capital Requirements Regulation.
In particular, the EBA reiterates its stance in favour of the continued use of the IRB approach and introduces changes which aim at harmonising definitions and supervisory practices in the definition of default, the estimation of risk parameters and treatment of defaulted assets, credit risk mitigation techniques and disclosure in four phases.
In order to ensure an efficient use of resources in institutions and supervisory authorities, the EBA calls for a flexible approach in the implementation of the regulatory review. The opinion also notes that the necessary bank-specific changes are best determined together with the relevant Competent Authority.
View EBA sets out roadmap for the implementation of the regulatory review of internal models, 4 February 2016