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  • (ii) Corporate, Sovereign, Bank, and Retail Exposures

    • CA-5.2.46

      The transition period starts on the date of implementation of this Module and will last for 3 years from that date. During the transition period, the following minimum requirements can be relaxed:

      (a) For corporate, sovereign, and bank exposures under the foundation approach, paragraph CA-5.8.74, the requirement that, regardless of the data source, banks must use at least five years of data to estimate the PD; and
      (b) For retail exposures, paragraph CA-5.8.77, the requirement that regardless of the data source banks must use at least five years of data to estimate loss characteristics (EAD, and either expected loss (EL) or PD and LGD).
      (c) For corporate, sovereign, bank, and retail exposures, paragraph CA-5.8.56, the requirement that a bank must demonstrate it has been using a rating system that was broadly in line with the minimum requirements articulated in this document for at least three years prior to qualification.
      (d) The applicable aforementioned transitional arrangements also apply to the PD/LGD approach to equity. There are no transitional arrangements for the market-based approach to equity.
      Apr 08

    • CA-5.2.47

      Under these transitional arrangements for IRB, banks must have a minimum of two years of data at the implementation of this Module. This requirement will increase by one year for each of three years of transition.

      Apr 08

    • CA-5.2.48

      Owing to the potential for very long-run cycles in house prices which short-term data may not adequately capture, during this transition period, LGDs for retail exposures secured by residential properties cannot be set below 10% for any sub-segment of exposures to which the formula in paragraph CA-5.4.3 is applied.36 During the transition period the CBB will review the potential need for continuation of this floor.

      36 The 10% LGD floor shall not apply, however, to sub-segments that are subject to/benefit from sovereign guarantees. Further, the existence of the floor does not imply any waiver of the requirements of LGD estimation as laid out in the minimum requirements starting with section CA-5.8.79.

      Apr 08