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  • (iii) Risk Weights for Specialised Lending

    • Risk Weights for PF, OF, CF, and IPRE

      • CA-5.3.6

        Banks that do not meet the requirements for the estimation of PD under the corporate IRB approach will be required to map their internal grades to five supervisory categories, each of which is associated with a specific risk weight. The slotting criteria on which this mapping must be based are provided in Appendix CA-7. The risk weights for unexpected losses associated with each supervisory category are:

        Supervisory Categories and UL Risk Weights for other SL Exposures

        Strong Good Satisfactory Weak Default
        70% 90% 115% 250% 0%
        Amended: April 2011
        Apr 08

      • CA-5.3.7

        Although banks are expected to map their internal ratings to the supervisory categories for specialised lending using the slotting criteria provided in Appendix CA-7, each supervisory category broadly corresponds to a range of external credit assessments as outlined below.

        Strong Good Satisfactory Weak Default
        BBB- or better BB+ or BB BB- or B+ B to C- Not applicable
        Apr 08

      • CA-5.3.8

        Banks that meet the requirements for the estimation of PD will be able to use the general foundation approach for the corporate asset class to derive risk weights for SL sub- classes.

        Apr 08

    • Risk Weights for HVCRE

      • CA-5.3.9

        Banks that do not meet the requirements for estimation of PD, must map their internal grades to five supervisory categories, each of which is associated with a specific risk weight. The slotting criteria on which this mapping must be based are the same as those for IPRE, as provided in Appendix CA-7. The risk weights associated with each category are:

        Supervisory Categories and UL Risk Weights for High-volatility Commercial Real Estate

        Strong Good Satisfactory Weak Default
        95% 120% 140% 250% 0%
        Amended: April 2011
        Apr 08

      • CA-5.3.10

        As indicated in paragraph CA-5.3.7, each supervisory category broadly corresponds to a range of external credit assessments.

        Apr 08

      • CA-5.3.11

        Banks that meet the requirements for the estimation of PD will use the same formula for the derivation of risk weights that is used for other SL exposures, except that they will apply the following asset correlation formula:

        Correlation (R) = 0.12 x (1 - EXP(-50 × PD)) / (1 - EXP(-50)) + 0.30 x [1 - (1 - EXP(-50 × PD)) / (1 - EXP(-50))]

        Apr 08