1. Risk-weighted Assets for Default Risk
CA-5.6.2
For receivables belonging unambiguously to one asset class, the IRB risk weight for default risk is based on the risk-weight function applicable to that particular exposure type, as long as the bank meets the qualification standards for this particular risk-weight function. For example, if banks cannot comply with the standards for qualifying revolving retail exposures (defined in paragraph CA-5.2.21), they should use the risk-weight function for other retail exposures. For hybrid pools containing mixtures of exposure types, if the purchasing bank cannot separate the exposures by type, the risk-weight function producing the highest capital requirements for the exposure types in the receivable pool applies.
Apr 08(i) Purchased Retail Receivables
CA-5.6.3
For purchased retail receivables, a bank must meet the risk quantification standards for retail exposures but can utilise external and internal reference data to estimate the PDs and LGDs. The estimates for PD and LGD (or EL) must be calculated for the receivables on a stand-alone basis; that is, without regard to any assumption of recourse or guarantees from the seller or other parties.
Apr 08(ii) Purchased Corporate Receivables
CA-5.6.4
For purchased corporate receivables, the purchasing bank is required to apply the existing IRB risk quantification standards for the bottom-up approach.
Apr 08
