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  • 1. Composition of Minimum Requirements

    • CA-5.8.2

      To be eligible for the IRB approach a bank must demonstrate to CBB that it meets certain minimum requirements at the outset and on an ongoing basis. Many of these requirements are in the form of objectives that a qualifying bank's risk rating systems must fulfill. The focus is on banks' abilities to rank order and quantify risk in a consistent, reliable and valid fashion.

      Apr 08

    • CA-5.8.3

      The overarching principle behind these requirements is that rating and risk estimation systems and processes provide for a meaningful assessment of borrower and transaction characteristics; a meaningful differentiation of risk; and reasonably accurate and consistent quantitative estimates of risk. Furthermore, the systems and processes must be consistent with internal use of these estimates. CBB will periodically develop detailed review procedures to ensure that banks' systems and controls are adequate to serve as the basis for the IRB approach.

      Apr 08

    • CA-5.8.4

      The minimum requirements set out in this section apply to all asset classes unless noted otherwise. The standards related to the process of assigning exposures to borrower or facility grades (and the related oversight, validation, etc.) apply equally to the process of assigning retail exposures to pools of homogenous exposures, unless noted otherwise.

      Apr 08

    • CA-5.8.5

      The minimum requirements set out in this section apply to both foundation and advanced approaches unless noted otherwise. Generally, all IRB banks must produce their own estimates of PD49 and must adhere to the overall requirements for rating system design, operations, controls, and corporate governance, as well as the requisite requirements for estimation and validation of PD measures. Banks using their own estimates of LGD and EAD for retail exposures must also meet the incremental minimum requirements for these risk factors included in paragraphs CA-5.8.79 to CA-5.8.100.

      49 Banks are not required to produce their own estimates of PD for certain equity exposures and certain exposures that fall within the SL sub-class.

      Apr 08