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  • — Standards for Retail Exposures

    • CA-5.8.14

      Rating systems for retail exposures must be oriented to both borrower and transaction risk, and must capture all relevant borrower and transaction characteristics. Banks must assign each exposure that falls within the definition of retail for IRB purposes into a particular pool. Banks must demonstrate that this process provides for a meaningful differentiation of risk, provides for a grouping of sufficiently homogenous exposures, and allows for accurate and consistent estimation of loss characteristics at pool level.

      Apr 08

    • CA-5.8.15

      For each pool, banks must estimate PD, LGD, and EAD. Multiple pools may share identical PD, LGD and EAD estimates. At a minimum, banks must consider the following risk drivers when assigning exposures to a pool:

      (a) Borrower risk characteristics (e.g. borrower type, demographics such as age/occupation);
      (b) Transaction risk characteristics, including product and/or collateral types (e.g. loan to value measures, seasoning, guarantees; and seniority (first vs. second lien)). Banks must explicitly address cross-collateral provisions where present.
      (c) Delinquency of exposure: Banks are expected to separately identify exposures that are delinquent and those that are not.
      Apr 08