Under the IRB approach for corporate credits, banks will be permitted to separately distinguish exposures to SME borrowers (defined as corporate exposures, being an unlisted or unincorporated enterprise where the reported annual sales for the consolidated group of which the firm is a part is less than BD 2 million) from those to large firms. A firm-size adjustment (i.e. 0.04 x (1 - (S - 0.2)/1.8)) is made to the corporate risk weight formula for exposures to SME borrowers. S is expressed as total annual sales in millions of BD with values of S falling in the range of equal to or less than BD 2 million or greater than or equal to BD 0.2 million. Reported sales of less than 0.2 million BD will be treated as if they were equivalent to 0.2 million BD for the purposes of the firm-size adjustment for SME borrowers.

Correlation (R) = 0.12 × (1 - EXP(-50 × PD)) / (1 - EXP(-50)) + 0.24 × [1 - (1 - EXP(-50 × PD)) / (1 - EXP(-50))] - 0.04 × (1 - (S-0.2) / 1.8)