Basel II identifies two methodologies for calculating capital requirements for credit risk. This module sets out the rules relating to the standardized approach. The internal rating-based approach (IRB) and securitization framework are presented in a separate module. The standardized approach makes use of external credit assessments⁶ as a means of calculating the risk weight for an exposure to a counterparty.

⁶ The notations follow the methodology used by one institution, Standard & Poor's. The use of Standard & Poor's credit ratings is an example only; those of some other external credit assessment institutions could equally well be used. The ratings used throughout this document, therefore, do not express any preferences or determinations on external assessment institutions by CBB.