Revised partial use: Banking supervision on the right track

Martin Neisen and Hermann Schulte-Mattler
Additional contact information
Martin Neisen: PricewaterhouseCoopers, Germany
Hermann Schulte-Mattler: Professor of Finance, Dortmund University of Applied Sciences, Germany

Journal of Risk Management in Financial Institutions, 2019, vol. 13, issue 1, 70-80

Abstract: The new partial use philosophy of the European Banking Authority (EBA) could be the first step towards revitalising the internal ratings-based approach (IRBA) in the area of credit risk. Banks currently using or that wish to use the IRBA will benefit from the greater flexibility and foreseen cost reductions. As part of the Basel III finalising postcrisis reforms document — often referred to as Basel IV — the Basel Committee on Banking Supervision (BCBS) fundamentally changes the requirements on the parallel use of the IRBA and the standardised approach for credit risk and gives banks much more flexibility in the adequate application of both approaches. The EBA supports this change in a paper on the implementation of Basel IV, published in August 2019 (EBA-Op-2019-09a). The new supervisory view of the partial use could be the first step towards reviving the IRBA. It will bring about a sustained improvement in banks’ risk management in the important area of credit risk, as more risk-sensitive estimation methods are used.

Keywords: Basel III finalising document; Basel IV framework; credit risk; internal ratings-based approach; CRR; standardised approach (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hstalks.com/article/5378/download/ (application/pdf)
https://hstalks.com/article/5378/ (text/html)
Requires a paid subscription for full access.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2019:v:13:i:1:p:70-80

Access Statistics for this article

More articles in Journal of Risk Management in Financial Institutions from Henry Stewart Publications
Bibliographic data for series maintained by Henry Stewart Talks ().