The BBA haws responded to the PRA’s consultation clarifying its expectations for banks seeking to progress to the Internal Ratings Based approach to assessing credit risk weighted assets

We welcomed the clarification of the process but recommended a series of sequential ‘stage gates’ that would help IRB aspirant banks understand the modular approach better.

Whilst understanding the need for conservatism we observed that the reference points proposed in the calculation of Probability of Possession Given Default were too conservative.

Finally we highlighted the potential for double counting between Expected Credit Losses under IFRS 9 and IRB modelling as an important issue that would merit further discussion with the PRA.

Please read the full response via the link below.

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