18
Exposures and Risk Weights
IRB Banks
•General Rules
•IRB banks will calculate their required regulatory capital on the basis of certain risk components
§Foundation IRB banks will determine some of the risk components internally and will use a supervisory value for others
§Advanced IRB banks will determine all of the risk components pursuant to their own internal systems
•Risk components include probability of default (PD), loss given default (LGD), exposure at default (EAD) and effective maturity (M)
•Risk components will vary depending on the asset class
§Corporate: Treated differently are SME exposures and specialised lending exposures (project finance, object finance, commodities finance, income-producing real estate and high-volatility commercial real estate)
§Sovereign
§Banks
§Retail (defined differently than for standardised banks)
§Equity
Overview