The European Banking Authority (EBA) has published final draft regulatory technical standards (RTS) on the specification of the assessment methodology for competent authorities regarding compliance of an institution with the requirements to use the internal ratings-based (IRB) approach in accordance with Articles 144(2), 173(3) and 180(3)(b) of the Capital Requirements Regulation (Regulation 575/2013) (CRR).
The final draft RTS provide a mapping of the minimum IRB requirements as laid down in Chapter 3, Title II, Part Three of the CRR, into fourteen chapters. Each chapter starts with a brief description of the assessment criteria to be used by competent authorities relating to verification requests and of the methods to be used by competent authorities in this context. Under the IRB approach, institutions determine their own funds requirements for credit risk, taking into account their own estimates of risk parameters. Competent authorities may, under the CRR, permit institutions to use the IRB approach, provided that the relevant conditions set out in the CRR are met.
The draft RTS are available here and will now be submitted to the European Commission for endorsement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.