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These final draft Regulatory Technical Standards (RTS) provide a mapping of the minimum Internal Ratings Based (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 as regards verification requests and of the methods to be used by competent authorities in this context.
Among others, clarifications are provided on the independence of validation function from the credit risk control unit, on the calculation of own-LGD estimates as default-weighted averages and on the process of calculation of the difference between expected loss amounts and credit risk adjustments.
The European Banking Authority’s(EBA) studies on the comparability of risk weighted exposure amounts (RWAs) have shown that different supervisory practices can contribute significantly to non-risk-based differences in capital requirements when calculated according to the IRB Approach.
The draft RTS are part of the EBA's work on supervisory convergence, which is key for ensuring comparability of models' outcomes and restoring public confidence in the use of such models for regulatory purposes. These final draft RTS are considered an integral part of the EBA's Plan of a regulatory review of the IRB Approach.
Regulatory Technical Standards on assessment methodology for IRB_approach