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Revised partial use: Banking supervision on the right track
Journal of Risk Management in Financial Institutions,
13
(1),
70-80
(2019)
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
The full article is available to subscribers to the journal.
Author's Biography
Martin Neisen is a Partner in the Regulatory Management department and a Global Basel IV Leader at PricewaterhouseCoopers (PwC) in Frankfurt am Main, responsible for coordinating PwC’s initiatives with respect to Basel IV implementation. These initiatives cover all aspects regarding the impact and execution of Basel IV, including strategic implications, standardised approaches, internal models, business implications, IT (information technology) as well as knowledge management. He leads the Regulatory Management department in PwC Europe.
Hermann Schulte-Mattler is a Professor of Finance at the Dortmund University of Applied Sciences. Previously he worked for many years in the banking regulation division of the Federal Association of German Banks. Following studies in Economics at the University of Duisburg-Essen and Ohio State University and subsequent employment at a major bank, he studied in the PhD finance programme at the Wharton School at the University of Pennsylvania. He is the author of an extraordinary number of publications on the topic of international harmonisation of banking supervision rules and risk management. Furthermore, he is the co-publisher of a leading commentary on the German Banking Act and implementing regulations.
Citation
Neisen, Martin and Schulte-Mattler, Hermann (2019, December 1). Revised partial use: Banking supervision on the right track. In the Journal of Risk Management in Financial Institutions, Volume 13, Issue 1. https://doi.org/10.69554/INPD3577.
© Henry Stewart
Publications LLP
Publications LLP