Status: Will be live at 03/21/2016 00:00
Response to the BCBS's Second Consultation on the SA for Credit Risk
The IIF recently submitted a joint letter in response to the Basel Committee's consultation on revisions to the Standardized Approach for Credit Risk (SA). The industry understands the challenging nature of the work in revising the credit risk SA, especially since the new SA framework is intended to be applicable across all types of banks. As such, we are grateful for the iterative process being undertaken to ensure the ultimate approach balances the objectives of the Committee with the practical considerations of implementing fundamental changes to a core element of the Basel framework which will ultimately interact with the other components of the regulatory capital regime. Taking into account this valuable and considered work, we believe, however, that aspects of the overall proposal would benefit from further review and amendment to ensure the mitigation of potential unintended consequences for downstream lending activity. We outline these issues in discussion on general themes relating to the application of risk sensitivity in capital rules and on specific exposure classes impacted by the new consultation.