Internal Ratings Based (IRB) Discussion

UK banks are currently re-evaluating their FIRB vs. AIRB decisions. There is not yet clarity around PRA’s views around their acceptance around having “partial FIRB” or if banks would go to FIRB for all Wholesale (across turnover and country segments). This could be a point to highlight to PRA if there is going to be clearer guidance in the near future.

Hi, PRA refer to Banks as "data rich" and reserve the term "LDP" to portfolios with fewer than 20 defaults; I presume you have more than 20 Bank defaults. For LDPs, PRA expect particular calibration techniques to determine long-run average default rate such as Pluto-Tasche.

Hi All - my experience with the ECB is that qualitative factors are fine within IRB models - models have now been aprpoved by the ECB with a reasonable range of qual factors included.

A noteworthy oddity potentially affecting the choice of modelling approach: In the slotting approach, the risk mitigating effect of ECA coverage cannot be recognised. I.e. for transactions with ECA coverage, there is a significant over-estimation of risk in the slotting approach. On the other hand, FIRB and AIRB as well as the standardized approach do allow for consideration of ECA coverage.

Hello I have seen corporate model have country specific sub models, to reflect political dependencies and support or changes in legislation, e.g., the France care home scandal and changes in the legislation In the RSU corporate model one of the submodules is a Merton model, to reflect the market movements