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A key objective of the revisions incorporated into the framework is to reduce excessive variability of risk-weighted assets (RWA)

The revisions to the regulatory framework will help restore credibility in the calculation of RWA. They include the following elements:

  • a revised standardised approach for credit risk, which will improve the robustness and risk sensitivity of the existing approach;

  • revisions to the internal ratings-based approach for credit risk, where the use of the most advanced internally modelled approaches for low-default portfolios will be limited;

  • revisions to the credit valuation adjustment (CVA) framework, including the removal of the internally modelled approach and the introduction of a revised standardised approach;

  • a revised standardised approach for operational risk, which will replace the existing standardised approaches and the advanced measurement approaches;

  • revisions to the measurement of the leverage ratio and a leverage ratio buffer for global systemically important banks (G-SIBs), which will take the form of a Tier 1 capital buffer set at 50% of a G-SIB's risk-weighted capital buffer; and

  • an aggregate output floor, which will ensure that banks' RWA generated by internal models are no lower than 72.5% of RWA as calculated by the Basel III framework's standardised approaches. Banks will also be required to disclose their RWA based on these standardised approaches.