Consolidated Basel Framework - calculation of RWA for credit risk (CRE)
Last updated: December 2022
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Banks can choose between two broad methodologies for calculating their risk-based capital requirements for credit risk. The first is the standardised approach which assigns standardised risk weights to exposures. The second risk-weighted capital treatment for measuring credit risk, the internal ratings-based (IRB) approach, allows banks to use their internal rating systems for credit risk, subject to the explicit approval of the bank’s supervisor.