BCBS Issues Consultative Document Regarding Revisions to Standardized Approach for Credit Risk

The Basel Committee on Banking Supervision ("BCBS") published a consultative paper titled "Revisions to the Standardized Approach for Credit Risk."

According to the BCBS, the proposed revisions seek to strengthen the existing regulatory capital standards in several ways, including by:

• reducing reliance on external credit ratings;
• enhancing granularity and risk sensitivity;
• updating risk weight calibrations;
• increasing comparability with the internal ratings-based approach with respect to the definition and treatment of similar exposures; and
• improving clarity on the application of the standards.

Comments on the consultative document and proposed standards text are due by March 27, 2015.

Regarding the consultative paper, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (the "Agencies") issued a joint statement in which they stated that they will consider the proposals outlined in the paper "with the goal of developing a stronger and more transparent risk-based capital framework for the largest institutions." The Agencies noted that any change to the U.S. risk-based capital rules as a result of proposals in this or subsequent papers released by the BCBS would be considered in a manner that is consistent with the U.S. notice-and-comment process.

See: BCBS Consultative Document; BCBS Press Release. See also: FRB Press Release; FDIC Press Release; OCC Press Release.