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26. Illustrative Risk Weights Calculated Under the Internal Ratings-Based (IRB) Approach to Credit Risk
No: 44047144
Date(g): 27/12/2022 | Date(h): 4/6/1444
Status: In-Force
Effective from Jan 01 2023 - Dec 31 2022 To view other versions open the versions tab on the right
26.1
Table 1 provides illustrative risk weights calculated for four exposure types under the IRB approach to credit risk. Each set of risk weights for unexpected loss (UL) was produced using the appropriate risk-weight function of the risk-weight functions set out in Chapter 11 of Minimum Capital Requirements for Credit Risk. The inputs used to calculate the illustrative risk weights include measures of the probability of default (PD), loss-given-default (LGD), and an assumed effective maturity (M) of 2.5 years, where applicable.
26.2
A firm-size adjustment applies to exposures made to small or medium-sized entity borrowers (defined as corporate exposures where the reported sales for the consolidated group of which the firm is a part is less than €50 million). Accordingly, the firm-size adjustment was made in determining the second set of risk weights provided in column two for corporate exposures given that the turnover of the firm receiving the exposure is assumed to be €5 million.
