After banks have calculated their counterparty credit risk exposures, or EAD, according to the methods outlined above, they must apply the standardized approach to credit risk, the IRB approach to credit risk, or, in the case of the exposures to CCPs, the capital requirements set out in Chapter 8 of this framework. For counterparties to which the bank applies the standardized approach, the counterparty credit risk exposure amount will be risk weighted according to the relevant risk weight of the counterparty. For counterparties to which the bank applies the IRB approach, the counterparty credit risk exposure amount defines the EAD that is used within the IRB approach to determine risk- weighted assets (RWA) and expected loss amounts.
5.13.
For IRB exposures, the risk weights applied to OTC derivative exposures should be calculated with the full maturity adjustment (as defined in paragraph 6 of chapter 11 of the Minimum Capital Requirements for Credit Risk) capped at 1 for each netting set for which the bank calculates CVA capital under either the basic approach (BA-CVA) or the standardized approach (SA-CVA), as provided in 11.12.
5.14.
For banks that have SAMA approval to use IMM, RWA for credit risk must be calculated as the higher of:
(1)
the sum of RWA calculated using Internal Models Method (IMM) with current parameter calibrations; and
(2)
the sum of RWA calculated using IMM with stressed parameter calibrations.
