Ahead of the 3rd Edition IRB Models, the Standardised Approach for Credit Risk, and Capital Floors Conference, we spoke with Gottfried Gruber, Senior Examiner, On-Site Supervision Division at Oesterreichische Nationalbank, about how IRB models can be best developed for low default portfolios.
When IRB models were introduced by Basel II around 2004 the idea was to achieve a more risk sensitive approach to calculate capital requirements for credit risk. The Basel Committee then recognized the importance of the performance of IRB models on the one hand and of the comparability across credit institutions on the other hand.
What we have been observing, is that, increasing complexity in financial products and the individual choices of credit institutions in scope, as well as application of IRB models resulted in a high variability of risk-weighted assets.
In retrospect, many aspects which seemed unproblematic ostensibly, turned out to be fraught with problems.
These issues have been addressed by regulation, which now appears more forward-looking and future-oriented than previously.
Nevertheless, a reduction in complexity must not soften the substance of current regulation, in particular, proportionality should be more pronounced. Proportionality, as applied in a correct manner, could foster a better relation between regulation and the risks of various business models. Ideally, one would follow Einstein’s quote “Everything should be made as simple as possible, but not simpler.”
About the speaker:
Gottfried Gruber is senior auditor at the Oesterreichische Nationalbank and is responsible for on-site inspections of credit institutions in the LSI area. Within that scope he also conducts inspections of IRB models in Austrian credit institutions applied in Pillar I as well as in Pillar II.
Gottfried holds a doctoral degree in Social and Economic Sciences from the Vienna University of Economics and Business (WU Vienna).
This marcus evans event will enable banks to discuss the latest updates from the Basel committee and how banks are developing or amending their credit risk models in order to comply with the requirements, as well as looking in detail at both the benefits and the issues with the use of standardised models, and the lessons that can be learned from the ECB’s TRIM exercise. The event will also look at how a bank’s credit risk modelling can be streamlined by looking at IRB models, IFRS9 credit risk modelling and the ICAAP in an integrated approach, in addition to discussing remaining key issues before the deadline for the IFRS9 implementation in January. By discussing the issues in the credit risk modelling area today, individual firms, as well as the industry as a whole, will be able to proceed in the knowledge that everyone is moving forward together.
The 3rd Edition IRB Models, the Standardised Approach for Credit Risk, and Capital Floors Conference will take place from the 27th until the 28th of November 2017 in London, UK.
Fore more information please contact Yiota Andreou at Yiotaa@marcusevanscy.com or at +357 22 849 404