By Bank for International Settlements
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Additional resources for Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework - Comprehensive Version
28 95. Banks must disclose ECAIs that they use for the risk weighting of their assets by type of claims, the risk weights associated with the particular rating grades as determined by supervisors through the mapping process as well as the aggregated risk-weighted assets for each risk weight based on the assessments of each eligible ECAI. 2. Multiple assessments 96. If there is only one assessment by an ECAI chosen by a bank for a particular claim, that assessment should be used to determine the risk weight of the claim.
Therefore, banks are encouraged to develop, implement and improve systems for tracking and monitoring the credit risk exposure arising from unsettled transactions as appropriate for producing management information that facilitates action on a timely basis. Furthermore, when such transactions are not processed through a delivery-versus-payment (DvP) or payment-versus-payment (PvP) mechanism, banks must calculate a capital charge as set forth in Annex 3 of this Framework. B. External credit assessment 1.
The two options are summarised in the tables below. Option 1 Credit assessment of Sovereign AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- Below B- Unrated Risk weight under Option 1 20% 50% 100% 100% 150% 100% Credit assessment of Banks AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- Below B- Unrated Risk weight under Option 2 20% 50% 50% 100% 150% 50% Risk weight for short-term claims26 under Option 2 20% 20% 20% 50% 150% 20% Option 2 64. When the national supervisor has chosen to apply the preferential treatment for claims on the sovereign as described in paragraph 54, it can also assign, under both options 1 and 2, a risk weight that is one category less favourable than that assigned to claims on the sovereign, subject to a floor of 20%, to claims on banks of an original maturity of 3 months or less denominated and funded in the domestic currency.
Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework - Comprehensive Version by Bank for International Settlements