Content

This Directive is mandatory for all European banks and investment firms. Banks are required to hold sufficient capital to protect them against Unexpected Loss. In the Basel III framework, the amount of capital that a specific bank should hold is calculated on the basis of risk-weighted exposure amount (RWA) formulas. The RWA depends on several risk parameters which can be estimated through internal models under the IRB approach: Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD) and – in some cases – Effective Maturity.

Learning Goals

• Have a broad understanding of internal models and their regulation and supervision
• Know the relevance IRB roll-out plans and the design of rating systems
• Identify the main elements of banking supervision in Europe
• Have an overview of and know how to read the capital requirements regulations and directive, implementing and regulatory technical standards

Target Audience

• IRB model developers and validators with little or no prior experience in the field

Prerequisites

The material will be taught in English. Participants are advised to come equipped with basic understanding of:

Schedule

The module will be taught over2 sessions of each 4 hours. The track schedule will be planned in coordination with the client based on the selection of modules.

Example case studies

For this module, examples of case studies are

• Given the outline of an internal models-based approach, identify relevant, material and critical regulatory requirements and challenges
• Guided debates concerning

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