Global Standardized Risk-Based Capital Approach
The Basel Committee has finalized changes to the risk-based capital standardized approach (SA) designed to make the SA the most likely approach banks will use and, where internal models apply, a base against which the advanced approach can be more easily judged. Other aspects of the new standards1 revise the advanced internal-ratings based (IRB) requirements and set an “output floor” designed to limit reliance on internal models. Taken together, the changes to the SA and output floor redefine the Basel III credit-risk rules so substantively as to lead many to characterize the new framework as “Basel IV.”

CAPITAL221.pdf