Standardised approach (credit risk)
What is standardised approach?
In the context of credit risk management, it refers to a set of recommendations proposed by the Basel Committee on Banking Supervision (BCBS), which sets the global standard on how much capital banks should hold.
Where have you heard about standardised approach?
Taking a standardised approach to credit risk has big implications for banks, which have been under much more scrutiny the world over since the 2008 credit crisis. Under the approach, banks are required to be a lot more rigorous in calculating their capital requirements for credit risk.
What you need to know about standardised approach.
The BSBC provides a forum for regular co-operation on banking supervisory matters designed to improve financial stability worldwide. Basel III is a far-reaching set of reforms developed by the BCBS to strengthen the supervision and risk management of the banking sector. This includes taking a standardised approach to credit risk so everyone is singing from the same hymn sheet.
The latest proposals include reducing reliance on external credit ratings and a substantial strengthening of the counterparty credit risk framework.
Find out more about standardised approach.
Read about the Basel Committee on Banking Supervision to learn more about the organisation's role.
