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The Management Of Credit Risk According To Internal Ratings- Based Approach

Author

Listed:
  • Balogh Peter

    ("Babes-Bolyai" University, Cluj-Napoca)

  • BOLOCAN DRAGOS-MIHAIL

    ("Babes-Bolyai" University, Cluj-Napoca)

Abstract

The internal ratings based approach (IRB Approach) was created as part of Basel II replacing the original Basle Accord of 1988 (Basle I) in an effort to create a better framework for regulating bank capital. This paper covers the methodology and components of the IRB Approach used to determine capital requirements for credit risk. Such an approach, which relies heavily upon a bank's internal assessment of its counterparties and exposures, can secure two key objectives consistent with those which support the wider review of The New Basel Capital Accord.. IRB approach should promote safety and soundness in the financial system and, consistent with providing incentive compatibility, that the structure and requirements of the IRB approach do not impinge upon or undermine banks' well-established lending and credit risk management practices

Suggested Citation

  • Balogh Peter & BOLOCAN DRAGOS-MIHAIL, 2010. "The Management Of Credit Risk According To Internal Ratings- Based Approach," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 665-671, December.
    • Handle: RePEc:ora:journl:v:1:y:2010:i:2:p:665-671
    as

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    File URL: http://anale.steconomiceuoradea.ro/volume/2010/n2/105.pdf
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    References listed on IDEAS

    as
    1. Miru, Oana Maria & Hetes-Gavra, Roxana & Nicolescu, Ana Cristina, 2008. "Applying Basel II Requirements in Romania," MPRA Paper 12613, University Library of Munich, Germany.
    2. Kim, Joocheol & Kim, KiHyung, 2006. "Loss Given Default Modelling under the Asymptotic Single Risk Factor Assumption," MPRA Paper 860, University Library of Munich, Germany.
    3. Marianne Ojo, 2010. "Risk management by the Basel Committee," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 18(4), pages 305-315, November.
    4. repec:pra:mprapa:15545 is not listed on IDEAS
    5. Ojo, Marianne, 2009. "The responsive approach by the Basel Committee (on Banking Supervision) to regulation: Meta risk regulation, the Internal Ratings Based Approaches and the Advanced Measurement Approaches," MPRA Paper 16752, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Basel II; credit risk; internal rating based approach;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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