basel-rwa-credit

STANDARDISED APPROACH — RISK WEIGHT TABLE

Sovereign and Central Bank Exposures

Credit Assessment	Risk Weight
AAA to AA−	0%
A+ to A−	20%
BBB+ to BBB−	50%
BB+ to B−	100%
Below B−	150%
Unrated	100%

Domestic currency sovereign claims (where funded in same currency): 0% (national discretion).

Banks and Securities Firms

Credit Assessment	Short-term (≤3M)	Long-term
AAA to AA−	20%	20%
A+ to A−	20%	50%
BBB+ to BBB−	20%	50%
BB+ to B−	50%	100%
Below B−	150%	150%
Unrated	20%	50%

Corporate Exposures

Credit Assessment	Risk Weight
AAA to AA−	20%
A+ to A−	50%
BBB+ to BB−	75% (Basel IV; 100% pre-Basel IV)
Below BB−	150%
Unrated	100%

Investment-grade corporates (BCBS Basel IV): 65% if criteria met. SME corporate (qualifying): 75% (SME supporting factor may apply — check jurisdiction overlay).

Retail Exposures

Qualifying revolving retail: 45% Other retail (consumer loans, personal loans): 75% Qualifying SME retail: 75%

Residential Mortgage Exposures (Basel IV LTV-based)

LTV	Risk Weight (General)
≤ 50%	20%
50–60%	25%
60–80%	30%
80–90%	40%
90–100%	50%
> 100%	70%

Note: Pre-Basel IV (current in many jurisdictions): flat 35–50%. Load jurisdiction overlay to confirm whether Basel IV LTV table has been implemented.

Commercial Real Estate (Basel IV)

Income-producing CRE: 75% (LTV-based table in Basel IV, higher than residential) Land acquisition, development, construction (ADC): 150% CRE securing a residential or SME loan (ancillary): follows the underlying loan RW. Check jurisdiction overlay — CRE risk weights vary significantly.

Past Due and Stage 3 Exposures

Unsecured past-due (>90 days, net of specific provisions): Provision < 20% of outstanding: 150% Provision ≥ 20% of outstanding: 100% Provision ≥ 50% of outstanding: 50%

Off-Balance-Sheet Credit Conversion Factors (CCF)

Facility Type	CCF
Unconditionally cancellable commitments	10%
Commitments with original maturity ≤ 1 year	20%
Commitments with original maturity > 1 year	40%
Note issuance facilities / revolving underwriting	50%
Direct credit substitutes (guarantees)	100%
Forward asset purchases	100%

EAD for off-balance-sheet = Notional amount × CCF Then apply the risk weight for the underlying exposure type.

CREDIT RWA CALCULATION

Credit RWA = Σ (EAD × Risk Weight) For off-balance-sheet: EAD = Drawn + (Undrawn × CCF), then × Risk Weight.

IRB APPROACH (for reference)

IRB RWA = K × 12.5 × EAD Where K = WCDR × LGD − PD × LGD (simplified form of Basel IRB formula) WCDR = Conditional PD under the worst-case systematic risk scenario Advanced IRB: bank supplies PD, LGD, EAD Foundation IRB: bank supplies PD; regulator supplies LGD and EAD Basel IV restrictions: AIRB no longer permitted for banks and large corporates.

CREDIT RISK MITIGATION (CRM)

Eligible financial collateral: cash, sovereign bonds, bank bonds, equities in main index CRM reduces EAD (collateralised portion gets lower or 0% risk weight). Guarantees: substitute risk weight of guarantor for the guaranteed portion. Netting: bilateral netting agreements reduce gross derivative exposure to net.

WORKED EXAMPLE — CREDIT RWA CALCULATION

Portfolio: Mixed lending book (simplified)

Exposure Class	Gross Exposure (M)	CCF (if OBS)	EAD (M)	Risk Weight	RWA (M)
Domestic sovereign (AAA, domestic ccy)	500	—	500	0%	0
Bank (A+ rated, long-term)	200	—	200	50%	100
Corporate (BBB+ rated)	300	—	300	75%	225
Corporate (unrated)	150	—	150	100%	150
Residential mortgage (LTV 70%)	400	—	400	30%	120
Retail revolving	100	—	100	45%	45
Undrawn commitment > 1yr (corporate, BBB)	200	40%	80	75%	60
Guarantee (on BB- rated entity)	50	100%	50	150%	75
Total	1,900		1,780		775

Credit RWA = 775M At 8% total capital requirement: minimum capital = 775 x 8% = 62M

OUTPUT FORMAT — CREDIT RWA SUMMARY

CREDIT RWA SUMMARY
Entity:             [Bank / Group name]
Reporting Date:     [YYYY-MM-DD]
Approach:           [SA / F-IRB / A-IRB]
Jurisdiction:       [Overlay applied: UK PRA / EU CRR / US Fed / etc.]

EXPOSURE BREAKDOWN (M):
  Sovereigns:                    EAD [X]    RW [X%]    RWA [X]
  Banks:                         EAD [X]    RW [X%]    RWA [X]
  Corporates:                   EAD [X]    RW [X%]    RWA [X]
  Retail:                       EAD [X]    RW [X%]    RWA [X]
  Residential Mortgage:         EAD [X]    RW [X%]    RWA [X]
  Commercial Real Estate:       EAD [X]    RW [X%]    RWA [X]
  Past Due:                     EAD [X]    RW [X%]    RWA [X]
  Off-Balance-Sheet:            Notional [X]  CCF [X%]  EAD [X]  RWA [X]

TOTAL CREDIT RWA:               [Amount]
  of which Output Floor (if IRB): [Amount if binding]

CRM APPLIED:
  Eligible collateral:          [Amount]
  Guarantees (substitution):    [Amount]
  RWA reduction from CRM:       [Amount]

NEVER DO THESE

• NEVER apply the 0% domestic currency sovereign risk weight to foreign currency sovereign exposures — the 0% treatment is only for domestic currency claims funded in the same currency
• NEVER use Basel IV LTV-based residential mortgage risk weights without confirming that the jurisdiction has implemented them — many jurisdictions still use the flat 35% pre-Basel IV weight
• NEVER omit the CCF step for off-balance-sheet exposures — EAD must be calculated as Notional x CCF before applying the risk weight
• NEVER apply the SME supporting factor without verifying the exposure qualifies under the jurisdiction's SME definition (turnover threshold, exposure cap)
• NEVER ignore the Basel IV output floor for IRB banks — IRB credit RWA must be >= 72.5% of SA RWA for the same portfolio

ALL OUTPUTS REQUIRE REVIEW BY A QUALIFIED PROFESSIONAL BEFORE USE IN REGULATORY FILINGS OR BUSINESS DECISIONS.