The IRB Approach Of Policy Bank Under The New Basle Accord

The IRB approach is a method which is raised by The Basel Committee in the New Basle Accord to allow banks measure their credit risk by using their internal historical data. The banks with advanced technique of risk management will benefit from using the IRB approach by managing much asset with the same amount of capital. The contents of the IRB approach include categorization of banking-book exposures, estimating risk components like PD, LGD, EAD and M for each kind of assets, calculating the capital requirement of the credit risk of banking-book exposures.As the policy bank is different from the commercial bank in goal, production , client and assets categorization, the IRB approach of the policy bank has its specialty which reflect in three main aspect: Not only includes obligor rating but also includes geography rating and industry rating, the method and standard of the obligor rating aim at corporation client with big loan, has to use external data to estimate the risk components owing to the lack of internal data.Because the main risk of the policy bank in China is credit risk, the investigation of the IRB approach of the policy bank may estimate its credit risk exactly and calculate its capital adequacy and loss loan reserve. The IRB approach of the policy bank has abroad usage in portfolio management, loan pricing, EC allocation and performance assessing.