Basel II Compliance

Quantitative Impact Study (QIS)

The feedback form the industry on the second consultative document, following which the Basel Committee issued the third Quantitative Impact Study (QIS3) in October 2002. This addressed the concerns form the industry and consequently significant changes were made to the previous proposals. 

The main changes for Retail Portfolios are;  

  1. The application of default definition at product or facility level rather than customer level.

  2. The Retail Portfolios were segmented as follows;

Qualifying Revolving Exposures

Residential Mortgage Exposures

Other Retail Exposures

  1. Separate risk weight functions are given for each segment which include varying degrees of exposure correlation.

  2. The inclusion of SME's with in the Retail Definition of exposure form enterprises where the bank has a total exposure of less then a million euros.

  3. At the supervisor's discretion, the relaxation of minimum data requirements for implementation of of Advanced Internal Ratings Based (IRB) approach.

  4. The allowance of scoring models including behavioural scoring to predict the PD, EAD and LGD.

                                     More     Back

SLA Consulting Limited

The Risk and Information Strategist