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ISDA International Swaps and Derivatives Association |
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For Immediate
Release WedneThurssday,
December 198,
2002
For More Information, Please
Contact:
Stacy Carey, ISDA New York,
(212) 901-6000; scarey@isda.org
Kathie Beans, RMA, (215) 446-4095; kbeans@rmahq.org
___________Simon Wills, BBA, + 44 ((44-207) 216-8800 PHONE, Simon.Wills@bba.org.uk
ISDA,
RMA, BBA LAUNCH
INTERNAL RATINGS VALIDATION
SURVEY
NEW YORK,
Thursday, December 19, 2002 - The International Swaps and Derivatives Association
(ISDA), the Risk Management Association (RMA) and the British Bankers
Association (BBA) today launched a survey of the validation of banks’
internal credit ratings, a key element underlying the Internal Ratings-Based
(IRB) approach in the New Basel Capital Accord. The Survey will examine validation processes for
specific asset classes covered in the New Accord, including corporate
exposures, specialized lending, small- and medium-sized entities, bank exposures,
retail, and sovereigns. It will be conducted interactively through web-based
technology and through participant interviews. Survey participants will
complete the questionnaires during January. The results and a list of
participating organizations will be available in April 2003.
PricewaterhouseCoopers designed and are consultants to the Survey. The
Associations decided to undertake the Survey after the Basel Committee on
Banking Supervision, in its Second Consultative Package, set out the minimum
requirements financial institutions must meet in order to use the IRB
approach. One of the requirements will be for banks to demonstrate their
capabilities to validate their estimates of default probabilities and the
techniques used to assign internal ratings. Specific standards for
validation, however, will be left to the discretion of national regulators.
The Survey is intended to provide guidance to regulators and the industry in
this area of New Accord implementation. The
Survey, which has the active support of major financial institutions and has
been encouraged by leading financial regulators, will not recommend the
adoption of specific methodologies or standards. Instead, the information
gained through this research will provide financial institutions and
regulators a better understanding of the range of validation techniques in
use and how to implement them. The
results will benefit financial institutions by facilitating the sharing of
knowledge about current validation techniques and providing a benchmark to
global industry practice; they will benefit national regulators by providing
an overview of the diversity of techniques among institutions in various
countries. Further, the information should help avoid the adoption of
inflexible or overly prescriptive standards that could lead to reduced
incentives for continued innovation and improvement of existing methods and
models. ISDA is the global trade association representing
leading participants in the privately negotiated derivatives industry. ISDA
was chartered in 1985, and today has more than 590 member institutions from
46 countries on six continents. These members include most of the world's
major institutions that deal in privately negotiated derivatives, as well as
many of the businesses, governmental entities and other end users that rely
on over-the-counter derivatives to manage efficiently the financial market
risks inherent in their core economic activities. Information about ISDA and
its activities is available on the Association's web site: www.isda.org. RMA is a member-driven professional association
whose sole purpose is to advance the use of sound risk management principles in
the financial services industry. Founded in 1914, RMA's historical focus on
credit risk has broadened in recent years to examine risk management on an
enterprise-wide scale, covering market risk and operational risk as well as
credit risk. Headquartered in Philadelphia, RMA's membership is comprised of
3,000 financial institutions worldwide. More than 16,000 commercial loan,
credit, and risk management professionals are individual members of RMA
throughout North America, and in London, Hong Kong, and Singapore. http://www.rmahq.com/ The
British Bankers' Association (BBA) is the leading trade association in the
banking and financial services industry representing banks and other
financial services firms operating in the UK. It has 295 members, as well as
many associate members, which fund its not-for-profit activities. www.bba.org.uk ### |