Affiliations: [a] Department of Applied Economics, International Centre of Decision Choice and Analysis, The National Research University Higher School of Economics, Moscow, Russia | [b] Research and Forecasting Department, the Bank of Russia, Moscow, Russia | [c] Laboratory of Mathematical Modeling of Complex Systems of the P.N. Lebedev Physical Institute, Moscow, Russia | Tel.: +7 916 514 16 20; E-mail: Penikas@hse.ru; URL: https://www.hse.ru/en/staff/Penikas
Correspondence:
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Corresponding author: Department of Applied Economics, International Centre of Decision Choice and Analysis, The National Research University Higher School of Economics, Moscow, Russia. Tel.: +7 916 514 16 20; E-mail: Penikas@hse.ru.
Abstract: In December 2019 the Basel Committee has launched the consolidated Basel framework. The framework inherits the Basel II internal ratings-based (IRB) approach for the credit risk with mostly no changes. The absence of the material methodological changes is unexpected given the fact that the key shortcomings of the IRB approach stay unresolved. The paper objective is therefore to list its earlier discussed shortcomings and to address the new ones. Latter include the unbalanced treatment of PD and LGD parameters, as well as methodological inconsistency in expected and unexpected loss treatment.
Keywords: Basel Committee, IRB, credit risk, regulation, structural model
