The amendments to part II relate to note 56 of the standardized credit risk approach and the internal ratings act, which are effective from Jan. 1, 2025.
The amendments to part III regarding securitization, part V regarding market risks and part VII regarding methods of the calculation will be effective from Jul. 1, 2025.
On Nov. 21, TAI FSC revised rules re internal ratings-based approach.
TAI FSC planned to revise Methods for calculating bank's regulatory capital and risk-weighted assets to strengthen the risk management framework of domestic banks.
Revisions allow banks to use the internal ratings-based (IRB) approach for calculating capital requirements to enhance their internal risk management capabilities.
Follows TAI FSC Feb. 2023 re calculation of banks' regulatory capital, see #162325.
Revisions
Cover various aspects, including credit risk standardized approach, IRB approach, output floor requirement, operational risk calculation method, leverage ratio.
Credit risk standardized approach involves refining risk weights for various categories, introducing due diligence requirements, and defining default risk more explicitly.
Banks that use external credit ratings should set aside capital to conduct reviews at least annually, to strengthen their due responsibilities in using external credit ratings.
Adjustments re the IRB approach involve excluding certain exposures, refining risk component estimates, and changing the qualification process for banks applying IRB.
Output floor requirement is introduced, ensuring that risk-weighted assets calculated using IRB are not lower than 72.5% of those calculated using standardized approach.
Operational risk calculations will be based on new standardized approach; changes in leverage ratio measurement will affect derivative exposures, clearing and settlement.
Effectiveness
Changes are expected to be implemented from Jan. 1, 2025.
Dec. 2023 Parts Amended
On Dec. 7, 2023, TAI FSC, TAI Justice revised Part I, Part II, Part IV, Part VI and Part VII of Methods for calculating bank's regulatory capital and risk-weighted assets.
Includes consequential amendments from revisions made on Nov. 21, 2023 above.
The amendments to part II relate to note 56 of the standardized credit risk approach and the internal ratings act, which are effective from Jan. 1, 2025.
The amendments to part III regarding securitization, part V regarding market risks and part VII regarding methods of the calculation will be effective from Jul. 1, 2025.
