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CRE53 Internal models method for counterparty credit risk (paras. 53.1-53.71) (effective as of 1 January 2023)
This chapter sets out the internal models method for counterparty credit risk.
Version effective as of 01 Jan 2023
Updated to include the following FAQ: CRE53.24 FAQ4.
Approval to adopt an internal models method to estimate EAD
53.1 A bank (meaning the individual legal entity or a group) that wishes to adopt an internal models method to measure exposure or exposure at default (EAD) for regulatory capital purposes must seek approval from its supervisor. The internal models method is available both for banks that adopt the internal ratings-based approach to credit risk and for banks for which the standardised approach to credit risk applies to all of their credit risk exposures. The bank must meet all of the requirements given in CRE53.6 to CRE53.60 and must apply the method to all of its exposures that are subject to counterparty credit risk, except for long settlement transactions.