/basel-rwa-credit

name: basel-rwa-credit
description: >
  Activate for: credit risk RWA, risk-weighted assets, standardised approach,
  SA risk weight, risk weight table, CCF, credit conversion factor, EAD,
  exposure at default, IRB approach, mortgage risk weight, LTV band,
  corporate risk weight, SME risk weight, CRE risk weight.
  NOT for: market risk RWA or FRTB calculations (use basel-rwa-market),
  overall capital adequacy ratios or buffer stacking (use basel-capital),
  IFRS 9 ECL provisioning or impairment (use ifrs9-ecl).
metadata:
  version: "1.0"
  author: "Panaversity — The AI Agent Factory"
  standard: "Basel III Standardised Approach for Credit Risk (BCBS)"

STANDARDISED APPROACH — RISK WEIGHT TABLE

Sovereign and Central Bank Exposures

| Credit Assessment | Risk Weight | | ----------------- | ----------- | | AAA to AA− | 0% | | A+ to A− | 20% | | BBB+ to BBB− | 50% | | BB+ to B− | 100% | | Below B− | 150% | | Unrated | 100% |

Domestic currency sovereign claims (where funded in same currency): 0% (national discretion).

Banks and Securities Firms

| Credit Assessment | Short-term (≤3M) | Long-term | | ----------------- | ---------------- | --------- | | AAA to AA− | 20% | 20% | | A+ to A− | 20% | 50% | | BBB+ to BBB− | 20% | 50% | | BB+ to B− | 50% | 100% | | Below B− | 150% | 150% | | Unrated | 20% | 50% |

Corporate Exposures

| Credit Assessment | Risk Weight | | ----------------- | --------------------------------- | | AAA to AA− | 20% | | A+ to A− | 50% | | BBB+ to BB− | 75% (Basel IV; 100% pre-Basel IV) | | Below BB− | 150% | | Unrated | 100% |

Investment-grade corporates (BCBS Basel IV): 65% if criteria met. SME corporate (qualifying): 75% (SME supporting factor may apply — check jurisdiction overlay).

Retail Exposures

Qualifying revolving retail: 45% Other retail (consumer loans, personal loans): 75% Qualifying SME retail: 75%

Residential Mortgage Exposures (Basel IV LTV-based)

| LTV | Risk Weight (General) | | ------- | --------------------- | | ≤ 50% | 20% | | 50–60% | 25% | | 60–80% | 30% | | 80–90% | 40% | | 90–100% | 50% | | > 100% | 70% |

Note: Pre-Basel IV (current in many jurisdictions): flat 35–50%. Load jurisdiction overlay to confirm whether Basel IV LTV table has been implemented.

Commercial Real Estate (Basel IV)

Income-producing CRE: 75% (LTV-based table in Basel IV, higher than residential) Land acquisition, development, construction (ADC): 150% CRE securing a residential or SME loan (ancillary): follows the underlying loan RW. Check jurisdiction overlay — CRE risk weights vary significantly.

Past Due and Stage 3 Exposures

Unsecured past-due (>90 days, net of specific provisions): Provision < 20% of outstanding: 150% Provision ≥ 20% of outstanding: 100% Provision ≥ 50% of outstanding: 50%

Off-Balance-Sheet Credit Conversion Factors (CCF)

| Facility Type | CCF | | ------------------------------------------------- | ---- | | Unconditionally cancellable commitments | 10% | | Commitments with original maturity ≤ 1 year | 20% | | Commitments with original maturity > 1 year | 40% | | Note issuance facilities / revolving underwriting | 50% | | Direct credit substitutes (guarantees) | 100% | | Forward asset purchases | 100% |

EAD for off-balance-sheet = Notional amount × CCF Then apply the risk weight for the underlying exposure type.

CREDIT RWA CALCULATION

Credit RWA = Σ (EAD × Risk Weight) For off-balance-sheet: EAD = Drawn + (Undrawn × CCF), then × Risk Weight.

IRB APPROACH (for reference)

IRB RWA = K × 12.5 × EAD Where K = WCDR × LGD − PD × LGD (simplified form of Basel IRB formula) WCDR = Conditional PD under the worst-case systematic risk scenario Advanced IRB: bank supplies PD, LGD, EAD Foundation IRB: bank supplies PD; regulator supplies LGD and EAD Basel IV restrictions: AIRB no longer permitted for banks and large corporates.

CREDIT RISK MITIGATION (CRM)

Eligible financial collateral: cash, sovereign bonds, bank bonds, equities in main index CRM reduces EAD (collateralised portion gets lower or 0% risk weight). Guarantees: substitute risk weight of guarantor for the guaranteed portion. Netting: bilateral netting agreements reduce gross derivative exposure to net.

WORKED EXAMPLE — CREDIT RWA CALCULATION

Portfolio: Mixed lending book (simplified)

| Exposure Class | Gross Exposure (M) | CCF (if OBS) | EAD (M) | Risk Weight | RWA (M) | | ----------------------------------------- | ------------------ | ------------ | --------- | ----------- | ------- | | Domestic sovereign (AAA, domestic ccy) | 500 | — | 500 | 0% | 0 | | Bank (A+ rated, long-term) | 200 | — | 200 | 50% | 100 | | Corporate (BBB+ rated) | 300 | — | 300 | 75% | 225 | | Corporate (unrated) | 150 | — | 150 | 100% | 150 | | Residential mortgage (LTV 70%) | 400 | — | 400 | 30% | 120 | | Retail revolving | 100 | — | 100 | 45% | 45 | | Undrawn commitment > 1yr (corporate, BBB) | 200 | 40% |