Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/269868 
Year of Publication: 
2023
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 07/2023
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
The novel partial-use philosophy by the Basel Committee on Banking Supervision initiates a paradigm shift for banks, allowing them to permanently partially apply the internal ratings-based approach (IRBA) and not having to fully roll it out across the overall bank anymore. This raises the questions of how banks roll out the IRBA and what the consequences of partial use may be. We reveal that banks with little rollout progress over time can keep annual cost growth comparatively low. Furthermore, we find that the first implementation steps lead to the greatest risk-weighted assets reductions, which indicates that banks benefit from 'cherry-picking' by not fully rolling out the IRBA. However, we also provide tentative evidence that bank risk management improves with a progressing rollout.
Subjects: 
Costs
Internal Ratings-Based Approach
Partial Use
Risk Management
Risk-Weighted Assets
Rollout
JEL: 
G21
G28
G32
ISBN: 
978-3-95729-938-3
Document Type: 
Working Paper

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