Regulatory Alerts2022-08-01
G9-2022 - Matters related to the credit risk models of banks
The Prudential Authority issued Guidance Note G9-2022 to establish binding expectations for Internal Ratings-Based (IRB) banks regarding the development, validation, and ongoing monitoring of their credit risk models. The guidance mandates rigorous model documentation, accurate Loss Given Default (LGD) estimates for defaulted loans, strictly controlled LGD overrides, and comprehensive quality assessments of internal and external development datasets. These requirements directly govern the Prudential Authority’s assessment of model change applications and ensure consistent capital calculations across South African banking institutions.
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