Guidelines on the Incremental Default and Migration Risk Charge (IRC)

These Guidelines include provisions on the IRC modelling approaches employed by credit institutions using the Internal Model Approach (‘IMA’) for the calculation of the required capital for specific interest risk in the trading book. The incremental risk charge is intended to complement additional standards being applied to the value-at-risk (VaR) modelling framework in the trading book. These Guidelines are seen as an important means of addressing weaknesses in the regulatory capital framework and in the risk management of financial institutions.