Basel Committee on Banking Supervision Studies on credit risk concentration (original) (raw)

Concentration of exposures in credit portfolios is a critical aspect of credit risk, arising from name concentration and sector concentration, both violating key assumptions of the Asymptotic Single-Risk Factor (ASRF) model in the Basel II Framework. The Basel Committee on Banking Supervision's Concentration Risk Group has examined current practices across banks, assessing the real-world implications of these concentration risks on economic capital relative to Pillar 1 capital charges. The findings indicate that sector concentration significantly impacts economic capital, influencing risk assessment methodologies within banks.