EACRA ES11 – Use of Credit Ratings in Basel III Standardised ApproachUnder the EU Capital Requirements Regulation (CRR), the standardised approach links a bank’s capital charge directly to the external credit rating of its exposures.
✅ Stronger rating → lower risk weight → lower capital requirement
⚠️ Weaker rating → higher risk weight → higher capital requirement
📌 No rating → default 100% risk weight (with a temporary exception for certain high-quality unrated corporates).
Illustrative example (per €100 exposure):
A-rated corporate → 50% RW → €4 capital charge
Unrated corporate → 100% RW → €8 capital charge
C-rated corporate → 150% RW → €12 capital charge
🔎 These differences matter – both for banks’ capital planning and for corporates deciding whether to obtain a public rating.
💡 This is the focus of our Educational Series #11.
