1. Introduction.....................................................................................................................1

2. Economic foundations of the risk weight formulas ..........................................................1

3. Regulatory requirements to the Basel credit risk model..................................................4

4. Model specification..........................................................................................................4

4.1. The ASRF framework.............................................................................................4

4.2. Average and conditional PDs.................................................................................5

4.3. Loss Given Default.................................................................................................6

4.4. Expected versus Unexpected Losses ....................................................................7

4.5. Asset correlations...................................................................................................8

4.6. Maturity adjustments ..............................................................................................9

4.7. Exposure at Default and risk weighted assets .....................................................11

5. Calibration of the model ................................................................................................11

5.1. Confidence level...................................................................................................11

5.2. Supervisory estimates of asset correlations for corporate, bank and sovereign

exposures.............................................................................................................12

5.3. Specification of the retail risk weight curves ........................................................14