QIS 2: Introduction

The Basel Committee on Banking Supervision's Quantitative Impact Study questionnaire is attached. The objective of the impact study is to assess whether the Committee has met its goals with regard to the New Basel Capital Accord. The impact study will gather the data necessary to allow the Committee to gauge the impact of the current proposals across a wide range of banks in the G10 and beyond, given the differing risk profiles of banks and the extent to which credit risk mitigation is used.

Banks are asked to provide the data to their national supervisor by 1 June, in an electronic format. The Committee recognises that the deadline for the questionnaire is short. However, this is essential if the New Accord is to be agreed this year as planned and it is hoped that banks' close co-operation with their supervisors in filling in the questionnaire will expedite the exercise. Supervisors will maintain an ongoing dialogue with participating banks throughout this process. They will also be asked to review banks' responses and discuss the data with banks on an ongoing basis to ensure that any difficulties are resolved prior to the 1 June deadline. This should help the Committee to have a thorough understanding of any limitations of data provided.

It is also recognised that banks will not have exact data to answer some of the questions or might not be able to calculate the requirements. Estimates, therefore, are acceptable as long as they are well founded and agreed with national supervisors.

The Committee appreciates that the exercise is lengthy and very detailed and recognises that it will be a burden on participating institutions. However, we believe that it is in the interests of the industry that the Committee's proposals have a strong quantitative basis. The requested information is critical to an accurate assessment of the overall impact of the revised Accord and to the calibration of its components (so reducing the need for any buffer against uncertainty). Your co-operation and participation is, therefore, of considerable significance and your supervisor will be happy to discuss the exercise with you should this be necessary or to resolve any queries that you might have.

All data supplied will be treated as confidential. The Committee does wish, however, to provide some feedback for the industry on the overall results. This will be done on a basis that avoids any disclosure of individual bank balance sheet data.


The Committee is asking that the capital requirements for credit risk be calculated using both the standardised and IRB foundation approaches for a convenient date either in 2000 or the first quarter of 2001. The questionnaire is divided into three sections:

  1. Chapter 1 (Parts I through VIII) requests general information on the nature of the bank (size, current capital, credit rating etc.). In addition, it asks for the capital requirements for credit risk under the standardised and IRB foundation approaches to be calculated for a bank's whole portfolio - at least 80% of group-wide exposures should be included - as well as the impact of credit risk mitigation. All banks are asked to calculate capital requirements for credit risk under the standardised and IRB approaches if they can. This section also asks for operational risk data and consists of questions pertaining to the Basic Indicator and the Standardised approaches to operational risk.
  2. The second section requests details of the standardised approach for credit risk. Those banks only able to provide information on the standardised approach should complete this section.
  3. The third section requests details of the IRB approach This should be completed by banks which expect to request permission to apply the IRB approach under the New Accord and which have information on loans by grades, and can estimate the probability of default associated with such grades.

The questionnaire is provided in Microsoft Excel format. As the objective of this study rests on being able to analyse cross-sections of standard data, the worksheet protection feature has been enabled. You are asked to provide data precisely in the form in which it is asked. If banks have further comments they wish to make they should provide these on additional sheets or should discuss the matter further with their national supervisor.

Capital calculations

It is essential that, when performing these calculations, the bank compare the proposed and current capital requirements using the same portfolio. Banks which can calculate capital requirements for a wider selection of exposures under the standardised than the IRB approach should, as a comparator, calculate the standardised approach only for the narrower book used for the IRB. This is to ensure that the percentage changes in capital required by the different methods (standardised requirements versus current requirements, IRB foundation requirements versus current requirements etc.) are meaningful and comparable. Similarly, for banks calculating the requirements under the advanced approach for only part of the portfolio, the IRB and standardised approach should also be calculated only for this part of the portfolio. It would be helpful if all banks with own loss given default (LGD) information could try to calculate the advanced approach on at least part of their book, even if maturity information is not av ailable and therefore that dimension cannot be included.


Large international banks are being asked to ensure that at least 80% (by value) of their group-wide exposures are included in the data for capital calculations. This is necessary to ensure that the data supplied is broadly representative of the banks' portfolios and to give an accurate impression of the impact. At the level of operating entities some banks concentrate particular types of exposure in one entity, making that entity unrepresentative of the whole group. It is understood that it will not be possible to include the exposures in every entity within a group, but the main operating entities should be included. Any intra-group transactions should be excluded when calculating the group-wide figures. The Committee appreciates that it may also be necessary to estimate some elements of the data necessary to calculate the capital requirements for the IRB approach. This is satisfactory as long as the estimates are representative of the wider picture in the group.

Given the wide variety of results likely, the Committee also needs to consider the typical profiles of book across the G10 and the impact that the Accord has on banks with these types of portfolio. This is why the Committee is asking for information on the quality distributions of the credit books and also the split between corporate, interbank, sovereign and retail exposures and the split between commitments and drawn facilities. All this information will be essential to assess the New Accord's impact.

Internal Ratings

In terms of the IRB, one of the main determinants of the overall effect is the split in the corporate, sovereign and interbank exposures between three broad risk categories of internal loan grades as defined by their associated probabilities of default:

Therefore, at a minimum the Committee requires information on this broad quality distribution. The Committee is asking also for a breakdown by the finer loan gradings and default probabilities used by the bank, which is an important input into the exercise. It is recognised however, that it may be possible to do this for only certain portfolios and that the most extensive allocation might simply be into the three broad bands above. Of course, even if the detailed quality distributions are not available at an aggregate level, banks should use whatever finer distributions they have in calculating capital requirements under the IRB approaches.

Another area of interest to the Committee is the extent to which the distribution of exposures across rating bands changes over time, in particular across the cycle. If possible, some indication of how the distribution has changed would be very helpful. It will also be necessary to know whether internal grades, when set, are "point in time" (i.e. assuming that the financials for the borrower remain as they are currently) or whether they are "through the cycle" (i.e. taking into account possible stresses in different economic conditions). If a bank uses an approach that is rather different from either of these, they should point this out to their supervisor.


The definition of default used is clearly important here and, if possible, banks should use the definition set out in paragraph 146 of the supporting document for the IRB approach (i.e. banks should monitor all four of the different criteria and recognise default as soon as one of the four is fulfilled). The Committee recognises that some banks may not be able to do this at this juncture and therefore we are asking that banks state the definition or definitions used for different portfolios. Again, supervisors will be speaking with banks to gain an understanding of how the quality distributions might have differed if the definition of default would have been different.

Credit Risk Mitigation

The Committee is also requesting information on the extent to which exposures are collateralised and the consequent loss given default. Collateralisation is also an important determinant of the final capital figure. It is essential to try to take the overall effect of collateralisation into account in the calculation of capital, which is required under the standardised and IRB approaches. Likewise, information on a bank's estimates of loss given default for such collateral would be helpful.

Even if it is difficult to obtain precise data on the extent to which exposures are backed by the new forms of collateral/credit risk mitigation which will be allowable under the New Accord, it would be helpful to have estimates of this and also of the extent to which other forms of collateral have been taken. One possible method of generating these estimates might be for banks to conduct a random sample of their loan documentation to look at the extent of collateralisation by collateral type and facility. This could be done for both financial and physical collateral. Banks should discuss with their supervisors how this might be undertaken to produce reliable data for the Committee. However, if a bank is unable either to estimate or provide accurate information, it should leave these tables uncompleted.

Operational Risk

The Committee has outlined proposals for the development of a capital charge to cover operational risks. It has set out 3 approaches to operational risk of increasing sophistication - the Basic Indicator Approach, the Standardised Approach and the Internal Measurement Approach. Information is requested to allow an estimation of the impact of the charge using the Basic Indicator Approach and on indicators to inform the further development of the Standardised and Internal Measurement Approaches. This should be submitted along with the rest of the QIS information by 1 June 2001. A further data request for operational loss data will be made to obtain information to allow an accurate calibration of all three techniques for assessing the operational risk charge; the deadline for submission of this data is likely to be during August.


More generally, there are areas where banks and supervisors will need to consider together the definitions that are used for business lines (e.g. retail, project-finance etc). Wherever possible, banks should use definitions that are given in the consultation paper - part 1 of the questionnaire lists the most important of these. However, the Committee recognises that current systems may mean that, in the time available, banks will have to meet the definitions on a "best efforts" basis. In general, banks should classify exposures (e.g. categories such as project finance or retail) according to the risk characteristics of a type of business - a case of "knowing it when you see it". For example, for retail, it is important to capture certain characteristics (large number of low value exposures, with a lower unexpected loss relative to expected loss etc).