The purpose of this paper prepared by the Models Task Force of the Basel Committee is to further the Committee's dialogue with the industry on the IRB treatment of equity exposures in the banking book. Comments on the issues outlined in this paper would be welcome, and should be submitted to relevant national supervisory authorities and central banks and may also be sent to the Secretariat of the Basel Committee on Banking Supervision at the Bank for International Settlements, CH-4002 Basel, Switzerland.