Document ID: chunk:federal_register_of_legislation:F2024L01074:body:0:p13
Version: federal_register_of_legislation:F2024L01074
Segment Type: other
Provision Reference: 
Character Range: 34063–36897

will result in a material change in RWA for a given type of exposure; or
        2.           a significant change to its modelling assumptions.
 2.          An ADI that has obtained IRB approval must continue to employ that IRB approach on an ongoing basis except to the extent that the IRB approval is revoked or suspended for some or all of the ADI's operations. A return to the standardised approach to credit risk, or the use of the FIRB approach where the ADI has approval to use the AIRB approach, will generally only be permitted in exceptional circumstances.
 3.          APRA may, at any time, vary or revoke an IRB approval, or impose additional conditions on the IRB approval if it considers that:
        1.           an ADI is not complying with this Prudential Standard; or
        2.           it is appropriate, having regard to the particular circumstances of the ADI.
    Where APRA has varied or revoked an IRB approval, it may require the ADI to apply the standardised approach to credit risk for some or all of its operations, until it meets the conditions specified by APRA for returning to an IRB approach.
 1.          APRA may require an ADI to reduce its level of credit risk or increase its capital if APRA considers that the ADI's capital for credit risk under an IRB approach is not commensurate with its credit risk profile.
 2.          If an ADI becomes aware that it is not complying with a requirement of this Prudential Standard, it must notify APRA and provide a plan for its timely return to compliance.

Attachment A - IRB risk-weight functions
 1.              An ADI must apply the risk-weight functions and schedules set out in this Attachment to calculate RWA for UL for corporate, sovereign, financial institution and retail exposures. In calculating RWA:
        1.           PD and LGD are expressed as percentages;
        2.           EAD is expressed in Australian dollars;
        3.           ln denotes the natural logarithm;
        4.           N(x) denotes the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x); and
        5.           G(z) denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value of x such that N(x) = z).
 1.              To determine total RWA under an IRB approach, the ADI must sum:
        1.           RWA for UL for all IRB asset classes, aside from those exposures excluded in (b) and (c) below, and multiply the amount by a scaling factor of 1.1;
        2.           RWA for UL for exposures under the supervisory slotting approach; and
        3.           RWA for UL for aggregate residual value of lease exposures which are risk weighted according to Table 2 of