Abstract
In publishing its first consultative paper, A New Capital Adequacy Framework, in 1999, the Basel Committee on Banking Supervision has brought unprecedented focus to issues relating to consistency and robustness of financial institutions’ internal credit risk management processes. Regulators aim to ensure that banks set aside appropriate levels of capital for counterparty risks. In determining an appropriate level of capital, banks need to determine both the level of risk and creditworthiness through its internal rating process. The issues discussed here are those that Credit Suisse First Boston (CSFB) has faced in building its internal rating process; the majority of comments reflect our experience in structuring our credit process based on the types of risks within our credit portfolio. This paper focuses on two key issues.
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