Calculation of RWA during sup ervisory stress testing

The article discusses the approaches used in conducting Supervisory stress testing to calculate the value of risk-weighted assets (the denominator of the capital adequacy indicator) for banks using a standardized approach to calculating RWA and for banks using a basic or advanced approach based on internal ratings to calculate RWA. Assumptions are proposed for calculating RWA based on a basic or advanced approach based on internal ratings for each individual segment of the loan portfolio. Limitations of decision-making on using a basic or advanced approach based on internal ratings in calculating RWA in Supervisory stress testing models are given. Changes in risk weights calculated using a basic or advanced approach based on internal ratings in a stress scenario are considered. The only risk metric that affects the credit risk RWA in a basic or advanced approach based on internal ratings is also defined, which changes in a stressful scenario. Additionally, the value of risk-weight granularity when using RWA assessment models in Supervisory stress testing is discussed. In conclusion, we draw a conclusion about the complexity of RWA forecasting and the recommended approaches to developing models for predicting the metric in question.