Uniform Borrowers Risk Grades
The imperatives of the new Basel capital adequacy framework require banks to more accurately measure risks against which capital will be set aside. Pillar 3 of the Accord (i.e. on market discipline) has set guidelines for public disclosure of risk profiles to enable stakeholders assess institutional risks. Within the overall framework for risk management, risk measurement is not optional as it is a key component of the process. The measurement of credit risks is bound to acquire institutional character in a number of cases due to distinct risk profiles. However, for ease of interpretation by various stakeholders including regulatory authorities, a need has been established to provide some standard guidelines against which external credit assessments and internal rating systems may be mapped.