Foundation Internal Ratings Based Approach for calculating credit risk (FIRB)

In the foundation IRB approach, the simpler of the two IRB approaches for the calculation of minimum own funds requirements for credit risk (see also the Advanced Internal Ratings Based Approach) only the probability of default (PD) of an obligor or a rating class is calculated within the bank. The other parameters, like the loss given default (LGD), or the residual maturity (M) are prescribed by the CRR. The recognition of collateral items is handled differently in the Foundation IRB Approach to the Advanced IRB Approach.