Basel II revised default correlation values reflect industry experience, says Fitch

Basel II revised credit card default correlation values will be crucial guidelines to credit portfolio analysis under the IRB approach, says Fitch Ratings, a rating agency based in New York.

In a recent teleconference conducted to discuss the Basel II credit risk framework, Kim Olson, Fitch's director for policy and regulatory liaison, said the change by the Basel Committee to fix the correlation across all probability of default (PD) levels at 4% reflected a correlation estimate of the experience in the industry.

Before the revision, the Basel Committee had set the credit card correlation at an 11% peak for high-quality borrowers and 2% for low-quality borrowers, which the

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