Risk-weighted assets (RWA)

Roles that need it

• Capital Reporting Analyst
• Credit Risk Analyst
• Credit Risk Model Developer
• Regulatory Consultant (Banking)
• Corporate Banking Analyst
• FP&A Analyst

Skills it belongs to

• Basel framework and capital
• Credit risk models (IFRS 9, IRB)
• Prudential and regulatory reporting (COREP, FINREP, US call reports)

Related concepts

• CET1 (Common Equity Tier 1)Common Equity Tier 1 is the highest quality layer of a bank's own funds: ordinary shares, share premium, retained earnings and other reserves, minus regulatory deductions. The CET1 ratio divides it by risk-weighted assets and must be at least 4.5% under the CRR, before buffers and Pillar 2.
• Output floorThe output floor limits how far internal models can lower capital requirements: total risk-weighted assets cannot fall below 72.5% of the amount calculated with standardised approaches. In the EU it is phased in under CRR3 from 50% in 2025 to 72.5% in 2030.
• Standardised approach for credit riskThe standardised approach sets credit risk weights by exposure class, using external ratings or prescribed values: for example 100% for unrated corporates and lower weights for residential mortgages by loan-to-value. CRR3 makes it more risk-sensitive, and it also feeds the output floor.
• IRB approach (internal ratings-based)The internal ratings-based approach lets a bank use its own approved models for probability of default and, in the advanced version, loss given default and exposure at default to set credit risk weights. CRR3 restricts its use for some portfolios and adds input floors.

Sources

• Regulation (EU) No 575/2013 (Capital Requirements Regulation), EUR-Lex (external site) accessed 31 Oct 2026
• The Basel Framework, BIS (external site) accessed 31 Oct 2026

Updated 31 Oct 2026.