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The Committee permits banks a choice between two broad methodologies for calcula
ting their capital requirements for credit risk. One alternative, the Standardis
ed Approach, will be to measure credit risk in a standardised manner, supported
by external credit assessments. The other alternative, the Internal Ratings-base
d Approach, which is subject to the explicit approval of the bank s supervisor, wo
uld allow banks to use their internal rating systems for credit risk.