the internal ratings based approach (IRB). Within     IRB there is a foundation approach and an advanced approach, the latter of which gives banks more scope to set elements of the capital charges themselves.   Standardized Approach In the standardized approach banks will risk-weight assets in accordance with a set matrix, which splits assets according to their formal credit rat- ings. The matrix is detailed in Exhibit 14.4, which shows the new pro- posed risk weights as percentages of the standard 8% ratio. The greatest change is to the four risk weight buckets of the current regime. The revised ruling would redistribute the capital required for dif- ferent types of lending and also add an additional category for very low- rated assets. For sovereign lending there is a smooth scale from 0% to 8%, while the scale is more staggered for corporates. An unusual feature is that low-rated companies attract a higher charge than non-rated bor- rowers. For lending to other banks there are two options. In the first, the sovereign risk of the home country of the bank is used, and the bank placed in the next lower category. In the second option, the credit rating of a bank itself is used. Whatever option is selected, the main effect will be that the capital charge for interbank lending will increase significantly, virtually doubling the current level. National regulators will select which of the two approaches to use for interbank exposures. Under option 1, loans will be categorized in accor- dance with the rating of their sovereign domicile, while under option 2 loans would be slotted according to the banks own rating. If using the latter approach, assets of shorter than three months will receive preferen- tial treatment.   EXHIBIT 14.4 Basel Capital Requirement Proposals, Percentage Weightings   Credit Rating   AAA to A+ to BBB+ to BB+ to B+ to Below Asset AA A- BBB- BB- B- B- Unrated   Sovereign 0% 20% 50% 100% 100% 150% 100% Banks-option 1a 0% 20% 50% 100% 100% 150% 100%