The assessment of credit risk is a mayor component of Basel's pillar 1 requirements. Credit Risk is measured via the amount of risk-weighted assets (RWA), which is derived in the Standardised Approach for each deal by the product of its exposure and the corresponding risk weight. The risk weight itself depends on the type and rating of the customer as well as on the currency and the remaining time to maturity of the deal.
When calculating amounts of RWA, effects of credit risk mitigation (CRM) are taken into account by performing an optimisation of the distribution of available collateral to corresponding claims in order to reduce the RWA amount.