Since the IRB Approach is more risk sensitive vis-à-vis the Standardised Approach, a small change in the degree of risk could result in a large additional capital requirement for the banks following the IRB approach - which would dissuade such banks from assuming high-risk exposures.
Since the beginning of 2015, euro area GDP growth has been solid in every quarter. The preliminary flash estimate for the fourth quarter of 2016 is 0.5%, with similar growth expected in the first quarter of this year. The December Eurosystem staff projections for GDP growth were 1.7% for this year, and 1.6% for both 2018 and 2019.