Bank credit risk review to level playing field

Tim Wallace
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BIG BANKS across the world are ahead of schedule implementing incoming rules on capital buffers, global regulators said yesterday.

But the Basel Committee also warned regulators will have to hammer out agreements on how the riskiness of loans is worked out to ensure rules are applied fairly.

Currently risk weightings vary considerably from bank to bank, meaning different lenders calculate that they need to hold radically different levels of capital against exactly the same assets. Uneven weights make it hard for investors to know how safe a lender is, and to compare buffers between banks.

“Possible short-term policy options include improvement of public disclosure and regulatory data collection to aid in the understanding of risk-weighted assets; additional guidance and clarifications of the Basel framework; and further harmonisation of supervisory practices with regard to model approvals,” said the Committee.

“Over the medium term, the Committee will examine the potential to further harmonise national implementation requirements and to place constraints on model parameter estimates.”