A-IRB is overly prescriptive, say US banks

Several US banks would like to see a full internal models-based approach to regulatory capital. According to their response to the Advance Notice of Proposed Rulemaking (ANPR) on the implementation of the new Basel Capital Accord, the banks said the credit risk capital requirements are too prescriptive.

“With credit risk, data is plentiful and increasingly available, quantification techniques are well developed, and the market practices to both price and hedge risk are improving every day. Yet with all this, the ANPR continues to provide a great deal of prescription that in total arrives at a capital results that are too conservative,” said Massachusetts-based FleetBoston Financial in its comment letter.

In contrast, the determination of operational risk, a discipline very much in its

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