Basel plans modelling curb for billions in credit RWAs
Proposals clamp down on IRB approach that is “usually gamed pretty easily”, says FDIC’s Hoenig
International regulators have proposed a series of constraints on the way banks model capital requirements for loan portfolios and other credit risk exposures - part of an ongoing drive to limit the use of models and produce more comparable risk-weighted asset (RWA) numbers between banks.
The Basel proposals, which were issued today (March 24), would remove the option to use internal ratings-based (IRB) approaches for exposures to banks and other financial institutions, as well as to the largest
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