Internal ratings-based (IRB) approach
IRB risk-weights highest at smallest EU banks – ECB
Lenders with less than €30 billion in assets consistently report lower risk densities than bigger banks across all modelled portfolios
F-IRB captured more of EU banks’ credit risk in H1
Gains mostly accrued from bank-modelled A-IRB portfolios
EBA: more climate risk supervisory reporting is coming
Official anticipates effort to identify climate impact on internal models, concentration risk
Some euro banks modelled lower mortgage risk in H1
Italian and Belgian lenders reported steepest drops in risk density despite recessionary threat
Hong Kong, India, Turkey lag behind on Basel III framework
Only Canada, Japan and Saudi Arabia ready for full implementation as January deadline approaches
A-IRB to lose credit risk reach under Basel III
Americas banks expected to generate just 40% of RWAs using internal models, from 67% currently
Banks temper credit loss models by editing Covid narrative
Faced with geopolitical chaos and signs of recession, expected credit loss models need to adapt fast
How a credit run affects asset correlation
This paper analyzes how soaring demand in the lending market shortly before a financial crisis can affect one of the main parameters in the internal ratings-based approach: the asset correlation.
Nationwide’s IRB charges up 89% on PRA’s parameter curbs
The building society’s strict focus on mortgages meant impact was all-sweeping
How will US regulators perform the Basel III balancing act?
Largest banks seek offsets for higher capital requirements caused by possible end of IRB, IMM
Credit RWAs for EU, UK banks up in Q1 amid IRB clampdown
Reforms to improve comparability of internal models compound declining asset quality
Credit risk capital models hanging by a thread in the US
Industry insiders expect Fed to drop IRB and IMM when adopting Basel III, but market risk models may survive
Model clampdown costs NatWest 157bp of CET1 ratio
Measures to remedy internal model deficiencies added £14.8 billion RWAs overnight
EU lawmakers’ demand for local capital floors alarms banks
Multiple output floors applied to each entity raises fears of capital increase for large groups
Regulation triple-whammy lops 63bp off StanChart’s CET1
January 1 saw the introduction of SA-CCR, curbs on IRB modelling and the reversal of software capitalisation benefits
Some EU banks keep underprovisioning for ECLs
Divergences between accounting and regulatory markdowns remains high at some top lenders
Weather, or not: is climate risk just part of credit risk?
Practitioners divided on whether climate risk can fit into existing credit risk weights
Counterparty risk solution of the year: Moody’s Analytics
Asia Risk Awards 2021
BoE floor could double capital charges on HSBC’s UK home loans
New rules could forcibly push up residential mortgage portfolio’s 5% risk density
Deutsche takes €17.7bn RWA add-on in final Trim hit
Leveraged loan portfolio among targets of ECB’s remedies
After bruising EU model review, banks ask: ‘Why bother?’
Post-Trim changes erode capital savings from internal models while raising their running costs
EBA to consult on banks’ machine learning use
Watchdog will set out stance on ML-based capital models amid conflicting guidance from supervisors
ECB’s models review heaped €275bn of extra RWAs on banks
Average bank CET1 capital ratio fell 71bp through Trim process
Share of small EU bank assets under standardised approach grew in 2020
At small banks, SA covered 88% of credit exposures