The Basel Committee on Banking Supervision has issued a new report on consistency among banks (represented by 32 international banking groups) in assigning risk weights to assets. The report concludes that there is reasonable consistency in relative risk assessment but significant deviations around the mean in the “Loss Given Default”, “Exposure at Default” and “Probability of Default” applied to the banks’ credit book portfolios. This inconsistency leads to significant variation in the capital allocated to transactions by the banks.
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