New Basel study confirms variations in how banks tot up risks

Global banking regulators have reinforced their campaign to impose more consistent ways for banks to assess risks on their trading books with a second finding of wide variations between systems in use in the sector. The Basel Committee said on Tuesday a review of how lenders assign risk weightings to more complex trading positions showed big differences, reflecting the in-house models that banks use for their calculations. Regulators have told banks to hold more capital against the risk of default, but this is still contingent on an assessment of the scale of risk being taken. And watchdogs therefore want to tighten up on risk assessments to stop lenders being able to “game” the system by using models that understate their risks and allow them to hold less capital, potentially giving them a trading advantage.

    

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