UID:
edoccha_9959301368302883
Format:
1 online resource (49 pages)
ISBN:
1-4843-0401-2
,
1-4843-0428-4
Series Statement:
IMF Working Papers
Content:
Concerns about excessive variability in bank risk weights have prompted their review by regulators. This paper provides prima facie evidence on the extent of risk weight heterogeneity across broad asset classes and by country of counterparty for major banks in the European Union using internal models. It also finds that corporate risk weights are sensitive to the riskiness of an average representative firm, but not to a market indicator of a firm’s probablity of default. Under plausible yet severe hypothetical scenarios for harmonized risk weights, counterfactual capital ratios would decline significantly for some banks, but they would not experience a shortfall relative to Basel III’s minimum requirements. This, however, does not preclude falling short of meeting additional national supervisory capital requirements.
Note:
Cover -- Contents -- Abstract -- I. Introduction -- II. Regulatory Review of Bank Risk Weights -- III. Variation in Risk Weights Across Bank Portfolios -- IV. Variation in Risk Weights by Country of Counterparty and Asset Class -- V. IRB Corporate Risk Weights and Firm Fundamentals -- VI. Harmonization of Risk Weights: Hypothetical Counterfactual Analyses -- VII. Conclusions -- FIGURES -- 1. Capital Ratios for Banks in the EU -- 2. Risk Weighted Assets Density -- 3. RWA, IRB/SA Portfolio Decomposition, and Risk Weights -- 4. IRB/SA Average Risk Weights by Credit Exposure -- 5. IRB Average Risk Weights in the Europe -- 6. Changes to Capital Adequacy Ratios -- TABLES -- 1. Median Risk Weights across IRB/SA Portfolios of European Banks -- 2. Descriptive Statistics for Bank Risk Weights by Country of Counterparty Exposure -- 3. IRB Corporate Risk Weights and Firm Fundamentals -- 4. IRB Corporate Risk Weights and Expected Default Frequencies -- APPENDICES -- I. The 2015 EU-Wide Transparency Exercise -- II. Average Risk Weights, IRB Portfolio -- References.
Additional Edition:
ISBN 1-4843-0295-8
Language:
English
