Banks' Internal Rating Models - Time for a Change? The "System of Floors" as Proposed by the Basel Committee
This briefing paper reviews evidence showing that the adoption of an International Ratings Based (IRB) approach to estimating risk weights by banks has been associated with reductions in average reported risk weights. Several economic studies find that the lower reported risk weights using the IRB methodology to some extent reflect downward risk manipulation by banks. In a system of floors, the purpose of an aggregate output floor should be to prevent wholesale bank-level downward risk weight manipulation, giving rise to effective bank undercapitalization and a heightened probability of bank failure. Input floors can play a useful role alongside an aggregate output floor, if they are targeted to address the problem of potential mismeasurement of risk.
Poglobljena analiza
Zunanji avtor
Harry Huizinga
O dokumentu
Vrsta publikacije
Politično področje
Ključna beseda
- ekonomske analize
- EVROPSKA UNIJA
- Evropski bančni organ
- FINANCE
- finančna zakonodaja
- finančni nadzor
- gospodarska reforma
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- institucije EU in evropska javna uprava
- izvedeni finančni instrument
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- mednarodne zadeve
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- POSLOVANJE IN KONKURENCA
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- statistika