Bank models create RWA variation, says EBA

27 Feb 2013

Half of the variation between banks’ risk-weighted assets cannot be explained by differing balance sheet structures and regulation, but may instead be down to the banks’ own methods for calculating their RWAs, the European Banking Authority (EBA) has found.

RWAs form the denominator of a bank’s capital ratio, and thus a bank using a measure that produced lower RWAs would appear to have a healthier balance sheet.

The amount of common equity and total capital banks must hold against risk-weighted assets has risen sharply since the onset of ...

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