Basel finds “considerable variation” in RWAs

The Basel Committee on Banking Supervision has found that banks around the world are inconsistent in the way that they assess credit risk in their banking books.

It is an important study because so much rests on the risk weights produced by banks’ internal models. Most important, they determine how much capital banks need to raise, so the suggestion that lenders and national regulators are applying different standards is worrying.

The research draws on supervisory data from more than 100 large banks that have adopted the internal ratings-based model for credit risk in the banking book, according to the committee, “as well as...