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This year will be challenging for banks in terms of risk assessment. First, capital requirement assessment rules will evolve towards an extensive use of the standardised approach or internal models with a minimum probability of default (input floor).
This evolution has been largely discussed between central banks governors and chief supervisors whose recent meetings aimed to agree on revisions to Basel 3 regulation. Discussions are still intense between these stakeholders, as the use of the standardised approach implies more capital consumption for banks holding assets with proven low risk-weights on the basis of internal models taking in account specific industry criteria, track-record and collateral practices.
As a consequence, on the one hand,...
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