Banks aren’t manipulating risk weight models

Author: Lizzie Meager | Published: 21 Mar 2016

There is no evidence to prove the claim that banks in Europe have been manipulating their risk weight models during stressful times, according to a report.

Under Basel III rules, banks are required to assign a risk level to every asset on their books, giving them their risk-weighted assets (RWA). But the suspicion that this internal approach is being abused has been rife for some time, due to high variations in RWAs from bank to bank.

But the report, researched by Europe Economics and commissioned by the Association for Financial Markets in Europe (Afme) failed to find a correlation between adjustments to the model used and stressful situations when banks may have been incentivised to manipulate the data.

Jacqueline Mills, Afme"The findings don’t prove it’s not happening at all, but it does prove that it’s not widespread or systemic," said Jacqueline...