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