Banks fear outcome as Basel Committee wraps up RWA review

Regulators have spent much of the past year trying to work out why risk-weighted asset numbers are so varied. With the results due soon, bank participants say the study should paint a kinder picture than other recent analyses, but they fear the policy changes that may follow. By Michael Watt

In the next few months, regulators will emerge, oily and dishevelled, from a year spent under the bonnet of the bank capital system. They are trying to find out whether huge bank-to-bank differences in risk-weighted assets (RWAs) – the modelled numbers on which capital ratios are based – are legitimate. The stakes are high. Banks have an obvious incentive to play tricks with their RWAs as a way of reducing the impact of Basel III’s tough new capital requirements, and if the market loses faith in