Internal model cull to create ‘perverse incentives’

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Recent moves by the Basel Committee on Banking Supervision to restrict the use of the internal ratings-based approach to modelling could create "perverse incentives" for banks to invest in the same assets, according to a JP Morgan regulatory expert.

The Basel Committee recently published a consultation paper looking at reducing the variation of credit risk modelling by banks in a bid to increase both transparency and comparability. However, speaking on April 13 at the International Swaps and

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