Eurozone banks fear market risk capital hike due to Covid-19
Hopes that ECB will fix double-counting as VAR breaches rise on market volatility
Eurozone banks fear their trading book capital requirements are set to balloon, because current market turmoil will trigger a procyclical effect in the regulatory methodology for calculating market risk. Other jurisdictions are providing ways for their banks to avoid the increase, but eurozone banks are still anxiously awaiting a fix from the European Central Bank’s single supervisory mechanism.
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