Bank of England urged to rethink HHI concentration risk add-on
Experts think overhaul of credit risk measure should be part of PRA’s ongoing Pillar 2 review
The Bank of England (BoE) has been urged to rethink its methodology for measuring credit concentration risk in bank portfolios. The Herfindahl-Hirschman Index (HHI) is used to calculate supervisory add-ons under the UK’s Pillar 2A capital framework, but risk managers at both larger and smaller banks have differing reasons to dislike the method.
“It is not telling us the complete story,” says
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