In simplifying credit risk models, EBA could compound capital costs
Skipping hard yards of internal ratings-based approach might trip higher capital charges and implementation costs
The European Banking Authority is seeking ways to simplify the calculation of credit risk exposures – one of the most complex and thorny aspects of the European Union’s bank capital framework. But, as a key comment deadline looms, its efforts to control the cost of compliance could result in catapulting capital costs.
An EBA discussion paper, published on February 9, floats the idea of providing
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