Basel floors must be below 75% to preserve models, banks say

Risk managers warn that planned system of capital floors could prompt banks to ditch models – a 25% saving is cited by four as the smallest effective incentive

BIS headquarters, home of the Basel Committee

Banks will stop modelling their regulatory capital requirements if they generate less than a one-quarter saving on the standardised alternatives, risk managers predict – a response to the Basel Committee on Banking Supervision's plans to floor modelled capital at some percentage of the standardised formulas for credit, market and operational risk.

Four bank risk managers shared estimates with Risk on where they believe the floor will be set. Although suggestions began as low as 10%, they all

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