Default risk floors threaten €72bn of RWAs in EU

Risk.net analysis finds PD floor would hit a swath of low-risk corporate loans at the biggest EU banks

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High rise: PDs for low-risk corporate borrowers are set to climb to 5bp, magnifying RWAs by 50% for a one-year loan, according to one credit risk expert

Proposals requiring banks to assume higher default risks for their least risky corporate borrowers will affect up to €72 billion in risk-weighted assets (RWAs) at 15 of Europe's largest banks, according to data collected by Risk.net. Barclays and Deutsche Bank contribute roughly a quarter of the total.

Bank capital requirements are set as a percentage of RWAs, which can be calculated in three different ways: using a standardised approach or two different modelled approaches. On March 24, the

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