Credit risk models can dodge procyclical bias ­– Fed adviser

Excluding some metrics makes A-IRB retail portfolio risk model more stable

throw lifebelt_Getty-web.jpg
Problem solved? José Canals-Cerdá says banks should use the right criteria to rank loans by risk

Last year the Basel Committee warned the advanced internal ratings-based capital approach could produce procyclical results, with the capital held against credit portfolios varying significantly as economic conditions change. It asked for comments and suggestions as part of a wide-ranging review of its approach to credit risk capital. According to José Canals-Cerdá, a senior special adviser on supervision, regulation and credit at the Federal Reserve Bank of Philadelphia, the problem could be

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: