Banks not ready for advanced IRB, says Trema speaker

Many international investment banks are not yet ready to implement the advanced internal-ratings-based approach to measuring credit risk, according to a controversial speaker at this week's Trema World Forum in Monaco.

Professor Dimitris Chorafas, an international management consultant, said banks are still lacking in sophistication. He also said some banks are not properly taking account of economic capital allocation. He said economic capital allocation to various units still uses ad hoc methodology, risk measures and performance metrics.

“The complexity could overwhelm many medium-sized banks,” he said.

Chorafas also criticised banks for spending lavishly on capital allocation databases. “Citi[group]

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