Capital floors could spur risk-taking – Swedish FSA

"Very careful" calibration needed to avoid bad incentives, says senior supervisor

Uldis Cerps, Finansinspektionen: Basel should be "very careful" with capital floors

If regulators impose harsh minimums on modelled capital numbers, it will encourage banks to take more risk, a senior bank supervisor has warned.

The Basel Committee on Banking Supervision is working on a system of floors that would prevent modelled risk-weighted assets (RWAs) falling below some percentage of the standardised capital approaches for credit, market and operational risk. Proposals were published in December but did not touch on where the floors should be struck.

"Calibrating the

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Risk Management

Hints on quantification approaches

Tiziano Bellini, head of risk integration competence line, international markets at Prometeia, examines the key components of successful model risk management, focusing on the importance of integration, processes, governance and IT solutions to…

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