Capital floors could spur risk-taking – Swedish FSA
"Very careful" calibration needed to avoid bad incentives, says senior supervisor
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 floor
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