Risk weight tweak could fix IFRS 9 capital clash – research

Practitioner suggests way to cancel out double-counting of Basel credit loss provisions

Euros

The shift to expected credit loss accounting has caused banks to complain they must set aside too much capital for credit losses owing to a discrepancy between the new rules and the Basel capital regime – but new research suggests a way of adjusting risk weights in advanced models to help resolve the clash.

The IFRS 9 accounting standards force lenders to hold provisions for expected credit losses across the lifetime of some assets, whereas firms using the advanced modelling approach use a more

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