Risk weight tweak could fix IFRS 9 capital clash – research

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

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