Danske Bank RWA spat worries modelling experts

Danske Bank and its regulator were pitched into open conflict in mid-June, when the Danish Financial Supervisory Agency told the bank to hold more capital for corporate loans – an order Danske is contesting. It’s the latest example of supervisory modelling scepticism, and it could have implications for other banks. Tom Newton reports

Ulrik Nødgaard

It's no secret that bank supervisors are newly sceptical about regulatory capital modelling, but it’s still unusual to see a public argument on the topic between a lender and its regulator, so Danske Bank’s July 12 decision to fight an order that would add an estimated Dkr100 billion to its risk-weighted assets (RWAs) – a jump of 12.5% – provides a rare insight into changing regulatory attitudes. And it could become a blueprint for further modelling showdowns.

Finanstilsynet, the Danish

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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