Switch to internal model helps HSBC cut counterparty risk by 18%

HSBC cut counterparty credit risk-weighted assets (RWAs) by $10.4 billion – almost a fifth of its total – in the second quarter, driven largely by a switch to using its internal model to calculate its exposures.

The bank reported it was now using its own model to size risk-based capital requirements for Asian and US portfolios, which reduced the counterparty credit RWAs for these exposures by $4.3 billion and $2.4 billion, respectively.

The remainder of the quarter-to-quarter decrease was

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