EU banks punished over lowball credit risk estimates

European authorities judge that almost one in six banks included in a recent supervisory benchmarking exercise have flawed credit risk models that underestimate their capital requirements.

Under the Capital Requirements Directive, national watchdogs must assess banks’ model outputs for benchmark portfolios and monitor the variability of own funds between firms at least annually.

Following the most recent assessment, 41% of institutions were found to produce modelled capital requirements for

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