Tools to blunt credit risk popular at EU banks. But why?
Just 1% to 5% of exposures covered by credit risk mitigants
European banks are enthusiastic users of credit-risk mitigation tools, even though they seem to have no more than glancing effects on risk-weighted assets (RWAs), a European Banking Authority (EBA) survey shows.
Forty-nine firms out of a sample of 94 said they use CRM tools, such as credit guarantees and derivatives, for corporate exposures measured using their advanced internal ratings-based (A-IRB) models. Twenty-nine incorporate them for corporate exposures captured using their foundation
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