Some EU banks can’t explain lowball credit model outputs

About one in five European banks’ models underestimate their credit risk without just cause, the results of a 2019 supervisory benchmarking exercise (SVB) shows.

Modelled capital requirements for an average credit portfolio were observed to be below benchmark levels without good reason at 20% of banks covered by the European Banking Authority’s (EBA) questionnaire.

Such so-called “negative deviations without justification” were most widespread for ‘corporate – other’ portfolios. Twenty-five

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