Some EU banks can’t explain lowball credit model outputs
Negative unjustified deviations in capital requirements most widespread for corporate portfolios
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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