Credit models at odds with standardised approach on Covid shock

Internal gauges of credit risk shifted out-of-sync with regulator-set standardised approaches at top US banks in the first quarter, quarterly filings show. 

Credit risk-weighted assets (RWAs) calculated under the standardised approach increased in Q1 by an average of 4% at Bank of America, Citi, Goldman Sachs, JP Morgan, Morgan Stanley, State Street and Wells Fargo. But under the advanced approaches, which use banks’ own internal models and ratings to size credit risks, RWAs increased 9%.

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