Banks' internal rating models - time for a change? The system of floors as proposed by the Basel Committee

  • We provide an assessment of the Basel Committee on Banking Supervision (BCBS) proposal to restrict the internal ratings-based approach on bank risk and to introduce risk-weighted asset floors. If well enforced, risk-sensitive capital regulation results in a more efficient credit allocation compared to the standard approach. Thus, the internal ratings-based approach should be maintained. Further, the use of internal ratings-based output floors potentially results in unintended negative side effects. Input floors are likely a valuable tool to achieve risk-weighted assets comparability. Finally, the proposed measures have a potential detrimental impact for European banks as compared to others.

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Metadaten
Author:Rainer HaselmannGND, Mark WahrenburgORCiDGND
URN:urn:nbn:de:hebis:30:3-429052
URL:http://safe-frankfurt.de/de/policy-center/publikationen/detailsview/publicationname/banks039-internal-rating-models-time-for-a-change-the-system-of-floors-as-proposed-by-the-basel-committee.html
Parent Title (English):SAFE white paper series, 43
Series (Serial Number):SAFE white paper series (43)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Date of Publication (online):2017/02/21
Year of first Publication:2016
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2017/02/21
Tag:BCBS; banking regulation; floors; internal rating models
Page Number:24
HeBIS-PPN:400203235
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht