Spanish paper finds issues with Basel III approach to calculating risk-weighted assets
Supervisors must investigate possible flaws in methodology, researchers say
The approach to calculating banks' risk-weighted assets (RWAs) introduced by Basel III may provide incentives for regulatory arbitrage, a paper published in the Bank of Spain's latest Financial Stability Journal argues.
In Credit portfolios and risk weighted assets: analysis of European banks, Carlos Trucharte Artigas et al analyse the data on credit exposures and RWAs gathered by the European Banking Authority in its 2014 assessment of European banks.
In particular, the authors examine the
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