Revisiting Risk-Weighted Assets

BySofiya Avramova, Vanessa Le Lesle

March 1, 2012

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In this paper, we provide an overview of the concerns surrounding the variations in the calculation of risk-weighted assets (RWAs) across banks and jurisdictions and how this might undermine the Basel III capital adequacy framework. We discuss the key drivers behind the differences in these calculations, drawing upon a sample of systemically important banks from Europe, North America, and Asia Pacific. We then discuss a range of policy options that could be explored to fix the actual and perceived problems with RWAs, and improve the use of risk-sensitive capital ratios.

Subject: Banking, Basel II, Basel III, Capital adequacy requirements, Covered bonds, Financial institutions, Financial regulation and supervision, Market risk

Keywords: Asia and Pacific, Asia Pacific bank, Banks, Basel I, Basel II, Basel III, Capital, Capital adequacy requirements, Covered bonds, credit risk, Europe, Global, II, III, IRB bank, Market risk, North America, pillar III report, Pollar III report, Regulation, risk appetite, risk modeling choice, Risk-weighted Assets, RWA methodology, unsecured debt, WP

Pages:
48
Volume:
2012
DOI:
https://doi.org/10.5089/9781475502657.001
Issue:
090
Series:
Working Paper No. 2012/090
Stock No:
WPIEA2012090
ISBN:
9781475502657
ISSN:
1018-5941

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