Submitted by Finance Addict
Regulators Are Encouraging Banks To Game Risk Models
Two interesting articles were published yesterday discussing how banks in Europe are resorting to clever tricks that artificially raise their loss-absorbing capital to levels specified by regulators. They’re doing this especially to hit the level of 9% core capital-as-a-percentage of risk-weighted assets that the regulators require as a response to the most recent stress tests. While actually selling
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