Determinants of internal ratings-based credit risk-weighted assets in Europe: 2015-2023

Juan Carlos García-Céspedes and Rubén García-Céspedes

Financial Stability Review, 2025, issue Autumn

Abstract: Risk-weighted assets (RWAs) and RWA density (RWD) are key metrics for assessing banks’ credit risk and for enabling cross-bank comparisons under the internal ratings-based (IRB) approach. Using data from the European Banking Authority, we analyse IRB-RWD levels across banks and countries, as well as their evolution over time. We relate IRB-RWD to credit risk indicators such as the non-performing loans ratio, provisions, probability of default and loss given default. Our findings show that country-specific dummy variables are not significant for most portfolios and countries and that systematic differences in domestic exposures suggest retail portfolios benefit from favourable treatment.

Date: 2025
Note: 49
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Persistent link: https://EconPapers.repec.org/RePEc:bde:revisl:y:2025:i:11:n:5

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