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Revisiting Risk-Weighted Assets

Sofiya Avramova and Vanessa Le Lesle

No 2012/090, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; risk appetite; IRB bank; credit risk; Asia Pacific bank; Pollar III report; risk modeling choice; RWA methodology; Banks; Regulation; Risk-weighted Assets; Basel I; II; III; Capital; pillar III report; unsecured debt; Capital adequacy requirements; Basel II; Covered bonds; Market risk; Basel III; Europe; North America; Asia and Pacific; Global (search for similar items in EconPapers)
Pages: 48
Date: 2012-03-01
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Citations: View citations in EconPapers (47)

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Handle: RePEc:imf:imfwpa:2012/090