Business models and risk weighted assets

Business models and risk weighted assets

Business models and how banks calculate risk are the top priority of the ECB…


Since banks’ internal models must be approved by their regulators, the ECB is now in the driving seat to shed some light on how banks assess asset risk. It is the role of the ECB, among others, to maintain risk sensitivity and the incentives for internal modelling. Meanwhile, it has been the supervisor’s stated objective to drive a harmonised model of supervision and the construction of a level playing field in the euro zone.  The ECB has made business models its top priority for 2016 and will critically review the calculation of risk-weighted assets in order to reduce excessive variability, thereby restoring confidence in the calculation of risk-weighted assets.

The articles in this section focus on bank structure, and the search by many banks for a viable and sustainable future amidst increasing regulatory and commercial pressures. What bank models work in this new environment and how can banks factor in the higher costs of doing business, constraints on balance sheet composition, business activities, legal and operational structure; and supervisory intervention all at the same time.  

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