Log in or Register for enhanced features | Forgotten Password?
White Papers | Suppliers | Events | Report Store | Companies | Dining Club | Videos
Banking Services
Commercial Banking
Return to: BBR Home | Banking Services | Commercial Banking

ECB sets four-year deadline to review internal risk models of banks

BBR Staff Writer Published 17 August 2015

The European Central Bank (ECB) has set a four-year deadline for preparing an ‘intrusive’ review that could force some of Eurozone’s biggest banks to increase their capital.


However, few experts seeking to work on the project have reportedly said that the report might take even longer due to its extensive and comprehensive nature that would demand a huge manpower and highly specialized staff.

ECB had initially expected to complete the report in one to two years. It will be reviewing around 123 banks that have more than 7,000 internal modules.

The internal risk models of banks are important as they can produce the risk weighted assets (RWA) that calculates the capital ratios used as a key measure of the financial strength of banks. Banks can achieve better capital rations from lower RWAs, reported the Financial Express.

While the internal models are required to be approved by supervisors, many anomalies have been found in the RWA models of banks due to which ECB had vowed to eliminate them.

Some of the biggest banks supervised by ECB that use the internal models for calculating capital include Deutsche Bank, Santander, UniCredit, BNP Paribas and Société Générale.

However, not all of the 123 banks employ the same model.

Image: The new headquarters of the European Central Bank at Frankfurt. Photo: courtesy of Epizentrum.