Today, the Basel Committee published a report on the regulatory consistency of risk-weighted assets (RWAs) for market risk. This analysis of market risk RWAs is part of the Basel Committee’s wider Regulatory Consistency Assessment Programme (RCAP). A similar analysis is currently under way for credit risk RWAs.
The market risk RWAs report brings together two pieces of analysis: (1) an examination of publicly available data for a selection of large banks and (2) the results of a hypothetical test portfolio exercise, in which 15 internationally active banks participated. The Basel Committee plans to conduct a further hypothetical test portfolio exercise later this year.
Potential Policy Options: According to the Basel Committee, the preliminary analysis in the report highlights three potential types of policy options that could be considered in the future:
- Improving public disclosure and regulatory data collection to aid the understanding of market risk RWAs;
- Narrowing the modeling choices for banks; and
- Further harmonization of supervisory practices with regard to model approvals to reduce the level of variation in market risk RWAs.
Basel Committee, Regulatory Consistency Assessment Programme (RCAP) – Analysis of Risk-Weighted Assets for Market Risk (Jan. 2013) available here: http://www.bis.org/publ/bcbs240.pdf