On July 22, 2015, the EBA published two reports on the findings of two benchmarking exercises conducted under CRD. The aim of the exercises is to assess and improve the consistency and comparability of risk weighted assets across large EU banks. The first report deals with findings on internal approaches applied for the calculation of RWAs for Low Default Portfolios across large EU firms. The study found that 75 percent of the observed differences in Global Charge levels across institutions can be explained by the proportion of defaulted exposures in a portfolio and portfolio mix. When each portfolio is looked at separately, the impact of defaulted exposures explains around 50 percent of GC differences for both large corporate and institutions portfolios. The remaining 50 percent could be attributed to bank-specific issues such as IRB parameters or risk management practices. Data was collected from 41 institutions for this study. The study was based only on draft technical standards, which will in the future be required to be used in benchmarking exercises. The report states that more in-depth analysis is required on the impact of collateral on internal loss-given-default estimates as well as comparisons between the internal ratings-based and standardized approaches. The second report deals with the internal approaches applied for Counterparty Credit Risk exposures under the Internal Model Method and Credit Valuation Adjustment Risk according to the Advanced Approach. This study was carried out using data collected by the Basel Committee for Banking Supervision and shows significant variability in the calculation of CCR and Credit Valuation Adjustment Risk when using the IMM across banks, especially where equity and foreign exchange OTC derivatives are concerned.
The press release and both reports are available at: http://www.eba.europa.eu/-/eba-publishes-rwa-assessment-as-the-next-step-in-improving-consistency-of-internal-model-outcom-1 .
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