The objective of this Comment is to provide a critical assessment of the recent debate about the Basel Committee for Banking Standards’ (“BCBS”) reforms to risk–weighted assets (“RWA”) calculations used to measure credit risk and to establish international standards for bank capital requirements. After introducing the interests and objectives of both the regulators and the banking industry relative to this issue, the second part of this Comment will cover the origins of the approaches to the calculation of RWAs for regulatory capital requirement purposes. Using loans as the focus of the analysis, the third part of this Comment will examine the types of issues involved in standardized versus internal bank model based approaches to RWA calculations. It will include a description of the variability presently occurring in the RWA calculations for loans and will offer explanations as to whether the variations are justified. Following this, the Comment will examine alternatives to the BCBS’ proposed calculations of RWAs for loans. The conclusion will appraise possible approaches to RWA calculations for loans in light of technology’s continued evolution.
O. Jean Strickland,
Seeking to have Banks Sing to the Same Tune: the Basel Committee Addresses Credit Risk–Weighted Assets,
26 U. MIA Bus. L. Rev.
Available at: https://repository.law.miami.edu/umblr/vol26/iss1/6