The empirical analysis, which was provided to the European Banking Authority, suggests use of wider and different risk drivers in credit risk calculations for regulatory capital requirements, so to improve variables’ correlation with risk and minimize data-related inaccuracies, for example applying debt-to-income, years with bank loan-to-value for Retail and Real Estate exposures. On the Corporate side, CRIF Credit Solutions’ Management Consulting has shown strong potential impacts on Banking RWA based on a sample of corporate exposures adopting ratios proposed by Regulatory.
CRIF’s study recommends to redefine number of clusters, allow a better distribution of risk-weights and to leverage multi-dimensional statistically derived algorithms and ratios, such as Rating Tool algorithms, as an alternative to leverage and revenue drivers.
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