ECB Plans ‘Intrusive’ Probe of Banks’ Risk-Weight Models
17 November 2014, by Jim Brunsden (Bloomberg)


The European Central Bank plans to clamp down on the complex models lenders use to gauge the risk of their assets, as it works to restore trust in the euro area’s financial system.

The ECB, newly installed as the euro area’s single supervisor, plans to scrutinize lenders’ models and eliminate variations across the currency bloc, top policy makers have said.

The Frankfurt-based central bank didn’t look at the way banks calculate asset risk in its year-long balance-sheet probe, completed last month.

The Basel Committee on Banking Supervision said last week that variations among countries “undermine confidence” in capital ratios, the core measure of financial strength used to score banks in the ECB’s health check.