On the 5th July, the Basel Committee on Banking Supervision published its first report on the regulatory consistency of Risk-Weighted Assets (RWAs) for Credit Risk in the Banking Book. This study is part of its wider Regulatory Consistency Assessment Programme (RCAP) which is intended to ensure consistent implementation of the Basel III Framework. This study draws on supervisory data for more than 100 major banks, as well as additional data on sovereign, bank and corporate exposures collected from 32 major international banks as part of a portfolio benchmarking exercise.
The Report notes a considerable variation across banks in average RWAs for credit risk in the banking book. Most of the variation in RWAs can be explained by broad differences in the composition of banks' assets, reflecting differences in risk preferences as intended under the Risk-Based Capital Framework. However, there is also material variation driven by diversity in bank and supervisory practices. The Report also includes a preliminary discussion of potential policy options that the Committee could pursue in seeking to minimise excessive practice based variations.