Credit risk models can dodge procyclical bias – Fed adviser
Excluding some metrics makes A-IRB retail portfolio risk model more stable
Last year the Basel Committee warned the advanced internal ratings-based capital approach could produce procyclical results, with the capital held against credit portfolios varying significantly as economic conditions change. It asked for comments and suggestions as part of a wide-ranging review of its approach to credit risk capital. According to José Canals-Cerdá, a senior special adviser on supervision, regulation and credit at the Federal Reserve Bank of Philadelphia, the problem could be
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