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Banks slam global banking watchdog over risk modelling revamp 

March 30, 2015

James Eyers, Sydney Morning Herald, Business Day

Australia's banks have launched a stinging attack on proposals by the international banking regulator to overhaul risk modelling, warning calls for a "capital floor" have "significant design and calibration challenges that if not resolved will only add to the complexity of the Basel framework".

The Australian Bankers' Association, in a submission sent to the Basel Committee on Banking Supervision  at the weekend, said introducing a capital floor to reduce the variance between big and small-bank risk models has "a number of obvious issues, the most material of which is the capital burden it would place on the industry".

Just two weeks after David Murray delivered his landmark financial system inquiry to the government on December 7, calling for the big banks to carry higher capital against mortgages to create a larger buffer against a crisis, the Basel Committee on Banking Supervision (BCBS) released two consultation documents on global bank-risk modelling.

The papers showed the committee had lost confidence in both big banks' use of their own internal models to assess credit risk and the one-size-fits-all approach applied by all other banks through the use of "standardised" risk models.

Read more: Sydney Morning Herald

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