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Fed may shun global risk rules banks spent billions to meet 

June 5, 2014
David Henry, Emily Stephenson, Reuters

The Federal Reserve may scrap elements of international measures aimed at assessing bank health in favour of imposing its own rules, frustrating bankers who have spent billions of dollars retooling their books to meet global standards.

Fed officials are concerned that parts of a key tool that regulators have developed to measure banks' riskiness—known as "Basel III capital rules" -- are flawed and can be gamed by the companies.

Under Basel, banks can determine how much debt they can take on by using their own models and computer systems to calculate how risky their assets are, among other methods. The higher the risk, the less money banks can borrow and lend, in turn cutting income banks can earn. In other words, this part of the Basel rules, known as the "internal-ratings based approach," give banks a chance to monkey with their risk models to boost profit.

Read more: Reuters

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