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Regulators to Banks: We’ll Size Up Your Risks 

June 13, 2016

Donna Borak, The Wall Street Journal

International regulators want to limit banks’ leeway in assessing the riskiness of their assets, a step that critics say could crimp lending, dent profits and worsen risk rather than reduce it.

A committee of overseers in Basel, Switzerland, since the end of last year has proposed five different rules that would require banks to use standardized calculations instead of their own when measuring possible losses on everything from loans to interest rates to fraud.

The Basel Committee on Banking Supervision is considering a series of rule revisions as part of their effort to finalize postcrisis capital rules. Regulators agreed to spend this year addressing weaknesses spotlighted by the financial crisis, including minimizing the variance in how banks weigh their own risk in three key areas: credit risk, market risk, and operational risk.

One proposal would stop banks from calculating their own exposure to other banks, large corporations and stockholdings. Another imposes tougher capital requirements on swaps, bonds and other securities that banks plan to trade. Capital requirements often depend on lenders’ exposure to risk. Read more

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