Basel Regulators Said to Scrutinize Banks’ ‘Flawed’ Risk Models

Global banking regulators are moving their attention to disparities in the way firms measure the riskiness of their assets on concern lenders may be using their internal models to mitigate rules aimed at making them boost capital.

The Basel Committee on Banking Supervision agreed on June 25 to make systemically important financial institutions hold core Tier 1 capital of as much as 9.5 percent of total risk-weighted assets. Now regulators are preparing to assess how banks set risk weightings amid criticism firms’ calculations are inconsistent, said a person with direct knowledge of the matter who declined to be identified because the talks are private.