Banks’ Window-Dressing Undermines Risk-Weight Trust, BIS Says

Global banks have improved their capital ratios in part by understating the riskiness of their assets, not by raising their ability to stem losses, the Bank for International Settlements said.

Regulators need to monitor the use of internal risk models in determining the capital lenders hold against losses and complement them with gauges that don’t use risk weightings, the BIS said in its annual report released today. The BIS, based in Basel, Switzerland and owned by 60 central banks, hosts the Basel Committee on Banking Supervision, a group of regulators and central bankers that sets global capital standards.