Banca d’Italia paper looks at factors behind RWA calculations, why they differ so much

In a Securities Finance Monitor post just the other day on the BIS and the push for simplicity in capital rules, we noted that one argument in favor of simpler rules was the inconsistency of applying current RWA rules. Banks with similar exposures can report different results based on differing interpretations. A September 2012 paper from the Banca d’Italia, “Inside the labyrinth of Basel risk-weighted assets: how not to get lost,” by Francesco Cannata, Simone Casellina and Gregorio Guidi examines those differences. Here are the main points:

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