The basel committee on banking supervision is planning an overhaul of its risk-weighted assets rules following complaints from some members that banks in some countries are abusing them in order to lower capital requirements, with a document expected out this week to outline the changes. Most large banks use their own internal models to calculate risk weightings from a dataset of default and loss probabilities, which are approved at national level. But calibration between countries has been a consistent problem for the Basel Committee, with some more conservative countries becoming annoyed that others have been approving less stringent models, in effect giving their banks an advantage. Indeed, numerous banks have in recent years boosted their capital ratios by simply tweaking their models - something approved by national regulators, but something some regulators have ridiculed as cheating.
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