Basel’s IRB attack ‘a capital game-changer’, Euromoney

Mayra Rodriguez Valladares, an independent New York-based regulatory consultant, supports Basel’s latest intrusive push to micro-manage banks’ liability management, citing the fact that low bank equity prices, in part, reflect a loss of investor confidence in apparently opaque capital management. “While I love the ethos of the Basel III, risk sensitivity has become out of control because of the variability and opaqueness in models,” she says. She adds: “The challenge still remains that banks get to use too many opaque models which involve hundreds of personnel such as modellers, risk managers, validators, compliance officers and auditors. Since all of them have different motives and skills, there is a lot of scope for errors. “Also, big banks continue to struggle with having complete, accurate data sets to measure their risks reliably and consistently. Hence, there is a lot of scope for subjectivity. Worst of all, banks are not required to be granular in their disclosures, so the market does not have the information to discipline.”

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