ECB to monitor banks’ risk models

The European Central Bank plans to inspect the internal models that banks use to calculate their risks to ensure that these systems behave consistently, a senior policymaker said yesterday.

Regulators have had in-house computer models in their sights in the wake of the financial crisis due to concerns some banks may attempt to downplay the riskiness of their assets and hold less capital than they should.

The ECB, which took over as the eurozone’s leading financial regulator in November, aims to compare these models using regional data and look for inconsistencies, said ECB executive board member Sabine Lautenschlaeger at a conference in Frankfurt, yesterday.