ECB Weighs Tougher Risk Model Approach That May Hit Bank Capital

The European Central Bank is considering pushing banks to use loan data from the region’s historic banking crisis when predicting future credit defaults, a move that could result in lower capital strength for some of the affected lenders.

Europe’s top financial regulator floated the idea at a presentation in November, when it announced how it seeks to enforce a new piece of regulation ordering banks to use credit data that includes times of stress in their risk models, people familiar with the matter said. The ECB proposal was to define that as the period between 2008 and 2018, during ...