Banks Develop Own “Capital Allocation” Models
Advances in technology and finance allowed banks to develop their own capital allocation (internal) models in the 1990s
This resulted in more accurate calculations of bank capital than possible under Basel I
These models allowed banks to align the amount of risk they undertook on a loan with the overall goals of the bank.
This resulted in more accurate calculations of bank capital than possible under Basel I
These models allowed banks to align the amount of risk they undertook on a loan with the overall goals of the bank.
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