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Risk Weights on Non-Financial Corporate Lending by Irish Retail Banks

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  • Lyons, Paul

    (Central Bank of Ireland)

  • Rice, Jonathan

    (Central Bank of Ireland)

Abstract

Risk weighted assets reflect the risk profile of a bank’s lending. In this Note, we look at the risk weighted assets of the non-financial corporate (NFC) exposures of Irish and European banks. We find that Irish NFC risk weights are higher than those in most other European countries. Factors that explain these higher risk weights include the measurement approach used and the higher default rates for Irish NFC loans, particularly during crisis periods. Overall, the evidence suggests that the current risk weights on Irish NFC lending are reflective of the relatively higher risk of Irish retail banks’ NFC exposures.

Suggested Citation

  • Lyons, Paul & Rice, Jonathan, 2022. "Risk Weights on Non-Financial Corporate Lending by Irish Retail Banks," Financial Stability Notes 4/FS/22, Central Bank of Ireland.
    • Handle: RePEc:cbi:fsnote:4/fs/22
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    File URL: https://www.centralbank.ie/docs/default-source/publications/financial-stability-notes/no-4-risk-weights-on-non-financial-corporate-lending-by-irish-retail-banks-(lyons-and-rice).pdf?sfvrsn=47e4961d_3
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    References listed on IDEAS

    as
    1. Reint Gropp & John Krainer & Elizabeth Laderman, 2019. "Deleveraging and Consumer Credit Supply in the Wake of the 2008-09 Financial Crisis," International Journal of Central Banking, International Journal of Central Banking, vol. 15(3), pages 205-251, September.
    2. Lyons, Paul & Rice, Jonathan, 2022. "Risk Weights on Irish Mortgages," Financial Stability Notes 1/FS/22, Central Bank of Ireland.
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