Valuation model risk on the rise at EU banks
Over two-thirds of fair value assets priced using banks' models
The share of European bank portfolios subject to model risk is on the rise, partly due to the new system of accounting for credit assets introduced at the start of last year.
At end-June 2018, €5.2 trillion ($6 trillion) of assets were classified as either level 2 or level 3 under IFRS 13 fair value measurement accounting rules, according to data published by the European Banking Authority (EBA). This means they lacked quoted prices in active markets to determine their valuation, and were
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