Internal credit models at the smallest banks supervised by the European Central Bank consistently produce higher risk-weights than at larger peers, a divergence that was underscored further as volatility swept markets in 2022.

As of end-September, the risk density for exposures calculated using the internal ratings-based (IRB) approach at lenders with less than €30 billion ($32.4 billion) in assets was between two and 22 percentage points higher than for aggregates across banks of all sizes