Many regions of the world saw a decline in the ratio of risk-weighted assets (RWAs) to total assets during 2014. This implies that the banks consider the risks on their books to be falling, and enables them to potentially hold less capital. Africa and South America witnessed swings of 6.75 and 5.28 percentage points, respectively.
Two of the largest banking markets in Africa, South Africa and Nigeria, both enjoyed double-digit declines in impairment charges in 2014, helping to explain the lower risk assessment of their assets. In South America, Colombia enjoyed a similar improvement in impairment charges, but Brazil’s rate of impairment rose slightly, while Mexico’s impairments also increased slightly as a share of total operating income. It remains to be seen whether the confidence signalled by the fall in RWAs to total assets is justified in practice.
