Concerns about excessive variability in bank risk weights have prompted their review by
regulators. This paper provides prima facie evidence on the extent of risk weight
heterogeneity across broad asset classes and by country of counterparty for major banks in
the European Union using internal models. It also finds that corporate risk weights are
sensitive to the riskiness of an average representative firm, but not to a market indicator of a
firm's probablity of default. Under plausible yet severe hypothetical scenarios for
harmonized risk weights, counterfactual capital ratios would decline significantly for some
banks, but they would not experience a shortfall relative to Basel III's minimum
requirements. This, however, does not preclude falling short of meeting additional national
supervisory capital requirements.