Risk weighed assets

Daniellll's picture
Rank: Chimp | banana points 4

When interest rate in the economy increases , we expect the collateral value that the bank borrowers give to the bank to decrease. Does this mean that risk weighted assets of banks would increase. In other words, would the supervisory body ask banks to increase their capital in response to this decrease in loan value (and potentially an increase in the allowance for doubtful loans)