Might banks cook their risk books in the heat of the moment?

According to analysts at Barclays Capital, the average risk weighting that European banks apply to their assets when calculating regulatory capital ratios has declined steadily from 49% in 1998 to 35% at the end of 2010.

Although it might well be that banks have deliberately reoriented their exposures in recent years by shifting towards asset classes that consume less regulatory capital because they are less risky, it would be touchingly naive for any investor to draw too much comfort from this.