There is no strong relationship between loan-to-valuation ratios, and the defaults and losses experienced by banks, a study by the Bank for International Settlements has found.On the other hand, for most banks in a global study, "on average, the parameters on the 'probability of default' (PD) are higher than the actual average default rates" incurred by banks.The study, the second of its kind by the BIS, considered variation in the risk-weighted assets within the retail and SME portfolios in late 2014 from 35 internationally active banks from 13 countries. Of these, nine banks covered the Asia-Pacific, 19 from Europe and seven from North America.One objective of the study, the BIS said, was to "highlight where there is potential to modify current standards ... or to simplify the internal ratings based capital framework [used by the largest banks] and increase its comparability."Banks' models "appear, on average, to produce PD estimates that are reasonably consistent with outcomes," the study concluded.It said the "tightest correspondence between actuals and estimates" occurs in credit card portfolios. SME loans, of the type classed as "other retail shows the weakest relationship, at least in more recent years," the BIS said. Losses reported by banks are more variable given the assumptions used in models."Although PDs appear, on average, to align with default rates, the study does not show similar alignment between average loss given default (LGD) and loss rate outcomes," the BIS said."The distribution of loss rates realised on defaulted exposures ... shows significantly higher variation than that for observed default rates."