Banks are struggling to predict default rates of loans on their own books, with many overestimating the probability that borrowers won’t repay, and treating assets as riskier than they actually are, IFR reports.

Barclays found that actual default rates were more than 50% lower than bank-predicted default rates.

This matters because banks use their predictions to come up with risk weighted asset figures, a key metric used to assess bank health, and even in the contracts for contingent capital bonds.