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Banks use internal models to optimize risk weights and better account for the specific risk of each asset class. As the choice of a set of risk weights affects the regulatory capital ratio, economic theory suggests that banks should optimize their risk weights accounting for the cost and benefit of holding equity capital. Banks with a higher cost of equity, and banks with better growth opportunities, should be more aggressive in reducing risk weights. We consider a large panel of international banks and find that, after controlling for a number of bank and country characteristics, a higher cost of equity and better growth opportunities have a negative relation with the ratio between risk-weighted assets and total assets and with the share of credit risk evaluated though internal models. The results are obtained in the context of endogeneity-robust econometric procedures and across several specifications. We also find that banks that are more aggressive in terms of such optimization have a subsequent lower return on equity and are more likely to have raised capital during the credit crisis