Competitive effects of Basel II on U.S. bank credit card lending
The authors analyze the potential competitive effects of the proposed Basel II capital regulations on U.S. bank credit card lending. They find that bank issuers operating under Basel II will face higher regulatory capital minimums than Basel I banks, with differences due to the way the two regulations treat reserves and gain-on-sale of securitized assets. During periods of normal economic conditions, this is not likely to have a competitive effect; however, during periods of substantial stress in credit card portfolios, Basel II banks could face a significant competitive disadvantage relative ...
Basel II: its promises and its challenges
Supervising interest rate risk management
This Economic Letter reviews the Basel Capital Accord's stated principles on interest rate risk. In brief, the principles strongly support the idea that banks' internal risk assessments should, whenever possible, form the basis for supervisory oversight of their interest rate risk profiles. The principles suggest supervisory guidelines for assessing the adequacy of interest rate risk management systems, such as focusing on banks' internal control functions and stress-testing results.
The potential impact of explicit Basel II operational risk capital charges on the competitive environment of processing banks in the United States
Basel II replaces Basel I?s implicit capital charge on operational risk with an explicit charge. Certain U.S. banks concentrated in processing-related business lines ? which have significant operational risk ? could thus face an increase in overall minimum regulatory capital requirements. Some have argued that, as a result, these so-called ?processing banks? would be disadvantaged vis--vis competitors not subject to regulatory capital requirements for operational risk. This paper evaluates these concerns.
Forum on validation of consumer credit risk models
On November 19, 2004, the Payment Cards Center and Wharton?s Financial Institutions Center co-sponsored a conference, "Forum on Validation of Consumer Credit Risk Models." The conference brought together leading academics, policymakers, and industry experts to discuss the general principles management can use as keys for effective model validation and risk assessment in a dynamic environment. The conference agenda links to presentations where available.