Bank size and risk-taking under Basel II

Hakenes, Hendrik ; Schnabel, Isabel

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URN: urn:nbn:de:bsz:180-madoc-26712
Document Type: Working paper
Year of publication: 2005
The title of a journal, publication series: None
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: G28 L11 G21 ,
Subject headings (SWD): Bank , Betriebsgröße , Kreditrisiko , Basler Eigenkapitalvereinbarung <2001> , Bankgeschäft , Unvollständige Konkurrenz , Eigenkapitalgrundsätze
Keywords (English): Basel II , IRB approach , bank competition , capital requirements , SME financing
Abstract: This paper discusses the relationship between bank size and risk-taking under Pillar I of the New Basel Capital Accord. Using a model with imperfect competition and moral hazard, we find that small banks (and hence small borrowers) may profit from the introduction of an internal ratings based (IRB) approach if this approach is applied uniformly across banks. However, the banks' right to choose between the standardized and the IRB approaches unambiguously hurts small banks who are pushed towards higher risk-taking due to fiercer competition. This may even lead to higher aggregate risk in the economy.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.

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