Potential competitive effects of Basel II on banks in SME credit markets in the United States

Allen Berger ()

No 2004-12, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We examine the likely competitive effects of the proposed implementation of the Basel II capital requirements on banks in the market for credit to SMEs in the U.S. Specifically, we address whether reduced risk weights for SME credits extended by large banking organizations that adopt the Advanced Internal Ratings-Based (A-IRB) approach of Basel II might significantly adversely affect the competitive positions of organizations that do not adopt A-IRB. The analyses suggest only a relatively minor competitive effect on the majority of community banks primarily because the organizations that are likely to adopt A-IRB tend to make very different types of SME loans to different types of borrowers than community banks. However, the analyses suggest the possibility of significant adverse effects on the competitive positions of large banking organizations that do not adopt A-IRB because the data do not suggest any strong segmentation in SME credit markets among large organizations.

Keywords: Risk management; Bank capital - Law and legislation; Commercial credit (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-ent, nep-fin and nep-reg
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Potential Competitive Effects of Basel II on Banks in SME Credit Markets in the United States (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2004-12

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