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Bank Safety Under Basel II Capital Requirements (Vauhkonen J.)

Basel I-III Competition and Market Power Regulation Risk-taking and Risk Management

Abstract We consider the impact of mandatory information disclosure on bank safety in a spatial model of banking competition in which a bank’s probability of success depends on the quality of its risk measurement and management systems. Under Basel II capital requirements, this quality is either fully or partially disclosed to market participants by the Pillar 3 disclosures. We show that, under stringent Pillar 3 disclosure requirements, banks’ equilibrium probability of success and total welfare may be higher under a simple Basel II standardized approach than under the more sophisticated internal ratings-based (IRB) approach.
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Libref/ Vauhkonen J. (2009) “Bank safety under Basel II capital requirements”, Bank of Finland Research Discussion Paper № 29/2009, pp. 1-36
© Программирование — Александр Красильников, 2008
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