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Assessing Banks’ Cost of Complying with Basel II

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  • David VanHoose

Abstract

This policy brief assesses the implications of Basel II for bank regulatory compliance costs. In spite of widespread complaints by bankers about the costs of complying with Basel II rules, the academic literature has given surprisingly little attention to quantifying these costs. The brief discusses estimates of Basel II compliance costs based on commonly utilized rules of thumb and on survey data collected by the Office of the Comptroller of the Currency (OCC). In addition, it utilizes OCC bank-level compliance-cost estimates to speculate about the potential for economies of scale in Basel II compliance. There is unavoidable imprecision associated with compliance-cost estimates. Nevertheless, costs of implementing Basel II ultimately should matter for the U.S. banking industry, both in terms of how the overall magnitudes of compliance costs may influence banks’ strategic-path choices as well as their on-going operating decisions.

Suggested Citation

  • David VanHoose, 2007. "Assessing Banks’ Cost of Complying with Basel II," NFI Policy Briefs 2007-PB-10, Indiana State University, Scott College of Business, Networks Financial Institute.
    • Handle: RePEc:nfi:nfipbs:2007-pb-10
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    File URL: http://www.indstate.edu/business/sites/business.indstate.edu/files/Docs/2007-PB-10_VanHoose.pdf
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    Cited by:

    1. Oana Toader, 2015. "Estimating the impact of higher capital requirements on the cost of equity: an empirical study of European banks," International Economics and Economic Policy, Springer, vol. 12(3), pages 411-436, September.
    2. John A. Tatom & Terrie Troxel, 2011. "A Report to the Federal Insurance Office," NFI Policy Briefs 2011-PB-07, Indiana State University, Scott College of Business, Networks Financial Institute.

    More about this item

    Keywords

    Basel II; bank regulatory compliance costs;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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