IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The Rocky Road to Implementation of Basel II in the United States

  • Richard Herring

    ()

Registered author(s):

    This paper contends that the problems US officials have encountered in their efforts to implement Basel II reflect inherent weaknesses in the structure of the approach. It begins with a brief overview of the original Basel Accord on Capital Adequacy (Basel I) and a summary of the Basel II approach, with emphasis on the Pillar I weights for credit risk. Next an analysis of the Fed’s bifurcated approach to implementation of Basel II is followed by an examination of three unanticipated obstacles: (1) perceived competitive inequities within the USA; (2) the surprisingly lower and variable capital charges revealed in the fourth quantitative impact study; and (3) the request by four leading banks for permission to implement the simpler, Standardized Approach rather than the Advanced Internal Ratings Approach (A-IRB). These reflect the erosion of several crucial predeal understandings as described by Kane (J Financ Serv Res 32(1):39–53, 2007a). The paper concludes with a consideration of whether it may have been possible to achieve equivalent improvements in risk management with lower compliance costs and less uncertainty about the impact on financial stability. Copyright International Atlantic Economic Society 2007

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://hdl.handle.net/10.1007/s11293-007-9094-6
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

    Volume (Year): 35 (2007)
    Issue (Month): 4 (December)
    Pages: 411-429

    as
    in new window

    Handle: RePEc:kap:atlecj:v:35:y:2007:i:4:p:411-429
    Contact details of provider: Postal: Suite 650, International Tower, 229 Peachtree Street, N.E., Atlanta, GA 30303
    Phone: (404) 965-1555
    Fax: (404) 965-1556
    Web page: http://springerlink.metapress.com/link.asp?id=112055
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Mark Carey, 2002. "A guide to choosing absolute bank capital requirements," International Finance Discussion Papers 726, Board of Governors of the Federal Reserve System (U.S.).
    2. M.J.B. Hall, 1996. "The amendment to the capital accord to incorporate market risk," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 49(197), pages 271-277.
    3. Herring, Richard J., 2004. "The subordinated debt alternative to Basel II," Journal of Financial Stability, Elsevier, vol. 1(2), pages 137-155, December.
    4. Robert Litan & William Isaac & William Taylor, 1994. "Financial Regulation," NBER Chapters, in: American Economic Policy in the 1980s, pages 519-572 National Bureau of Economic Research, Inc.
    5. Allen N. Berger, 2004. "Potential competitive effects of Basel II on banks in SME credit markets in the United States," Finance and Economics Discussion Series 2004-12, Board of Governors of the Federal Reserve System (U.S.).
    6. M.J.B. Hall, 1996. "The amendment to the capital accord to incorporate market risk," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 49(197), pages 271-277.
    7. Timothy H. Hannan & Steven J. Pilloff, 2004. "Will the proposed application of Basel II in the United States encourage increased bank merger activity? evidence from past merger activity," Finance and Economics Discussion Series 2004-13, Board of Governors of the Federal Reserve System (U.S.).
    8. Carey, Mark, 2002. "A guide to choosing absolute bank capital requirements," Journal of Banking & Finance, Elsevier, vol. 26(5), pages 929-951, May.
    9. Paul S. Calem & James R. Follain, 2003. "The asset-correlation parameter in Basel II for mortgages on single-family residences," Basel II White Paper 5, Board of Governors of the Federal Reserve System (U.S.).
    10. Edward J. Kane, 2007. "Basel II: a contracting perspective," Proceedings 1042, Federal Reserve Bank of Chicago.
    11. Diana Hancock & Andreas Lehnert & Wayne Passmore & Shane M. Sherlund, 2006. "The competitive effects of risk-based bank capital regulation: an example from U.S. mortgage markets," Finance and Economics Discussion Series 2006-46, Board of Governors of the Federal Reserve System (U.S.).
    12. Edward Kane, 2007. "Connecting National Safety Nets: The Dialectics of the Basel II Contracting Process," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(4), pages 399-409, December.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:kap:atlecj:v:35:y:2007:i:4:p:411-429. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

    or (Christopher F. Baum)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.