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The potential impact of explicit Basel II operational risk capital charges on the competitive environment of processing banks in the United States

Author

Listed:
  • Patrick de Fontnouvelle
  • Victoria Garrity
  • Scott Chu
  • Eric S. Rosengren

Abstract

Basel II replaces Basel I’s implicit capital charge on operational risk with an explicit charge. Certain U.S. banks concentrated in processing-related business lines – which have significant operational risk – could thus face an increase in overall minimum regulatory capital requirements. Some have argued that, as a result, these so-called “processing banks” would be disadvantaged vis-à-vis competitors not subject to regulatory capital requirements for operational risk. This paper evaluates these concerns.

Suggested Citation

  • Patrick de Fontnouvelle & Victoria Garrity & Scott Chu & Eric S. Rosengren, 2005. "The potential impact of explicit Basel II operational risk capital charges on the competitive environment of processing banks in the United States," Basel II White Paper 4, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgwp:4
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    File URL: http://www.federalreserve.gov/generalinfo/basel2/docs2005/opriskjan05.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Mark J. Flannery, 2007. "Supervising bank safety and soundness: some open issues," Economic Review, Federal Reserve Bank of Atlanta, issue Q1-2, pages 83-100.
    2. William Poole, 2007. "The GSEs: where do we stand?," Review, Federal Reserve Bank of St. Louis, issue May, pages 143-152.
    3. Allen Berger, 2006. "Potential Competitive Effects of Basel II on Banks in SME Credit Markets in the United States," Journal of Financial Services Research, Springer;Western Finance Association, vol. 29(1), pages 5-36, February.
    4. W. Scott Frame & Diana Hancock & Wayne Passmore, 2012. "Federal Home Loan Bank Advances and Commercial Bank Portfolio Composition," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(4), pages 661-684, June.
    5. Robert Eisenbeis & W. Frame & Larry Wall, 2007. "An Analysis of the Systemic Risks Posed by Fannie Mae and Freddie Mac and An Evaluation of the Policy Options for Reducing Those Risks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 31(2), pages 75-99, June.
    6. Altunbas, Yener & Gambacorta, Leonardo & Marques-Ibanez, David, 2009. "Securitisation and the bank lending channel," European Economic Review, Elsevier, vol. 53(8), pages 996-1009, November.

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    Keywords

    Bank capital ; Risk management ; Basel capital accord;

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