Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128021
Authors: 
Rime, Bertrand
Year of Publication: 
2003
Series/Report no.: 
Working Paper, Study Center Gerzensee 03.05
Abstract: 
We examine the prudential implications of the co-existence between the standardized approach and the internal ratings-based (IRB) approach, as defined in the new Basle Accord. We consider a model in which sophisticated banks, eligible for the IRB approach, and unsophisticated banks, eligible for the standardized approach, allocate their loan portfolio between high-risk and lowrisk borrowers. We find that the co-existence between the two regimes may induce sophisticated banks to decrease risk-taking, but encourage unsophisticated banks to increase risk-taking. The risk reallocation effects are stronger when competition is more intense.
Subjects: 
Banking regulation
capital standards
Basel Accord
JEL: 
G2
G28
Document Type: 
Working Paper

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