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  Bank Size and Risk-Taking under Basel II

Hakenes, H., & Schnabel, I. (2005). Bank Size and Risk-Taking under Basel II.

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 Creators:
Hakenes, Hendrik1, Author              
Schnabel, Isabel1, Author              
Affiliations:
1Max Planck Institute for Research on Collective Goods, Max Planck Society, ou_2173688              

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Free keywords: Basel II, IRB approach, bank competition, capital requirements, SME financing
 Abstract: This paper discusses the relationship between bank size and risk-taking under Pillar I of the New Basel Capital Accord. Using a model with imperfect competition and moral hazard, we find that small banks (and hence small borrowers) may profit from the introduction of an internal ratings based (IRB) approach if this approach is applied uniformly across banks. However, the banks' right to choose between the standardized and the IRB approaches unambiguously hurts small banks, and pushes them towards higher risk-taking due to fiercer competition. This may even lead to higher aggregate risk in the economy.

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 Dates: 2005
 Publication Status: Published in print
 Pages: 33
 Publishing info: Bonn : Max Planck Institute for Research on Collective Goods
 Table of Contents: -
 Rev. Type: -
 Identifiers: Other: 2005/06
 Degree: -

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