English
 
User Manual Privacy Policy Disclaimer Contact us
  Advanced SearchBrowse

Item

ITEM ACTIONSEXPORT

Released

Paper

Bank Size and Risk-Taking under Basel II

MPS-Authors
/persons/resource/persons183127

Hakenes,  Hendrik
Max Planck Institute for Research on Collective Goods, Max Planck Society;

/persons/resource/persons183196

Schnabel,  Isabel
Max Planck Institute for Research on Collective Goods, Max Planck Society;

External Ressource
Fulltext (public)
There are no public fulltexts stored in PuRe
Supplementary Material (public)
There is no public supplementary material available
Citation

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


Cite as: http://hdl.handle.net/11858/00-001M-0000-0028-6E50-A
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.