Competitive effects of Basel II on US bank credit card lending |
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| Authors: | William W Lang Loretta J Mester Todd A Vermilyea |
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| Institution: | aSupervision, Regulation, and Credit Department, Federal Reserve Bank of Philadelphia, Ten Independence Mall, Philadelphia, PA 19106-1574, USA;bResearch Department, Federal Reserve Bank of Philadelphia, Ten Independence Mall, Philadelphia, PA 19106-1574, USA;cThe Wharton School, University of Pennsylvania, PA, USA |
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| Abstract: | We analyze the potential competitive effects of the proposed Basel II capital regulations on US bank credit card lending. We find that bank issuers operating under Basel II will face higher regulatory capital minimums than Basel I banks, with differences due to the way the two regulations treat reserves and gain-on-sale of securitized assets. During periods of normal economic conditions, this is not likely to have a competitive effect; however, during periods of substantial stress in credit card portfolios, Basel II banks could face a significant competitive disadvantage relative to Basel I banks and nonbank issuers. |
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| Keywords: | Basel Accord Basel II Capital requirements Bank regulation Competition |
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