Effects of the New Basel Capital Accord on Bank Capital Requirements for SMEs

Using data from three countries (US, Italy and Australia) and surveying related studies from several other countries in Europe, we investigate the effects of the New Basel Capital Accord on bank capital requirements for small and medium sized enterprises (SMEs). We find that, for all the countries, banks will have significant benefits, in terms of lower capital requirements, when considering small and medium sized firms as retail customers. But they will be obliged to use the Advanced IRB approach and to manage them on a pooled basis. For SMEs as corporate, however, capital requirements will be slightly greater than under the existing Basel I Capital Accord. We believe that most eligible banks will use a blended approach (considering some SMEs as retail and some as corporate). Through a breakeven analysis, we find that for all of our countries, banking organizations will be obliged to classify as retail at least 20% of their SME portfolio in order to maintain the current capital requirement (8%). JEL classification: G21, G28     

Credit Risk Versus Capital Requirements under Basel II: Are SME Loans and Retail Credit Really Different?

Under Basel II, retail and SME credit (R&SME) receive special treatment because of a supposedly smaller exposure to systemic risk. Most research on this issue has been based on parameterized credit risk models. We present new evidence by applying Carey's (Carey, Mark. “Credit Risk in Private Debt Portfolios.” Journal of Finance 53, no. 4 (1998), 1363–1387.) nonparametric Monte-Carlo resampling method to two banks' complete loan portfolios. By exploiting that a sub-sample of all borrowers has been assigned an internal rating by both banks, we can compare the credit loss distributions for the three credit types, and compute both economic and regulatory capital under Basel II. We also test if our conclusions are sensitive to the definitions of R&SME credit. Our findings show that R&SME portfolios are usually riskier than corporate credit. Special treatment under Basel II is thus not justified. JEL classification: C14, C15, G21, G28, G33.     

Potential Competitive Effects of Basel II on Banks in SME Credit Markets in the United States

We examine the likely competitive effects of implementation of Basel II capital requirements on banks in the market for credit to SMEs in the U.S. Similar competitive effects from Basel II may occur for other credits and financial instruments in the U.S. and other nations. We address whether reduced risk weights for SME credits extended by large banking organizations that adopt the Advanced Internal Ratings-Based (A-IRB) approach of Basel II might significantly adversely affect the competitive positions of other organizations. The analyses suggest only relatively minor competitive effects on most community banks because the large A-IRB adopters tend to make very different types of SME loans to different types of borrowers than community banks. However, there may be significant adverse effects on the competitive positions of large non-A-IRB banking organizations because the data do not suggest any strong segmentation in SME credit markets among large organizations. JEL classification: G21, G28, G38, L51     

Bank Portfolio Allocation: The Impact of Capital Requirements, Regulatory Monitoring, and Economic Conditions

This paper develops a structural, dynamic model of a banking firm to analyze how banks adjust their loan portfolios over time. In the model, banks experience capital shocks, face uncertain future loan demand, and incur costs based on their proximity to regulatory minimum capital requirements and the intensity of regulatory monitoring. Implications of the model then are estimated using panel data on large U.S. commercial banks operating continuously between December 1989 and December 1997. The estimated model is used to simulate the optimal bank response to (1) past and proposed changes in capital requirements, (2) changes in regulatory monitoring intensity, and (3) economic downturns. The simulation results are used to shed light on the decline in loan growth and the rise in bank capital ratios witnessed over a decade ago as well as the possible impact of the current proposed modification to capital requirements.     

企业信用行为与失信惩戒机制：一个基于信用资本的分析框架

本文通过一个基于代表性企业与银行之间的博弈模型,讨论了信用资本的性质、价值度量及其对企业借贷行为的影响。文章认为,信用资本的性质与价值量将会影响到企业的财务与融资决策行为。信用信息共享为降低银行信贷风险、扩大信贷规模提供了一个基础设施,而有效的失信惩戒机制在其中起着关键作用。因此,我国应尽快建立包含有效的守信激励和失信惩戒机制的信用信息共享体系,这也可看作是对我国信用体系建设热潮的一个理论解释。     

The Impact of Personal Taxes on the Firm's Weighted Average Cost of Capital and Investment Behaviour: A Simplified Approach Using the Dempsey Discounted Dividends Model

The discounted dividends model advanced by Dempsey (1996) is extended to provide a weighted average cost of capital (WACC) assessment of investment opportunities with irregular cash flows. Thereafter, the framework is extended to an assessment of the implications of government tax policy for the firm's investment behaviour. The developed framework is consistent with the empirical evidence of Poterba and Summers (1985) which — over the period of UK tax history 1950–1983 encompassing four major tax on equity reforms — observes how the related dividend and investment politics of UK firms appear to be influenced by the level of dividend taxes.     

企业属性与行业集中度对上市公司负债率的影响*--基于对2009-2013年中国上市公司的分析

本文以2009-2013年我国A股上市公司为样本,利用面板数据回归分析方法,以企业资产规模、盈利能力、固定资产比率、成长性和投资规模为控制变量,检验企业属性及行业集中度对上市公司负债率的影响。结果表明,国有企业的长期负债潜在风险较大,企业资产负债率及长期负债率均随行业集中度上升呈倒U型变化。在此基础上,本文提出放松民间资本限制、增设考核目标、拓宽企业股权融资渠道等建议。