The authors 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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Working Paper
Competitive Effects of Basel II on U.S. Bank Credit Card Lending
March 2007
WP 07-09 – The authors analyze the potential competitive effects of the proposed Basel II capital regulations on U.S. bank credit card lending.