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Competitive effects of Basel II on US bank credit card lending

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  • Lang, William W.
  • Mester, Loretta J.
  • Vermilyea, Todd A.

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.

Suggested Citation

  • Lang, William W. & Mester, Loretta J. & Vermilyea, Todd A., 2008. "Competitive effects of Basel II on US bank credit card lending," Journal of Financial Intermediation, Elsevier, vol. 17(4), pages 478-508, October.
    • Handle: RePEc:eee:jfinin:v:17:y:2008:i:4:p:478-508
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    Cited by:

    1. Vermilyea, Todd A. & Webb, Elizabeth R. & Kish, Andrew A., 2008. "Implicit recourse and credit card securitizations: What do fraud losses reveal?," Journal of Banking & Finance, Elsevier, vol. 32(7), pages 1198-1208, July.
    2. Jason Allen & Kiana Basiri, 2016. "The Impact of Bankruptcy Reform on Insolvency Choice and Consumer Credit," Staff Working Papers 16-26, Bank of Canada.
    3. Bill Yang & Amanda King, 2011. "Do Credit Cards Really Reduce Aggregate Money Holdings?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 39(1), pages 85-95, March.
    4. Adel Benhamed & Mohamed Sadok Gassouma, 2023. "Investigation and Modelling of Economic Systematic Risk and Capital Requirement: A Monte Carlo Simulation," JRFM, MDPI, vol. 16(4), pages 1-13, April.

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