IDEAS home Printed from https://ideas.repec.org/a/pal/jorsoc/v66y2015i11p1826-1839.html
   My bibliography  Save this article

The impact of Basel Accords on the lender’s profitability under different pricing decisions

Author

Listed:
  • Bo Huang

    (School of Finance, Renmin University of China, Beijing, P.R. China)

  • Lyn C Thomas

    (Southampton Business School, University of Southampton, Southampton, UK)

Abstract

In response to the deficiencies in financial regulation revealed by the global financial crisis a new capital regulatory standard, Basel III, has been introduced. This builds on the previous regulations known as Basel I and Basel II. We look at how the interest rate charged to maximise a lender’s profitability is affected by these three versions of the Basel Accord under three types of pricing: a fixed-price model, a two-price model and a variable risk-based pricing model. We investigate the result under two different scenarios. First, a fixed price of capital, and second, a fixed amount of equity capital available. We develop an iterative algorithm for solving the latter based on solution approaches to the former. The riskiness of the portfolio has more significance than the Basel Accord requirements but the move from Basel I to Basel II has more impact than that from Basel II to Basel III.

Suggested Citation

  • Bo Huang & Lyn C Thomas, 2015. "The impact of Basel Accords on the lender’s profitability under different pricing decisions," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 66(11), pages 1826-1839, November.
    • Handle: RePEc:pal:jorsoc:v:66:y:2015:i:11:p:1826-1839
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/jors/journal/v66/n11/pdf/jors2014101a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: http://www.palgrave-journals.com/jors/journal/v66/n11/full/jors2014101a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liu, Wanan & Fan, Hong & Xia, Meng, 2023. "Tree-based heterogeneous cascade ensemble model for credit scoring," International Journal of Forecasting, Elsevier, vol. 39(4), pages 1593-1614.
    2. So Yeon Chun & Miguel A. Lejeune, 2020. "Risk-Based Loan Pricing: Portfolio Optimization Approach with Marginal Risk Contribution," Management Science, INFORMS, vol. 66(8), pages 3735-3753, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:jorsoc:v:66:y:2015:i:11:p:1826-1839. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.