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Basel II, External Ratings and Adverse Selection

Author

Listed:
  • Akhtar, S.
  • Bannier, C.
  • Tyrell, M.
  • Elizalde, A.
  • Janda, K.
  • Lind, G.

Abstract

This paper will describe and analyse the development of Basel II Capital Accord and will focus on the use of external ratings in the Standardized Approach in Basel II. Furthermore it will examine the problem of adverse selection which appears in Basel II as a result from the proposal for the use of external ratings in determining the risk weights in the standardized approach. The paper will also attempt to find possible solutions to the adverse selection problem by discussing two similar models, and derive implications from them.

Suggested Citation

  • Akhtar, S. & Bannier, C. & Tyrell, M. & Elizalde, A. & Janda, K. & Lind, G., 2008. "Basel II, External Ratings and Adverse Selection," MPRA Paper 12722, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:12722
    as

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    File URL: https://mpra.ub.uni-muenchen.de/12722/1/MPRA_paper_12722.pdf
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    References listed on IDEAS

    as
    1. Katherine Wyatt, 2003. "Basel II's New Standardized Approach: Possible Effects of Implementation," Finance 0304010, University Library of Munich, Germany.
    2. Abel Elizalde, 2007. "From Basel I to Basel II: An Analysis of the Three Pillars," Working Papers wp2007_0704, CEMFI.
    3. Karel Janda, 2006. "Lender and Borrower as Principal and Agent," Working Papers IES 2006/24, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jul 2006.
    4. Patrick Van Roy, 2005. "Credit ratings and the standardised approach to credit risk in Basel II," Finance 0509014, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Basel II; external ratings; adverse selection; rating agencies; standardized approach;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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