A Certification Model for Regulatory Arbitrage: <i>Will Regulatory Arbitrage Persist under Basel III?</i>

Berg, Tobias; Gehra, Bernhard; Kunisch, Michael

doi:10.3905/jfi.2011.21.2.039

Cited by 14 publications

(3 citation statements)

References 21 publications

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“…Our findings for Basel III are in line with earlier studies, such as Berg et al (2011) andJohnson (2011). As shown in Section 3.5.3, the discrepancies in the treatment of stocks and bonds in the banking book as opposed to the trading book reveal the potential of a considerable reduction of the capital burden.…”

Section: Iais 2009)supporting

confidence: 93%

Basel Accords versus Solvency II - Regulatory Adequacy and Consistency Under the Postcrisis Capital Standards

Siegel

2013

SSRN Journal

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Over the past decade, European banking and insurance regulation has been subject to significant reforms. In this regard, one of the declared goals of the authorities is the enhancement of market stability through adequate and consistent capital standards. This paper provides a critical analysis of the Basel II, III, and Solvency II capital standards for asset risks in light of this objective. Our discussion begins with a detailed overview of the current standard approaches for market and credit risk. Subsequently, we describe the two new capital adequacy proposals under Basel III -the partial and fuller risk factor approach. Based on empirical data, we calibrate a realistic asset portfolio and implement the models to compare the resulting capital charges. Our findings reveal huge differences in required capital across the financial sectors for the same type of asset risk. Moreover, the critical assessment of the standard approaches' mechanics displays an inadequate treatment of asset classes that might lead to severe distortions in the financial institutions' investment decisions. In this context, the unduly promotion of government bond holdings under all three frameworks is able to further deteriorate the postcrisis issues of moral hazard in the financial industry.

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Section: Iais 2009)supporting

confidence: 93%

Basel Accords versus Solvency II - Regulatory Adequacy and Consistency Under the Postcrisis Capital Standards

Siegel

2013

SSRN Journal

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“…Although its findings on the level of asset correlations in the ASRF model vary substantially, overall they tend to indicate lower rather than higher asset correlations compared to the values used in the IRBA capital requirements. A comprehensive overview of asset correlation studies can be found in Berg, Gehra andKunisch (2011), andKoziol (2013). In general, asset correlations can be computed in two different ways, or rather by using different types of data sources.…”

Section: Relation To the Literaturementioning

confidence: 99%

Support for the SME Supporting Factor: Multi-Country Empirical Evidence on Systematic Risk Factor for SME Loans

Dietsch¹,

Düllmann

Fraisse

et al. 2016

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“…Table A.1 in the Appendix provides a comprehensive overview of the existing empirical studies on asset correlations. Further studies are summarized in the survey of Berg, Gehra, and Kunisch (2011). We distinguish between two strands of empirical literature which lead to quite different results in terms of the level of asset correlations.…”

Section: Motivation and Overviewmentioning

confidence: 99%

Evaluation of Minimum Capital Requirements for Bank Loans to Smes

Düllmann

Koziol

2013

SSRN Journal

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A Certification Model for Regulatory Arbitrage: Will Regulatory Arbitrage Persist under Basel III?

Cited by 14 publications

References 21 publications

Basel Accords versus Solvency II - Regulatory Adequacy and Consistency Under the Postcrisis Capital Standards

Basel Accords versus Solvency II - Regulatory Adequacy and Consistency Under the Postcrisis Capital Standards

Support for the SME Supporting Factor: Multi-Country Empirical Evidence on Systematic Risk Factor for SME Loans

Evaluation of Minimum Capital Requirements for Bank Loans to Smes

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