Thursday, February 22, 2007

Evaluate the following statement:The development of Basel IA is important to smaller banks given the comparative advantage Basel II may give larger banks.

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posted by Eschenfelder at 8:01 AM

2 Comments:

Blogger Jason Tomazic said...

I agree with the statement that “the development of Basel IA is important to smaller banks given the comparative advantage Basel II may give larger banks. Big banks have the advantage of being able to comply with Basel II because it is cheaper for them to do so, and Basel gives them greater flexibility on having to hold a certain amount of reserves. A reworking of Basel I could provide smaller banks with the same flexibility.

11:11 AM  
Blogger joelene said...

I agree with the following statement because the development of Basel IA is important to smaller banks given the comparative advantage Basel II gives larger banks. Under Basel II, capital requirements are risk based so banks that want to take on more risk are required to hold more capital. Under Basel I, capital requirements are risk adjusted giving larger banks the ability to take on more risk without acquiring more capital. The development of Basel IA through the expansion of categories will offset the comparative advantage that Basel II gives larger banks.

3:08 PM  

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