December 2003
Abstract This paper surveys the literature on the impacts of the Basel Capital Accords on banking market profitability, competitiveness, structure and risk-taking. additional emphasis is applied to the evolution of mortgage markets through with(predicate)out the humanness over almost two decades of international bank restrictive policies.
This paper has received generous financial support from the Canada trapping and Mortgage Corporation (CMHC).
1 The Basel Capital Accords and International Mortgage Markets: A Survey of the Literature 1. Introduction
The 1988 Basel Capital Accord (Basel I) was subverter in that it sought to develop a single risk-adjusted chief city standard that would be applied throughout the major banking countries of the world. This aim playing field would cause best practices to be select by banks throughout the world, thereby enhancing the efficiency, productivity, safety and soundness of the spherical financial system. The Basel process produced many successes, but also several(prenominal) important failures and unintended consequences.
Loopholes in the regulations were exploited by banks through a process known as regulatory cap arbitrage. For example, the exclusion of market risk from the superior requirements induced banks to gaffe their risk exposure from priced credit risk to unpriced market risk. This loophole was modify by the Market Risk Amendment of 1996, which imposed a capital charge for market risk exposure. Section 1.1 offers a fine description of the capital requirements against market risk exposure. Compromises in Basel I made it necessary in 2001 to propose new regulations (referred to as Basel II) to address the original regulations unintended consequences. For example, the failure to differentiate betwixt high quality and low quality commercial credit contributed to a steady...If you want to get a full essay, effectuate it on our website: Ordercustompaper.com
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