M. Benetton, P. Eckley, Nicola Garbarino, Liam Kirwin, Georgia Latsi
{"title":"Specialisation in Mortgage Risk Under Basel II","authors":"M. Benetton, P. Eckley, Nicola Garbarino, Liam Kirwin, Georgia Latsi","doi":"10.2139/ssrn.2900165","DOIUrl":null,"url":null,"abstract":"Since Basel II was introduced in 2008, two approaches to calculating bank capital requirements have co-existed: lenders’ internal models, and a less risk-sensitive standardised approach. Using a unique dataset covering 7 million UK mortgages for 2005–15, and novel identification, we provide empirical evidence that the differences between these approaches cause lenders to specialise. This leads to systemic concentration of high-risk mortgages in lenders with less sophisticated risk management. Our results have broad implications for the design of the international bank capital framework.","PeriodicalId":266240,"journal":{"name":"ERN: Econometric Studies of Government Regulation of Financial Markets (Topic)","volume":"67 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2017-01-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"21","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"ERN: Econometric Studies of Government Regulation of Financial Markets (Topic)","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.2900165","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 21
Abstract
Since Basel II was introduced in 2008, two approaches to calculating bank capital requirements have co-existed: lenders’ internal models, and a less risk-sensitive standardised approach. Using a unique dataset covering 7 million UK mortgages for 2005–15, and novel identification, we provide empirical evidence that the differences between these approaches cause lenders to specialise. This leads to systemic concentration of high-risk mortgages in lenders with less sophisticated risk management. Our results have broad implications for the design of the international bank capital framework.