Following the adoption by the Basel Committee of new capital rules for banks, a process is now taking place in the EU …

We present a simple model of an economy with heterogeneous banks that may be funded with uninsured deposits and equity … supply of bank capital and show that optimal capital requirements should be lowered. Failure to do so would keep banks safer …

. Using a model with imperfect competition and moral hazard, we find that small banks (and hence small borrowers) may profit … from the introduction of an internal ratings based (IRB) approach if this approach is applied uniformly across banks …. However, the banks’ right to choose between the standardized and the IRB approaches unambiguously hurts small banks, and …

-based deposit insurance premiums, put explicit limits on the application of a “too big to fail” principle for banks and required … that examiners implement “prompt corrective action” (PCA) standards for banks. Essentially these steps were to improve the … functioning of the FDIC, especially removing discretion of the examiners in the process of addressing the risk of failure of banks …

companies. According to the new rules, the bank’s capital charge is calculated to capture credit, market and operational risk …. Banks are able to choose between standardized measurement concepts and more refined internal procedures and models which …. Limits for credit exposure of banks remained unchanged. Small and medium-sized companies should benefit both from …

which a bank’s probability of success depends on the quality of its risk measurement and management systems. Under Basel II …. We show that, under stringent Pillar 3 disclosure requirements, banks’ equilibrium probability of success and total …

requirements in the context of a dynamic equilibrium model of relationship lending in which banks are unable to access the equity … markets every period. Banks anticipate that shocks to their earnings as well as the cyclical position of the economy can … cyclical adjustments in the confidence level behind Basel II can reduce its procyclical effects without compromising banks …