The economic crisis of 2008 has highlighted the ineffectiveness of the banks in their disbursement of mortgages which caused the spread of Non-Performing Loans (NPLs) with underlying real estate. With the methods stated by the Basel III agreements, aimed at improving the capital requirements of...

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...