Competitive effects of Basel II on U.S. bank credit card lending

The authors analyze the potential competitive effects of the proposed Basel II capital regulations on U.S. bank credit card lending. They find that bank issuers operating under Basel II will face higher regulatory capital minimums than Basel I banks, with differences due to the way the two regulations treat reserves and gain-on-sale of securitized assets. During periods of normal economic conditions, this is not likely to have a competitive effect; however, during periods of substantial stress in credit card portfolios, Basel II banks could face a significant competitive disadvantage relative to Basel I banks and nonbank issuers. ; Also issued as Payment Cards Center Discussion Paper No. 07-04 ; Supersedes "Potential competitive effects on U.S. bank credit card lending from the proposed bifurcated application of Basel II", Working Paper 05-29