Optimal Bank Planning Under Basel III Regulations

10 Pages Posted: 23 Aug 2011  

Christian Schmaltz

University of Aarhus; True North Institute

Sebastian Pokutta

Georgia Institute of Technology

Date Written: August 22, 2011

Abstract

We provide a modeling framework for banks’ business planning under Basel III. For this purpose, we write banks’ planning as formal optimization problem where Basel III - minimum requirements/ratios enter as constraints. We analyze the effect of Basel III on the banks’ product mix for a simplified, deterministic two-product case. In what follows, we generalize the model by incorporating parameter uncertainty, adjustment cost, multiple time steps and products.

Keywords: Basel3, bank planning, bank optimization

JEL Classification: G21

Suggested Citation

Schmaltz, Christian and Pokutta, Sebastian, Optimal Bank Planning Under Basel III Regulations (August 22, 2011). Available at SSRN: https://ssrn.com/abstract=1914800 or http://dx.doi.org/10.2139/ssrn.1914800

Christian Schmaltz (Contact Author)

University of Aarhus ( email )

Nordre Ringgade 1
Aarhus, DK-8000
Denmark

True North Institute ( email )

145-157 St. John Street
London, EC1V 4PY
United Kingdom
+49-17621761996 (Phone)

HOME PAGE: http://www.tninstitute.eu

Sebastian Pokutta

Georgia Institute of Technology ( email )

Atlanta, GA 30332
United States

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