The specific worry of the Basel I banks is that the advanced approaches will yield lower capital charges for residential mortgage, retail, and small business loans. 2  BIS Review 18/2003  These arguments, it seems to me, require some careful thought.
My own experience as a banker is that loan pricing and profitability--and that must be what the issue is about--are influenced little by regulatory capital levels. Rather, rate setting on credits is determined by a complex web of factors, including local market competition from banks and other lenders, the cost of funds, the specifics of the bank-customer relationship, and internal capital allocation practices.