The second part of the competitive equity concern is the belief by some regional and community banks that they will be placed at a competitive disadvantage with A-IRB banks because of the larger banks' lower regulatory capital charges on residential mortgages, loans to smaller businesses, and certain retail loans. The direct competitive impact on Basel II and Basel I banks is important.
Of course, the rulemaking process in the United States will probe the issue fully. However, a number of factors suggest that the concern about competitive impact is not well founded.