Xavier Vives, Tuesday, March 17, 2015 - 00:00
Jon Danielsson, Eva Micheler, Katja Neugebauer, Andreas Uthemann, Jean-Pierre Zigrand, Monday, February 23, 2015 - 00:00
Georg Ringe, Jeffrey N. Gordon, Wednesday, January 28, 2015 - 00:00
Jon Danielsson, Sunday, January 18, 2015 - 00:00
Xavier Vives, Monday, December 22, 2014 - 00:00
Stephen Cecchetti, Wednesday, December 17, 2014 - 00:00
Stephen Cecchetti, Wednesday, December 17, 2014 - 00:00
Christian Thimann, Friday, October 17, 2014 - 00:00
Jonathan Bridges, David Gregory, Mette Nielsen, Silvia Pezzini, Amar Radia, Marco Spaltro, Tuesday, September 2, 2014 - 00:00
Lev Ratnovski, Luc Laeven, Hui Tong, Saturday, May 31, 2014 - 00:00
Large banks have grown and become more involved in market-based activities since the late 1990s. This column presents evidence that large banks receive too-big-to-fail subsidies and create systemic risk, whereas economies of scale in banking are modest. Hence, some large banks may be ‘too large’ from a social perspective. Since the optimal bank size is unknown, the best policies are capital surcharges and better bank resolution and governance.
Joseph Noss, Priscilla Toffano, Sunday, April 6, 2014 - 00:00
The impact of tighter regulatory capital requirements during an economic upswing is a key question in macroprudential policy. This column discusses research suggesting that an increase of 15 basis points in aggregate capital ratios of banks operating in the UK is associated with a median reduction of around 1.4% in the level of lending after 16 quarters. The impact on quarterly GDP growth is statistically insignificant, a result that is consistent with firms substituting away from bank credit and towards that supplied via bond markets.
Jens Hagendorff, Francesco Vallascas, Monday, December 16, 2013 - 00:00
Recent research shows that capital requirements are only loosely related to a market measure of bank portfolio risk. Changes introduced under Basel II meant that banks with the riskiest portfolios were particularly likely to hold insufficient capital. Banks that relied on government support during the crisis appeared to be well-capitalised beforehand, suggesting they engaged in capital arbitrage. Until the regulatory concept of risk better reflects actual risk, the proposed increases in risk-weighted capital requirements under Basel III will have little effect.
Jon Danielsson, Thursday, November 28, 2013 - 00:00
Basel III is coming into focus. The fundamental logic of the regulatory changes seems sensible, but the devil is in the detail – empirical implementation. This column discusses a detailed quantitative study, incorporating analytical calculations, Monte Carlo simulations and results from observed data. It concludes that the Basel Committee has taken three and a half steps backwards and half a step forward. If implemented, the framework is likely to lead to less robust risk forecasts than current methodologies.
Clemens Bonner, Sylvester Eijffinger, Monday, October 14, 2013 - 00:00
Liquidity requirements like the Basel III Liquidity Coverage Ratio are aimed at reducing banks’ reliance on short-term funding. This may have implications for the implementation of monetary policy, which usually operates through short-term interbank interest rates. This column looks at how banks reacted to the Dutch quantitative liquidity requirement. The authors conclude that liquidity requirements will only reduce overnight interest rates if they cause an aggregate liquidity shortage.
Lev Ratnovski, Sunday, July 28, 2013 - 00:00
After much negotiation, Basel III regulations set capital requirements to be between 8% and 12%. This column suggests this may not be enough. It looks at how much capital banks would need to fully absorb asset shocks of the size seen in OECD countries over the last 50 years. The answer is 18% risk-weighted capital, corresponding to 9% leverage. This benchmark is highly conservative, so the true 'optimal' bank capital may be lower.
Mike Mariathasan, Ouarda Merrouche, Saturday, June 29, 2013 - 00:00
The regulation of bank capital has recently come under renewed scrutiny. This column argues that the way we implement capital regulation needs to be reconsidered because banks under-report risk, thereby escaping government intervention and maintaining market access. One possible way forward, something already implemented under Basel III, is to ask banks to satisfy a capital requirement relative to total (rather than risk-weighted) assets. Overall, simple, transparent, workable rules are what we should be aiming for.
Stefano Micossi, Sunday, June 9, 2013 - 00:00
Global banking regulation is undergoing a massive reform, known as Basel III. This column argues that the proposed reforms will fail to correct flaws in the old system. The new rules are even more complicated, opaque and open to manipulation. What is needed is a radical shift to prudential rule based on a straight capital ratio.
Nicolas Véron, Tuesday, March 5, 2013 - 00:00
The EU was once a champion of global financial regulatory convergence. What happened? This column argues that the EU should drop its lacklustre inertia and pursue Basel III because, in the end, it’s in its interests to comply. EU policymakers ought to aim at enabling the adoption of a Capital Requirements Regulation that would be fully compliant with Basel III.
Clemens Bonner, Sylvester Eijffinger, Saturday, October 13, 2012 - 00:00
Will the new Basel rules make monetary policy less effective? This column looks at how banks responded to the introduction of the Dutch quantitative liquidity requirement. It concludes that a liquidity rule does influence lending rates and volumes in the interbank money market. These effects, however, are at least partially intended and the overall effect of a binding liquidity rule is still positive.
Morris Goldstein, Sunday, May 27, 2012 - 00:00
Europe’s banks are in bad shape. Slowing growth and rising capital adequacy ratios would stretch any bank. Doubts about sovereign debt and the Eurozone’s future may push some EU banks over the edge. Now the EU has decided how to implement the principles of the latest round of globally coordinated banking regulations – Basel III. This column argues that the EU has got it wrong.