Banking regulation and supervision in the next 10 years and their unintended consequences

D. Nouy

Debats Economiques et financiers from Banque de France

Abstract: In the paper, we deal with the unexpected effects of new regulations and supervision and provide recommendations to ensure their effectiveness. New regulations essentially aim at strengthening the solvency and the liquidity of financial institutions. However, some technical aspects of these regulations, particularly regarding the effect on deleveraging, the use of a non-risk weighted leverage ratio and regulatory arbitrage require continuous monitoring. In addition, banking supervision is evolving toward more intrusive approach, more stress test exercises and an increasing role of macro prudential supervision. These changes in supervisory approach also require an efficient management of communication in order to avoid market overreaction and banks? ex ante inefficient behaviour. Supervisors have to anticipate and manage these unintended effects. The European Banking Union will help address these challenges by setting a single supervisory mechanism, a single resolution mechanism and a single deposit insurance scheme.

Keywords: Basel III; CRD IV; regulatory arbitrage; stress test; macro prudential supervision; Banking Union. (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2013
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cfn and nep-rmg
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:decfin:5

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