The Research on the Effects of Bank Leverage and Capital Regulation

Jingyi Peng ()
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Jingyi Peng: The Beijing Jiaotong University, Department of Management Information System

A chapter in Proceedings of the 2022 International Conference on Economics, Smart Finance and Contemporary Trade (ESFCT 2022), 2022, pp 1360-1365 from Springer

Abstract: Abstract Since the 2008 financial crisis, regulation of the financial sector has been strengthened, including the establishment of strict standards for leverage regulation. At present, the global regulatory policy is gradually improved and developed under the Basel III framework. Basel III establishes a combination of microprudential and macroprudential financial regulatory models, including higher capital requirements for banks and globally consistent regulatory standards for liquidity and leverage. One of the most important implements is the complementarity of the Tier 1 leverage ratio and the risk-weighted capital leverage ratio. In addition, jurisdictions have set leverage ratios in more detail, such as the supplementary leverage ratio in the U.S. With globalization efforts, systemic risk has been somewhat reduced and financial markets have developed more maturely. Unpredictably, the ongoing epidemic, the outbreak of the Ukraine war, and the continuing high inflation make regulatory policy challenged. Moreover, the expansion of shadow banking, the rise of cryptocurrencies, and changes in payment methods still need to be tackled. However, the urgent issue that needs research is whether the existing regulatory framework is adequate to handle the challenges. And there are indications that the regulatory policy needs to be reformed.

Keywords: leverage regulation; capital requirements; economic; covid-19; Basel II (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-052-7_151

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DOI: 10.2991/978-94-6463-052-7_151

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