The Effect of Basel III on Banks’ Lending

Hao Chang and Yan Xue ()
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Hao Chang: Jacobs Levy Equity Management
Yan Xue: Rutgers University

Chapter 95 in Encyclopedia of Finance, 2022, pp 2251-2262 from Springer

Abstract: Abstract Basel III is considered as the most comprehensive set of regulations for mitigating banks’ credit risk and market risk. Its major function is to encourage banks to raise more capital and carry sufficient liquid assets to avoid bank runs and defend financial crisis, thus promoting the stability of the financial system and maximizing the social warfare. Although stricter capital and liquidity requirements reduce the risk of bank runs, a voice of opposition about the negative impact of the regulations on banks’ lending and profitability exists all the time. Finance researchers have conducted a number of theoretical and empirical studies to investigate how the rigorous regulations affect banks’ risk and performance. This chapter summarizes this growing literature and sheds light on the future research areas on how capital and liquidity requirements in Basel III effect on Banks’ lending and performance.

Keywords: Basel III; Capital regulations; Liquidity regulations; Banks’ lending; Risk management (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-91231-4_97

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DOI: 10.1007/978-3-030-91231-4_97

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