Some Implications of New Regulatory Measures for Euro Area Money Markets

David Doran, Caroline Kirrane and Mary Masterson
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David Doran: Central Bank of Ireland
Caroline Kirrane: Central Bank of Ireland
Mary Masterson: Central Bank of Ireland

Quarterly Bulletin Articles, 2014, 91-102

Abstract: A number of banking and financial market regulations have been proposed in response to the financial crisis; in particular the Basel III solvency and liquidity rules. These enhanced regulatory standards intend to ensure that banks and banking systems are significantly more resilient in the future than was the case in the run-up to the financial crisis. However, there have been concerns that the extent and range of the new regulatory measures may lead to unintended shifts in market behaviour. In consideration of these concerns, in January 2014 the Basel Committee announced a number of significant amendments to the Basel III ratios. This paper reviews the potential implications for euro area money markets and monetary policy that explain, in part, why the recent amendments were considered necessary. In addition, the European Market Infrastructure Regulation (EMIR) is briefly considered. We conclude that, while the latest Basel III amendments will mitigate some of the previous concerns, the proposed measures may still have adverse consequences for money markets. proposed measures may still have adverse consequences for money markets.

Date: 2014-01
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Persistent link: https://EconPapers.repec.org/RePEc:cbi:qtbart:y:2014:m:01:p:92-102

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