Macroeconomic impact of Basel III finalisation on the euro area

Katarzyna Budnik (), Ivan Dimitrov, Johannes Groß, Max Lampe and Matjaž Volk

Macroprudential Bulletin, 2021, vol. 14

Abstract: This article assesses the economic costs and benefits of the Basel III finalisation package for the euro area and shows that the transitory costs of the reform are outweighed by its permanent long-term benefits. Implementing EU-specific modifications to the Basel III reform, such as the small and medium-sized enterprise (SME) supporting factor, credit valuation adjustment (CVA) exemptions and discretion with regard to the operational risk capital charge, reduce the already moderate transitory costs of the reform, although they also reduce its long-run benefits. Approaches that, in addition, modify the implementation of the output floor fail to further reduce the short-term economic costs of the reform while again decreasing its long-term benefits. JEL Classification: G21, G28

Keywords: Basel III; Growth at risk; Impact assessment (search for similar items in EconPapers)
Date: 2021-07
Note: 1355359
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbmbu:2021:0014:1

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