Basel III, Liquidity Risk and Regulatory Arbitrage

Viktor Elliot and Ted Lindblom
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Viktor Elliot: University of Gothenburg
Ted Lindblom: University of Gothenburg

Chapter 3 in Liquidity Risk, Efficiency and New Bank Business Models, 2016, pp 35-55 from Palgrave Macmillan

Abstract: Abstract This chapter discusses and analyses the incentives for banks to behave opportunistically in order to bypass liquidity constraints and even benefit from regulatory arbitrage. The chapter specifically focuses on the new liquidity constraints introduced by Basel III and provides a number of examples from both on- and off-balance sheet perspectives of how banks are transferring risk to other parts of the economy that might be less well equipped to handle these risks. The chapter concludes by discussing the potential implications of such behaviours for the role banks will play in a liquidity-constrained economy.

Keywords: Central Bank; Deposit Insurance; Liquidity Constraint; Liquidity Regulation; Liquidity Risk (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-30819-7_3

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DOI: 10.1007/978-3-319-30819-7_3

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