 Basel III joint regulatory constraints: interactions and implications for the financing of the economyLaurent Clerc, Sandrine Lecarpentier and Cyril Pouvelle Working papers from Banque de France Abstract: This paper examines the impact of multiple regulatory constraints on the financing of the economy in the context of the implementation of the Basel III regulation on capital and liquidity. We propose a simple theoretical model of bank lending decision to analyse the interactions between these various regulatory requirements and the conditions under which some constraints may bind while others may not. Building on the predictions of this theoretical model, we estimate the impact of these different regulatory requirements on lending growth, on a panel of 54 French banks since 2014. Our results indicate that four pairwise interactions, most of them involving the leverage ratio, have a significant effect on lending growth. We also emphasize that the regulatory ratios interact more for banks with lower regulatory ratios and in periods of financial stress. More specifically, our results highlight a significant relationship of partial substitutability between the leverage ratio, the LCR and the NSFR for such banks in such periods, resulting from the positive effect of bank own funds on liquidity. Keywords: Bank Capital Regulation; Bank Liquidity Regulation; Basel III; Stress Tests (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:988 Access Statistics for this paper More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC. |
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