The Impact of regulatory capital regulation on balance sheet structure, intermediation cost and growth

Pierre-Charles Pradier and Hamza El Khalloufi ()
Additional contact information
Hamza El Khalloufi: PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne, LABEX Refi - ESCP Europe - Ecole Supérieure de Commerce de Paris

Post-Print from HAL

Abstract: As Europe is subject to a protracted recession, it should be asked whether the reform of the financial sector is not costly in terms of potential growth. Our analysis shows that the negative effect of the Basel III package excepted by the pre-QE studies are almost annihilated today. The recession must then have other causes: falling corporate lending volumes resulted from falling demand in the aftermath of the financial crisis, but this is longer the case. The EU is trying to incentivize corporate lending, via forward guidance as well as ‘supporting factor' cutting down the Basel capital requirements. The macroeconomic theorists are trying to account for future success of monetary policy around zero nominal interest rate via the risk-taking channel. All these clever initiatives failed to deliver. As a consequence, we might infer that banks are simply not taking any risks: rather than appealing to risk aversion, we would like to argue that the banks seem especially embarrassed by future regulatory developments, which appear remote and uncertain. The binding constraint for corporate lending and growth in the EU is then plausibly a combination of banks' expectations of future regulation and strong uncertainty aversion. While we offer some mitigation prospects, we hope that the theoretical developments of the recent years will quickly yield both theoretical advances and practical results.

Keywords: banking; financial regulation; bancaire; réglementation bancaire (search for similar items in EconPapers)
Date: 2016-09
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01390915
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in 2016

Downloads: (external link)
https://shs.hal.science/halshs-01390915/document (application/pdf)

Related works:
Working Paper: The Impact of Regulatory Capital Regulation on Balance Sheet Structure, Intermediation Cost and Growth (2017)
Working Paper: The Impact of Regulatory Capital Regulation on Balance Sheet Structure, Intermediation Cost and Growth (2017)
Working Paper: The Impact of regulatory capital regulation on balance sheet structure, intermediation cost and growth (2016)
Working Paper: The Impact of regulatory capital regulation on balance sheet structure, intermediation cost and growth (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01390915

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().