Macroprudential Banking Regulation: Does One Size Fit All?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe macroprudential regulatory framework of Basel III imposes the same capital and liquidity requirements on all banks around the world to ensure global competitiveness of banks. Using an agent-based model of the financial system, we find that this is not a robust framework to achieve (inter)national financial stability, because efficient regulation has to embrace the economic structure and behaviour of financial market participants, which differ from country to country. Market-based financial systems do not profit from capital and liquidity regulations, but from a ban on proprietary trading (Volcker rule). In homogeneous or bank-based financial systems, the most effective regulatory policy to ensure financial stability depends on the stability measure used.Irrespective of financial system architecture, direct restrictions of banks' investment portfolios are more effective than indirect restrictions through capital, leverage and liquidity regulations. Applying the model to the Swiss financial system, we find that excessively increasing regulatory complexity has destabilizing effects. These results highlight for the first time a necessary change in regulatory paradigm to ensure effectiveness and efficiency of financial regulations with regards to fostering financial system resilience.JEL classification: C63, G01, G11, G21, G28

Financial Regulation and Endogenous Macroeconomic Crises

“…For a comprehensive review, see Roventini (2009, 2012). Recently, also the debate on banking regulation was faced by agent-based models, as in Neuberger and Rissi (2012) who find (similarly to us) that both unregulated financial systems and overly restrictive regulations have destabilizing effects, or as in Cincotti et al (2012b) and in Krug et al (2015); moreover, da Silva and Lima (2015) studies the interplay between the interest rate setting by the central bank and financial regulation.…”

The Macroeconomic Effects of Basel III Regulations With Endogenous Credit and Money Creation

“…Agent based-stock flow consistent models are appropriate for describing bank behaviour under regulations. Cincotti et al (2012), Neuberger and Rissi (2014), Krug et al (2015) and Riccetti et al (2018) have examined most of the Basel III regulations, including the CAR, LR, LCR, NSFR, capital conservation buffer, and countercyclical buffer. However, using these models is difficult in presenting analytical solutions.…”

Analysis of Factors Affecting Liquidity of Islamic Banking Listed on the Indonesia Stock Exchange

“…propose macroprudential policies to prevent unsustainable LTD ratio levels and policy measures to counter unstable cyclical developments. In this case, excessively increasing regulatory complexity destabilizes banks (Neuberger & Rissi, 2012). It was further explained that financial policies related to macroprudential should focus on banking.…”