IDEAS home Printed from https://ideas.repec.org/a/rbq/journl/i143p46-54.html
   My bibliography  Save this article

Basel III and Bank Liquidity Creation

Author

Listed:
  • Franck Bancel

    (ESCP Europe, Labex Refi)

  • Laurent Salé

    (ESCP Europe, Labex Refi)

Abstract

Banks transform liquid deposits into illiquid loans, and in this transformation liquidity is created. Banks are not only intermediaries between depositors and borrowers, but are also central to monetary creation. As a result of the financial crisis of 2008, the role of banks as liquidity creators has gained renewed interest in the literature. The new Basel III regulatory framework affects the classical banking model in the sense that it requires additional capital, but it also obliges banks to switch to a long-term funding model. To adapt to the new regulation, several strategies have been adopted by banks, one of which is to reduce the volume of loans, especially when the new regulation significantly increases the level of capital required. In this article, we present the effects of the new Basel III regulatory framework on liquidity creation, and we show that there is no consensus among researchers on the question of what the impact of the new regulation will be on liquidity creation by the banking sector.

Suggested Citation

  • Franck Bancel & Laurent Salé, 2016. "Basel III and Bank Liquidity Creation," Bankers, Markets & Investors, ESKA Publishing, issue 143, pages 46-54, July-Augu.
    • Handle: RePEc:rbq:journl:i:143:p:46-54
    as

    Download full text from publisher

    File URL: http://www.revue-banque.fr/article/basel-iii-and-bank-liquidity-creation
    Download Restriction: price
    ---><---

    More about this item

    Keywords

    Liquidity Creation; Banks; Basel III;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rbq:journl:i:143:p:46-54. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marise Urbano (email available below). General contact details of provider: http://www.eska.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.