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Tailoring Regulations

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Abstract

Regulations are not written in stone. The benefits derived from them, along with the costs of compliance for affected institutions and of enforcement for regulators, are likely to evolve. When this happens, regulators may seek to modify the regulations to better suit the specific risk profiles of regulated entities. In this post, we consider the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) passed by Congress in 2018, which eased banking regulations for smaller institutions. We focus on one regulation—the Liquidity Coverage Ratio (LCR)—and assess how its relaxation affected newly exempt banks’ assets and liabilities, and the resilience of the banking system.

Suggested Citation

  • Rebecca Reubenstein & Asani Sarkar, 2021. "Tailoring Regulations," Liberty Street Economics 20210712, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:92863
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    File URL: https://libertystreeteconomics.newyorkfed.org/2021/07/tailoring-regulations/
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    More about this item

    Keywords

    banking regulations; tailoring; liquidity coverage ratio;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K2 - Law and Economics - - Regulation and Business Law

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