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Assessing the Cost of Financial Regulation

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  • Douglas Elliott
  • Andre Santos
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    Abstract

    This study assesses the overall impact on credit of the financial regulatory reforms in Europe, Japan, and the United States. Long-term cost estimates are provided for Basel III capital and liquidity requirements, derivatives reforms, and higher taxes and fees. Overall, average lending rates in the base case would rise by 18 bps in Europe, 8 bps in Japan, and 28 bps in the United States. These results are similar to the official BIS assessments of Basel III and an OECD analysis, but lower as a result of including expense cuts and reductions in the returns required by investors. As a result, they are markedly lower than those of the IIF.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/233.

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    Length: 81
    Date of creation: 26 Sep 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/233

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    Related research

    Keywords: Banking sector; Banking systems; Capital controls; Europe; Financial system stability assessment; Interest costs; Japan; Liquidity controls; United States; rules; regulatory changes; regulatory reforms; regulations; regulatory initiatives; regulatory requirements; regulatory impact; regulatory impacts; major regulatory initiatives; regulatory burden; qualitative assessment; legislation; economic benefits; sensitivity analysis; regulatory proposals; compliance costs; regulatory regime; regulatory issues; regulatory framework; insurance premiums; safety benefits; competitive market; regulatory intervention; economic cooperation; regulation of financial institutions; binding constraint; committee members; federal regulation; major regulatory changes; regulatory costs; consumer interests; competitive advantage; competitive advantages; economic activity; competitive position;

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    1. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    2. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
    3. Emanuel Kopp & Christian Ragacs & Stefan W. Schmitz, 2010. "The Economic Impact of Measures Aimed at Strengthening Bank Resilience – Estimates for Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 20.
    4. Michael R King, 2010. "Mapping capital and liquidity requirements to bank lending spreads," BIS Working Papers 324, Bank for International Settlements.
    5. Daniel Heller & Nicholas Vause, 2012. "Collateral requirements for mandatory central clearing of over-the-counter derivatives," BIS Working Papers 373, Bank for International Settlements.
    6. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
    7. Inci Ötker & Aditya Narain & Anna Ilyina & Jay Surti, 2011. "The Too-Important-to-Fail Conundrum," IMF Staff Discussion Notes 11/12, International Monetary Fund.
    8. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
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