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Macroeconomic Impact of Basel III

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  • Patrick Slovik
  • Boris Cournède

Abstract

The estimated medium-term impact of Basel III implementation on GDP growth is in the range of -0.05 to -0.15 percentage point per annum. Economic output is mainly affected by an increase in bank lending spreads as banks pass a rise in bank funding costs, due to higher capital requirements, to their customers. To meet the capital requirements effective in 2015 (4.5% for the common equity ratio, 6% for the Tier 1 capital ratio), banks are estimated to increase their lending spreads on average by about 15 basis points. The capital requirements effective as of 2019 (7% for the common equity ratio, 8.5% for the Tier 1 capital ratio) could increase bank lending spreads by about 50 basis points. The estimated effects on GDP growth assume no active response from monetary policy. To the extent that monetary policy will no longer be constrained by the zero lower bound, the Basel III impact on economic output could be offset by a reduction (or delayed increase) in monetary policy rates by about 30 to 80 basis points. Impact macro-économique de Bâle III L'impact estimé à moyen terme de la mise en conformité avec les règles de Bâle III sur la croissance du PIB est de l'ordre de -0,05 à -0,15 point de pourcentage par an. L’effet sur l’activité économique provient principalement de ce que les banques augmentent leurs marges de crédit afin de compenser la hausse de leurs coûts de financement provoquée par le durcissement des exigences de capital. Pour répondre aux exigences de fonds propres en 2015 (4,5% pour le ratio d'actions ordinaires, 6% pour le ratio de fonds propres de base), les banques devraient augmenter leurs marges de crédit d'environ 15 points de base en moyenne. Les exigences de capital en vigueur à compter de 2019 (7% pour le ratio d'actions ordinaires, 8,5% pour le ratio de fonds propres de base) pourraient augmenter les marges de crédit d’environ 50 points de base. Les effets estimés sur la croissance du PIB n’incorporent aucune réponse de la politique monétaire. Pour autant que la politique monétaire ne se heurte plus au plancher zéro des taux nominaux, l'impact de Bâle III sur la production économique pourrait être compensé par une réduction (ou un retard avant l’augmentation) des taux de la politique monétaire d'environ 30 à 80 points de base.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 844.

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Date of creation: 14 Feb 2011
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Handle: RePEc:oec:ecoaaa:844-en

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Keywords: monetary policy; bank; interest rates; Basel accord; Basel III; financial intermediaries; bank regulation; bank lending; bank capital requirements; politique monétaire; banque; taux d'intérêt; Crédit bancaire; Accord de Bâle; Bâle III; réglementation bancaire; intermédiaires financiers; Réglementation des fonds propres bancaires;

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Cited by:
  1. Douglas Sutherland & Peter Hoeller, 2014. "Growth Policies and Macroeconomic Stability," OECD Economic Policy Papers 8, OECD Publishing.
  2. Thomas F. Cosimano & Dalia Hakura, 2011. "Bank Behavior in Response to Basel III: A Cross-Country Analysis," IMF Working Papers 11/119, International Monetary Fund.
  3. Ghosh, , Swati R. & Sugawara, Naotaka & Zalduendo, Juan, 2011. "Banking flows and financial crisis -- financial interconnectedness and basel III effects," Policy Research Working Paper Series 5769, The World Bank.
  4. Horváth, Roman & Seidler, Jakub & Weill, Laurent, 2012. "Bank capital and liquidity creation: Granger-causality evidence," Working Paper Series 1497, European Central Bank.
  5. Barbora SUTOROVA & Petr TEPLY, 2013. "The Impact of Basel III on Lending Rates of EU Banks," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(3), pages 226-243, July.
  6. Benjamin Cohen, 2013. "How have banks adjusted to higher capital requirements?," BIS Quarterly Review, Bank for International Settlements, September.
  7. Schaetzle, Dominik, 2012. "Die Auswirkungen der neuen Eigenkapitalanforderungen nach Basel III: Eine Analyse empirischer Studien," Arbeitspapiere 124, Westfälsche Wilhelms-Universität Münster (WWU), Institut für Genossenschaftswesen.
  8. Peter J. Morgan & Victor Pontines, 2013. "An Asian Perspective on Global Financial Reforms," Finance Working Papers 23637, East Asian Bureau of Economic Research.
  9. Douglas Sutherland & Peter Hoeller, 2013. "Growth-promoting Policies and Macroeconomic Stability," OECD Economics Department Working Papers 1091, OECD Publishing.
  10. Eufrocinio M. Bernabe, Jr. & Jami’ah Jaffar, 2013. "Gauging the Macroeconomic Impact of Basel III on Malaysia," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp87, янваÑ.
  11. Sofiane Aboura & Emmanuel Lépinette, 2013. "An Alternative Model to Basel Regulation," Working Papers hal-00825018, HAL.
  12. Antonio Scalia & Sergio Longoni & Tiziana Rosolin, 2013. "The Net Stable Funding Ratio and banks’ participation in monetary policy operations: some evidence for the euro area," Questioni di Economia e Finanza (Occasional Papers) 195, Bank of Italy, Economic Research and International Relations Area.
  13. Douglas Sutherland & Peter Hoeller & Rossana Merola & Volker Ziemann, 2012. "Debt and Macroeconomic Stability," OECD Economics Department Working Papers 1003, OECD Publishing.
  14. Morgan, Peter J. & Pontines, Victor, 2013. "An Asian Perspective on Global Financial Reforms," ADBI Working Papers 433, Asian Development Bank Institute.
  15. David Dodge, 2011. "Public Policy for the Canadian Financial System: From Porter to the Present and Beyond," New Directions for Intelligent Government in Canada: Papers in Honour of Ian Stewart, in: Fred Gorbet & Andrew Sharpe (ed.), New Directions for Intelligent Government in Canada: Papers in Honour of Ian Stewart, pages 81-100 Centre for the Study of Living Standards.
  16. Jose Peydro Alcalde & Sona Benecka & Alexis Derviz & Adam Gersl & Tomas Holub & Roman Horvath & Petr Jakubik & Narcisa Liliana Kadlcakova & Dorota Kowalczyk & Ivana Kubicova & Steven Ongena & Jakub Ry, 2012. "Financial Stability and Monetary Policy," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 10, number rb10/2 edited by Jan Babecky & Roman Horvath.
  17. Swati Ghosh & Naotaka Sugawara & Juan Zalduendo, 2011. "Bank Flows and Basel III—Determinants and Regional Differences in Emerging Markets," World Bank Other Operational Studies 10099, The World Bank.
  18. Gaston Giordana & Ingmar Schumacher, 2012. "An Empirical Study on the Impact of Basel III Standards on Banks? Default Risk: The Case of Luxembourg," BCL working papers 79, Central Bank of Luxembourg.
  19. Pasali, Selahattin Selsah, 2013. "Where is the cheese ? synthesizing a giant literature on causes and consequences of financial sector development," Policy Research Working Paper Series 6655, The World Bank.
  20. Rudiger Ahrend & Antoine Goujard & Cyrille Schwellnus, 2012. "International Capital Mobility: Which Structural Policies Reduce Financial Fragility?," OECD Economic Policy Papers 2, OECD Publishing.
  21. Drumond, Inês & Jorge, José, 2013. "Loan interest rates under risk-based capital requirements: The impact of banking market structure," Economic Modelling, Elsevier, vol. 32(C), pages 602-607.
  22. Casselmann, Farina, 2013. "Financial services regulation in the wake of the crisis: The Capital Requirements Directive IV and the Capital Requirements Regulation," IPE Working Papers 18/2013, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

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