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Systemically Important Banks and Capital Regulation Challenges

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  • Patrick Slovik

Abstract

Bank regulation might have contributed to or even reinforced adverse systemic shocks that materialised during the financial crisis. Capital regulation based on risk-weighted assets encourages innovation designed to circumvent regulatory requirements and shifts banks’ focus away from their core economic functions. Tighter capital requirements based on risk-weighted assets may further contribute to these skewed incentives. The estimated macroeconomic costs of redirecting banks’ attention away from such unconventional business practices are low. During a medium-term adjustment period, for each percentage point of bank equity, regulation that is not based on risk-weighted assets would affect annual GDP growth by -0.02 percentage point more than under the risk-weighted assets framework. Refocusing banks’ attention toward their main economic functions is a core requirement for durable financial stability and sustainable economic growth. Banques d'importance systémique: défis pour la réglementation du capital La réglementation bancaire pourrait avoir contribué, voire renforcé, des chocs systémiques qui se sont matérialisés lors de la crise financière. La réglementation des fonds propres fondée sur des actifs pondérés par les risques encourage l'innovation conçue pour contourner les exigences réglementaires et éloigne les préoccupations des banques de leurs principales fonctions économiques. Le resserrement des exigences en capital fondées sur les actifs pondérés du risque peut exacerber ce biais d’incitation. Des estimations suggèrent que rediriger l’activité des banques hors de telles pratiques commerciales nonconventionnelles ne serait guère coûteux. Pendant une période d'ajustement de moyen terme, pour chaque point de pourcentage du ratio de capitaux propres bancaires, une réglementation qui ne s’appuie pas sur les actifs pondérés du risque réduirait la croissance annuelle du PIB de seulement 0,02 point de pourcentage de plus qu’une réglementation fondée sur les actifs pondérés par les risques. Un recentrage de l’attention des banques vers leurs principales fonctions économiques est une exigence fondamentale pour garantir la stabilité financière et une croissance économique durables.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 916.

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Date of creation: 11 Dec 2012
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Handle: RePEc:oec:ecoaaa:916-en

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Keywords: systemically important financial institutions; Too-big-to-fail; Bank Leverage; financial stability; Basel accord; Basel III; financial regulation; capital requirements; réglementation financière; crise financière; stabilité financière; Accord de Bâle; Bâle III; institutions financières d'importance systémique; levier bancaire;

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Cited by:
  1. William R. White, 2012. "Ultra easy monetary policy and the law of unintended consequences," Globalization and Monetary Policy Institute Working Paper 126, Federal Reserve Bank of Dallas.
  2. Mario Sarcinelli, 2012. "Come difendere la globalizzazione e salvaguardare i sistemi bancari dal contagio," Moneta e Credito, Economia civile, vol. 65(257), pages 9-47.
  3. William R. White, 2012. "Credit Crises and the Shortcomings of Traditional Policy Responses," OECD Economics Department Working Papers 971, OECD Publishing.

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  1. Systemically important financial institution in Wikipedia (English)
  2. 系统重要性金融机构 in Wikipedia (Chinese)

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