IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

The Impact of the Basel III Liquidity Regulations on the Bank Lending Channel: A Luxembourg case study

  • Gaston Giordana


  • Ingmar Schumacher


In this paper we study the impact of the Basel III liquidity regulations, namely the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR), on the bank lending channel in Luxembourg. For this aim we built, based on individual bank data, time series of the LCR and NSFR for a sample of banks covering between 82% and 100% of total assets of the banking sector. Additionally, we simulated the optimal balance sheet adjustments needed to adhere to the regulations. We extend the existing literature on the identification of the bank lending channel by adding as banks characteristics the estimated shortfalls in both the LCR and NSFR. We find a significant role for the bank lending channel in Luxembourg which mainly works through small banks with a large shortfall in the NSFR. We also show that big banks are able to increase their lending following a contractionary monetary policy shock, in line with the fact that big banks in Luxembourg are liquidity providers. Our extrapolation and simulation results suggest that the bank lending channel will no longer be effective in Luxembourg once banks adhere to the Basel III liquidity regulations. We find that adhering to the NSFR may reduce the bank lending channel more strongly than complying with the LCR.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Central Bank of Luxembourg in its series BCL working papers with number 61.

in new window

Length: 44 pages
Date of creation: Jun 2011
Date of revision:
Publication status: published as: ?Bank liquidity risk and monetary policy. Empirical evidence on the impact of Basel III liquidity standards?, International Review of Applied Economics, 2013, 27(5): 633-655.
Handle: RePEc:bcl:bclwop:bclwp061
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bcl:bclwop:bclwp061. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.