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Possible Unintended Consequences of Basel III and Solvency II

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  • International Monetary Fund

Abstract

In today's financial system, complex financial institutions are connected through an opaque network of financial exposures. These connections contribute to financial deepening and greater savings allocation efficiency, but are also unstable channels of contagion. Basel III and Solvency II should improve the stability of these connections, but could have unintended consequences for cost of capital, funding patterns, interconnectedness, and risk migration.

Suggested Citation

  • International Monetary Fund, 2011. "Possible Unintended Consequences of Basel III and Solvency II," IMF Working Papers 11/187, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/187
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    1. Imola Drigă, 2007. "The New Basel Capital Accord - an International Convergence of Capital Measurements and Capital Standards in Banking," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 7, pages 129-132.
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    Cited by:

    1. Clara Busana & Antonio Salera, 2014. "Riforme del welfare state ed equità," ECONOMIA E SOCIETÀ REGIONALE, FrancoAngeli Editore, vol. 2014(1), pages 215-222.
    2. repec:beo:journl:v:62:y:2017:i:215:p:169-204 is not listed on IDEAS
    3. Degryse, Hans & Smedts, Kristien & Van Hulle, Cynthia, 2017. "Risk-sharing benefits and the capital structure of insurance companies," CEPR Discussion Papers 11838, C.E.P.R. Discussion Papers.
    4. Pierluigi Bologna, 2015. "Structural Funding and Bank Failures," Journal of Financial Services Research, Springer;Western Finance Association, vol. 47(1), pages 81-113, February.
    5. Bryce, Cormac & Webb, Rob & Cheevers, Carly & Ring, P. & Clark, G., 2016. "Should the insurance industry be banking on risk escalation for solvency II?," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 131-139.
    6. Gabriele Galati & Richhild Moessner, 2014. "What do we know about the effects of macroprudential policy?," DNB Working Papers 440, Netherlands Central Bank, Research Department.
    7. CUHAL, Radu & STARIŢÎNA, Ludmila & SADOVEANU, Diana, 2015. "Modelling Approaches To Assess The Effectiveness Of Macro-Prudential Policy," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 2(1), pages 67-75.

    More about this item

    Keywords

    Cost of capital; Interconnectedness; Basel III; Solvency II; Funding; capital requirements; credit risk; market risk; underwriting; Financial Institutions and Services: Government Policy and Regulation;

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