Systemically Important Banks and Capital Regulation Challenges
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...
Main Author: | |
---|---|
Format: | eBook |
Language: | English |
Published: |
Paris
OECD Publishing
2012
|
Series: | OECD Economics Department Working Papers
|
Subjects: | |
Online Access: | |
Collection: | OECD Books and Papers - Collection details see MPG.ReNa |
Summary: | 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 |
---|---|
Physical Description: | 17 p. 21 x 29.7cm |