Macroprudential Banking Regulation: Does One Size Fit All?
The macroprudential regulatory framework of Basel III imposes the same minimum capital and liquidity requirements on all banks around the world to ensure global competitiveness of banks. Using an agent-based model of the fi nancial system, we fi nd that this is not a robust framework to achieve (...
Saved in:
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
University of Warsaw
2014-05-01
|
| Series: | Journal of Banking and Financial Economics |
| Subjects: | |
| Online Access: | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1100&context=jbfe |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1841561898396418048 |
|---|---|
| author | Doris Neuberger Roger Rissi |
| author_facet | Doris Neuberger Roger Rissi |
| author_sort | Doris Neuberger |
| collection | DOAJ |
| description | The macroprudential regulatory framework of Basel III imposes the same minimum capital and
liquidity requirements on all banks around the world to ensure global competitiveness of banks.
Using an agent-based model of the fi nancial system, we fi nd that this is not a robust framework to
achieve (inter)national fi nancial stability, because effi cient regulation has to embrace the economic
structure and behaviour of fi nancial market participants, which differ from country to country.
Market-based fi nancial systems do not profi t from capital and liquidity regulations, but from a ban
on proprietary trading (Volcker rule). In homogeneous or bank-based fi nancial systems, the most
effective regulatory policy to ensure fi nancial stability depends on the stability measure used.
Irrespective of fi nancial system architecture, direct restrictions of banks’ investment portfolios
are more effective than indirect restrictions through capital, leverage and liquidity regulations.
Applying the model to the Swiss fi nancial system, we fi nd that increasing regulatory complexity
excessively has destabilizing effects. These results highlight for the fi rst time a necessary change
in the regulatory paradigm to ensure the effectiveness and effi ciency of fi nancial regulations with
regards to fostering the resilience of the fi nancial system. |
| format | Article |
| id | doaj-art-00fcec1d9ffd4149a2eeba926b4044a3 |
| institution | Kabale University |
| issn | 2353-6845 |
| language | English |
| publishDate | 2014-05-01 |
| publisher | University of Warsaw |
| record_format | Article |
| series | Journal of Banking and Financial Economics |
| spelling | doaj-art-00fcec1d9ffd4149a2eeba926b4044a32025-01-03T01:18:10ZengUniversity of WarsawJournal of Banking and Financial Economics2353-68452014-05-0120141(1)52810.7172/2353-6845.jbfe.2014.1.1Macroprudential Banking Regulation: Does One Size Fit All?Doris Neuberger0Roger Rissi1University of Rostock, GermanyLucerne University of Applied Sciences and Arts, SwitzerlandThe macroprudential regulatory framework of Basel III imposes the same minimum capital and liquidity requirements on all banks around the world to ensure global competitiveness of banks. Using an agent-based model of the fi nancial system, we fi nd that this is not a robust framework to achieve (inter)national fi nancial stability, because effi cient regulation has to embrace the economic structure and behaviour of fi nancial market participants, which differ from country to country. Market-based fi nancial systems do not profi t from capital and liquidity regulations, but from a ban on proprietary trading (Volcker rule). In homogeneous or bank-based fi nancial systems, the most effective regulatory policy to ensure fi nancial stability depends on the stability measure used. Irrespective of fi nancial system architecture, direct restrictions of banks’ investment portfolios are more effective than indirect restrictions through capital, leverage and liquidity regulations. Applying the model to the Swiss fi nancial system, we fi nd that increasing regulatory complexity excessively has destabilizing effects. These results highlight for the fi rst time a necessary change in the regulatory paradigm to ensure the effectiveness and effi ciency of fi nancial regulations with regards to fostering the resilience of the fi nancial system.https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1100&context=jbfefi nancial stabilitysystemic riskfi nancial systembanking regulationagent-based model |
| spellingShingle | Doris Neuberger Roger Rissi Macroprudential Banking Regulation: Does One Size Fit All? Journal of Banking and Financial Economics fi nancial stability systemic risk fi nancial system banking regulation agent-based model |
| title | Macroprudential Banking Regulation: Does One Size Fit All? |
| title_full | Macroprudential Banking Regulation: Does One Size Fit All? |
| title_fullStr | Macroprudential Banking Regulation: Does One Size Fit All? |
| title_full_unstemmed | Macroprudential Banking Regulation: Does One Size Fit All? |
| title_short | Macroprudential Banking Regulation: Does One Size Fit All? |
| title_sort | macroprudential banking regulation does one size fit all |
| topic | fi nancial stability systemic risk fi nancial system banking regulation agent-based model |
| url | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1100&context=jbfe |
| work_keys_str_mv | AT dorisneuberger macroprudentialbankingregulationdoesonesizefitall AT rogerrissi macroprudentialbankingregulationdoesonesizefitall |