ECON committee published a study on the impact of CRD IV

12 July 2011

The three main pillars of the new regulatory framework for banks are: capital, leverage and liquidity requirements. The assessment of the CRD IV measures shows that there is a sound chance of increasing stability of the banking sector resulting in net benefits for the overall economy.

Nevertheless, these findings are surrounded by a high degree of uncertainty in connection with the actual behaviour of the involved market participants. Empirical evidence for the EU shows that the links between the proposed restrictions and the portfolio choice of banks are weak. The quantitative analyses indicate that in the short run financing costs of banks will increase by 0.06% per additional percentage point of regulatory capital requirements. The impact of liquidity requirements will be in the range of 0.05% per percentage point. The growth impact in the short run is estimated to be -0.18% for capital and -0.15% for liquidity requirements (per percentage point). In the long run the impact will be close to zero. Capital regulation beyond 13% capital requirements and above 5% additional liquidity are associated with excessive macroeconomic cost unlikely to be recovered from gains from increased economic stability.

 

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