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Whisper it in case the bank lobby hears: bank capital is good for the economy!
With the 2024 European elections coming into view, representatives in the European Parliament are looking for policy proposals to boost employment and industrial growth in their constituencies.
One of the best ways for them to achieve this is simple: commit to supporting stronger capitalised banks.
Europe’s firms and factories rely heavily on bank financing. When banks are strongly capitalised, these businesses can invest more. Strong banks will also help the EU to finance its sustainable transition.
We can see exactly what happened when the minimum requirements for bank capital were raised by a few percentage points after the global financial crisis.
In short, lending to firms and factories got stronger.
Impact of the Basel III reforms on bank lending – Source: Study by the Basel Committee on Banking Supervision
The latest in a series of studies from the Basel Committee for Banking Supervision (BCBS) shows that, even during the challenging years after the crisis, even when demand for credit fell, the Basel III reforms helped European banks to support their national economies. The BCBS study adjusts for GDP, market volatility, and interest rates, focusing only on how Basel III reforms impacted lending....
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