LCR changes result from regulatory high-wire act
The recent easing of the Basel III liquidity coverage ratio is welcome, but highlights the difficult – perhaps impossible – regulatory challenge of striking the right balance in a world of too-big-to-fail banks, writes David Rowe
The difficulty regulators face in balancing bank safety and soundness against credit supply and economic growth first became a practical reality for me in 1987. The first Basel capital accord was coming into effect in January 1988 and banks were busily trying to comply. Many of their customers, meanwhile, were complaining about a credit squeeze in which even good, established borrowers were having problems. A colleague pointed out that these two developments were directly related, and the
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