Regulators worry about bank deleveraging
Facing regulatory stress tests and the incoming leverage ratio, some banks are trying to shrink loan books further. Officials are worried about the potential impact on economic growth.
Regulators and policymakers are keeping a close eye on the extent to which banks shrink their lending businesses as the industry tries to comply with new prudential rules - and are hoping capital-raising plays a bigger part in the process than deleveraging, according to Sylvie Matherat, deputy director-general of the Banque de France and chair of the liquidity working group at the Basel Committee on Banking Supervision.
"What we don't like to see is too much deleveraging. Clearly there are two
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