The Impact of regulatory capital regulation on balance sheet structure, intermediation cost and growth

Pierre-Charles Pradier (1, 2) , Hamza El Khalloufi (3, 2)

1 CES - Centre d'économie de la Sorbonne
2 LABEX Refi
3 PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management

As Europe is subject to a protracted recession, it should be asked whether the reform of the financial sector is not costly in terms of potential growth. Our analysis shows that the negative effect of the Basel III package excepted by the pre-QE studies are almost annihilated today. The recession must then have other causes: falling corporate lending volumes resulted from falling demand in the aftermath of the financial crisis, but this is longer the case. The EU is trying to incentivize corporate lending, via forward guidance as well as ‘supporting factor’ cutting down the Basel capital requirements. The macroeconomic theorists are trying to account for future success of monetary policy around zero nominal interest rate via the risk-taking channel. All these clever initiatives failed to deliver. As a consequence, we might infer that banks are simply not taking any risks: rather than appealing to risk aversion, we would like to argue that the banks seem especially embarrassed by future regulatory developments, which appear remote and uncertain. The binding constraint for corporate lending and growth in the EU is then plausibly a combination of banks' expectations of future regulation and strong uncertainty aversion. While we offer some mitigation prospects, we hope that the theoretical developments of the recent years will quickly yield both theoretical advances and practical results.

Malgré les assouplissements récents de la règlementation bancaire afin de permettre une reprise des prêts aux entreprises, il semble que le paquet Bâle III ait un effet néfaste sur la croissance. Le texte s'interroge sur la contrainte active parmi l'ensemble des nouvelles règles. Il semblerait que les banques soient devenues très averses à l'incertitude, en particulier à l'incertitude sur l'évolution des règles qui leurs sont imposées. En conséquence nous proposons de modifier la nature des provisions en capital et le nombre de régulateurs ayant un pouvoir de décision sur le niveau des capitaux.

Mots clés: banking; financial regulation

Mots clés: bancaire; réglementation bancaire

Domaines: Economies et finances

Pierre-Charles Pradier, Hamza El Khalloufi. The Impact of regulatory capital regulation on balance sheet structure, intermediation cost and growth. 2016. ⟨halshs-01390915⟩