IDEAS home Printed from https://ideas.repec.org/a/bfr/rueban/201867.html
   My bibliography  Save this article

A DGSE model to assess the post-crisis regulation of universal banks

Author

Listed:
  • Olivier de BANDT
  • Mohammed CHAHAD

Abstract

The 2007-08 financial crisis led to a global overhaul of prudential regulatory instruments. At an international level, the new Basel III regulation increased capital requirements and also introduced two liquidity ratios, for the short and long term. This Rue de la Banque provides our latest estimates of the new regulation’s long-term impact on bank lending and gross domestic product, which appears limited. It also highlights the complementarity that can arise between solvency and liquidity objectives, the degree of substitutability that can appear between the two new liquidity ratios, and the role of sovereign bonds in the new regulation.

Suggested Citation

  • Olivier de BANDT & Mohammed CHAHAD, 2018. "A DGSE model to assess the post-crisis regulation of universal banks," Rue de la Banque, Banque de France, issue 67, September.
    • Handle: RePEc:bfr:rueban:2018:67
    as

    Download full text from publisher

    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/818279_rdb67_en_v4.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jaromír Beneš & Kirdan Lees, 2010. "Multi-period fixed-rate loans, housing and monetary policy in small open economies," Reserve Bank of New Zealand Discussion Paper Series DP2010/03, Reserve Bank of New Zealand.
    2. Mark Gertler & Simon Gilchrist, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 309-340.
    3. Paolo Angelini & Laurent Clerc & Vasco Cúrdia & Leonardo Gambacorta & Andrea Gerali & Alberto Locarno & Roberto Motto & Werner Roeger & Skander Van den Heuvel & Jan Vlček, 2015. "Basel III: Long-term Impact on Economic Performance and Fluctuations," Manchester School, University of Manchester, vol. 83(2), pages 217-251, March.
    4. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    5. Banerjee, Ryan N. & Mio, Hitoshi, 2018. "The impact of liquidity regulation on banks," Journal of Financial Intermediation, Elsevier, vol. 35(PB), pages 30-44.
    6. Clemens Bonner, 2016. "Preferential Regulatory Treatment and Banks' Demand for Government Bonds," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(6), pages 1195-1221, September.
    7. Matthieu Darracq Pariès & Christoffer Kok Sørensen & Diego Rodriguez-Palenzuela, 2011. "Macroeconomic Propagation under Different Regulatory Regimes: Evidence from an Estimated DSGE Model for the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 7(4), pages 49-113, December.
    8. M. Birn & M. Dietsch & D. Durant, 2017. "How to reach all Basel requirements at the same time?," Débats économiques et financiers 28, Banque de France.
    9. Kay Giesecke & Francis A. Longstaff & Stephen Schaefer & Ilya Strebulaev, 2012. "Macroeconomic Effects of Corporate Default Crises: A Long-Term Perspective," NBER Working Papers 17854, National Bureau of Economic Research, Inc.
    10. Barbora SUTOROVA & Petr TEPLY, 2013. "The Impact of Basel III on Lending Rates of EU Banks," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(3), pages 226-243, July.
    11. Francisco Covas & John C. Driscoll, 2014. "Bank Liquidity and Capital Regulation in General Equilibrium," Finance and Economics Discussion Series 2014-85, Board of Governors of the Federal Reserve System (U.S.).
    12. Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010. "Credit and Banking in a DSGE Model of the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 107-141, September.
    13. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
    14. Olivier de BANDT & Mohammed CHAHAD, 2018. "A DGSE model to assess the post-crisis regulation of universal banks," Rue de la Banque, Banque de France, issue 67, September.
    15. Anonymous, 1994. "Six monthly Monetary Policy Statement June 1994," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 57, June.
    16. Bridges, Jonathan & Gregory, David & Nielsen, Mette & Pezzini, Silvia & Radia, Amar & Spaltro, Marco, 2014. "The impact of capital requirements on bank lending," Bank of England working papers 486, Bank of England.
    17. Mervyn King, 1994. "Monetary policy in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 15(3), pages 109-128, August.
    18. Julio J. Rotemberg, 1982. "Monopolistic Price Adjustment and Aggregate Output," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(4), pages 517-531.
    19. Gianni De Nicolò & Andrea Gamba & Marcella Lucchetta, 2014. "Microprudential Regulation in a Dynamic Model of Banking," The Review of Financial Studies, Society for Financial Studies, vol. 27(7), pages 2097-2138.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Olivier de BANDT & Mohammed CHAHAD, 2018. "A DGSE model to assess the post-crisis regulation of universal banks," Rue de la Banque, Banque de France, issue 67, September.
    2. M. Birn & M. Dietsch & D. Durant, 2017. "How to reach all Basel requirements at the same time?," Débats économiques et financiers 28, Banque de France.
    3. Hibiki Ichiue & Jean-Guillaume Sahuc & Yasin Mimir & Jolan Mohimont & Kalin Nikolov & Olivier de Bandt & Sigrid Roehrs & Valério Scalone & Michael Straughan & Bora Durdu, 2022. "Assessing the Impact of Basel III: Evidence from Structural Macroeconomic Models," Working Papers hal-04159816, HAL.
    4. Thibaud Cargoet & Simon Cornée & Franck Martin & Tovonony Razafindrabe & Fabien Rondeau & Christophe Tavéra, 2021. "A Dual Banking Sector With Credit Unions and Traditional Banks : What Implications on Macroeconomic Performances?," Economics Working Paper Archive (University of Rennes & University of Caen) 2021-03, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    5. Chawwa, Tevy, 2021. "Impact of reserve requirement and Liquidity Coverage Ratio: A DSGE model for Indonesia," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 321-341.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ananou, Foly & Chronopoulos, Dimitris K. & Tarazi, Amine & Wilson, John O.S., 2021. "Liquidity regulation and bank lending," Journal of Corporate Finance, Elsevier, vol. 69(C).
    2. Falagiarda, Matteo & Saia, Alessandro, 2017. "Credit, Endogenous Collateral and Risky Assets: A DSGE Model," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 125-148.
    3. Blattner Tobias S. & Swarbrick Jonathan M., 2021. "Monetary Policy and Cross-Border Interbank Market Fragmentation: Lessons from the Crisis," The B.E. Journal of Macroeconomics, De Gruyter, vol. 21(1), pages 323-368, January.
    4. Jean-Guillaume Sahuc & Olivier de Bandt & Hibiki Ichiue & Bora Durdu & Yasin Mimir & Jolan Mohimont & Kalin Nikolov & Sigrid Roehrs & Valério Scalone & Michael Straughan, 2022. "Assessing the Impact of Basel III: Evidence from Structural Macroeconomic Models," EconomiX Working Papers 2022-3, University of Paris Nanterre, EconomiX.
    5. Benchimol, Jonathan & Bozou, Caroline, 2024. "Desirable banking competition and stability," Journal of Financial Stability, Elsevier, vol. 73(C).
    6. Kühl, Michael, 2017. "Bank capital, the state contingency of banks’ assets and its role for the transmission of shocks," Journal of Macroeconomics, Elsevier, vol. 54(PB), pages 260-284.
    7. R. P. Agenor & K. Alper & L. Pereira da Silva, 2013. "Capital Regulation, Monetary Policy, and Financial Stability," International Journal of Central Banking, International Journal of Central Banking, vol. 9(3), pages 198-243, September.
    8. Retselisitsoe I. Thamae & Nicholas M. Odhiambo, 2022. "The impact of bank regulation on bank lending: a review of international literature," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(4), pages 405-418, December.
    9. Brzoza-Brzezina, Michał & Kolasa, Marcin & Makarski, Krzysztof, 2015. "Macroprudential policy and imbalances in the euro area," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 137-154.
    10. Chawwa, Tevy, 2021. "Impact of reserve requirement and Liquidity Coverage Ratio: A DSGE model for Indonesia," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 321-341.
    11. Laurent Clerc & Alexis Derviz & Caterina Mendicino & Stephane Moyen & Kalin Nikolov & Livio Stracca & Javier Suarez & Alexandros P. Vardoulakis, 2015. "Capital Regulation in a Macroeconomic Model with Three Layers of Default," International Journal of Central Banking, International Journal of Central Banking, vol. 11(3), pages 9-63, June.
    12. Ali Dib, 2010. "Capital Requirement and Financial Frictions in Banking: Macroeconomic Implications," Staff Working Papers 10-26, Bank of Canada.
    13. Bonciani, Dario & Roye, Björn van, 2016. "Uncertainty shocks, banking frictions and economic activity," Journal of Economic Dynamics and Control, Elsevier, vol. 73(C), pages 200-219.
    14. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    15. Lang, Jan Hannes & Menno, Dominik, 2023. "The state-dependent impact of changes in bank capital requirements," Working Paper Series 2828, European Central Bank.
    16. M. Birn & M. Dietsch & D. Durant, 2017. "How to reach all Basel requirements at the same time?," Débats économiques et financiers 28, Banque de France.
    17. Beck, Thorsten & Colciago, Andrea & Pfajfar, Damjan, 2014. "The role of financial intermediaries in monetary policy transmission," Journal of Economic Dynamics and Control, Elsevier, vol. 43(C), pages 1-11.
    18. Li, Boyao, 2022. "How does bank equity affect credit creation? Multiplier effects under Basel III regulations," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 299-324.
    19. František Brazdik & Michal Hlavacek & Aleš Marsal, 2012. "Survey of Research on Financial Sector Modeling within DSGE Models: What Central Banks Can Learn from It," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(3), pages 252-277, July.
    20. Kame Babilla, Thierry U., 2023. "Digital innovation and financial access for small and medium-sized enterprises in a currency union," Economic Modelling, Elsevier, vol. 120(C).

    More about this item

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:rueban:2018:67. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael brassart (email available below). General contact details of provider: https://edirc.repec.org/data/bdfgvfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.