IDEAS home Printed from https://ideas.repec.org/a/psl/pslqrr/201442.html
   My bibliography  Save this article

CRR/CRD IV: the trees and the forest

Author

Listed:
  • Rainer Masera

    (Universita' degli Studi Guglielmo Marconi)

Abstract

This paper offers a review of the new CRR/CRD IV capital regulatory framework for banks in the EU, which represents the transposition into European law of the Basel III standard. Major shortcomings of the Second Capital Accord are examined, and the repair work is assessed in the light of the recognised need to amend the flaws. It is argued that the necessary adjustments must be evaluated in the holistic framework provided by the Banking Union approach. The main features of the new system are reviewed as components of an interconnected, complex network. The critical analysis highlights the significant improvements with respect to the Basel II standard, but it also brings to the fore the weaknesses which continue to characterise the new capital regulatory framework.

Suggested Citation

  • Rainer Masera, 2014. "CRR/CRD IV: the trees and the forest," PSL Quarterly Review, Economia civile, vol. 67(271), pages 381-422.
    • Handle: RePEc:psl:pslqrr:2014:42
    as

    Download full text from publisher

    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/13030/12837
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jón Daníelsson & Francisco Peñaranda, 2011. "On The Impact Of Fundamentals, Liquidity, And Coordination On Market Stability," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 621-638, August.
    2. Stephen Morris & Hyun Song Shin, 2004. "Liquidity Black Holes," Review of Finance, European Finance Association, vol. 8(1), pages 1-18.
    3. Dicembrino, Claudio & Scandizzo, Pasquale Lucio, 2011. "Can portfolio diversification increase systemic risk? evidence from the U.S and European mutual funds market," MPRA Paper 33715, University Library of Munich, Germany.
    4. Andrew G. Haldane & Vasileios Madouros, 2012. "The dog and the frisbee," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 109-159.
    5. Gordy, Michael B., 2003. "A risk-factor model foundation for ratings-based bank capital rules," Journal of Financial Intermediation, Elsevier, vol. 12(3), pages 199-232, July.
    6. Repullo, Rafael & Saurina, Jesús, 2011. "The Countercyclical Capital Buffer of Basel III: A Critical Assessment," CEPR Discussion Papers 8304, C.E.P.R. Discussion Papers.
    7. Alessandro Roncaglia, 2012. "Keynesian uncertainty and the shaky foundations of statistical risk assessment models," PSL Quarterly Review, Economia civile, vol. 65(263), pages 437-454.
    8. Sebastian Schich & Sofia Lindh, 2012. "Implicit guarantees for bank debt: where do we stand?," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2012(1), pages 45-63.
    9. Stijn Claessens & Lev Ratnovski & Manmohan Singh, 2012. "Shadow Banking; Economics and Policy," IMF Staff Discussion Notes 12/12, International Monetary Fund.
    10. Jacek Osinski & Katharine Seal & Lex Hoogduin, 2013. "Macroprudential and Microprudential Policies; Toward Cohabitation," IMF Staff Discussion Notes 13/5, International Monetary Fund.
    11. Miller, Merton H., 1995. "Do the M & M propositions apply to banks?," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 483-489, June.
    12. Samuel G. Hanson & Anil K. Kashyap & Jeremy C. Stein, 2011. "A Macroprudential Approach to Financial Regulation," Journal of Economic Perspectives, American Economic Association, vol. 25(1), pages 3-28, Winter.
    13. Rainer Masera, 2011. "Taking the moral hazard out of banking: the next fundamental step in financial reform," PSL Quarterly Review, Economia civile, vol. 64(257), pages 105-142.
    14. Marco Pagano, 1989. "Trading Volume and Asset Liquidity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 255-274.
    15. Adrian Blundell-Wignall & Paul Atkinson, 2011. "Global SIFIs, Derivatives and Financial Stability," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2011(1), pages 167-200.
    16. M. B. Gordy & E. Lutkebohmert, 2013. "Granularity Adjustment for Regulatory Capital Assessment," International Journal of Central Banking, International Journal of Central Banking, vol. 9(3), pages 38-77, September.
    17. Mr. Stijn Claessens & Mr. Lev Ratnovski & Mr. Manmohan Singh, 2012. "Shadow Banking: Economics and Policy," IMF Staff Discussion Notes 2012/012, International Monetary Fund.
    18. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 393-414.
    19. Tobias Adrian & Hyun Song Shin, 2014. "Procyclical Leverage and Value-at-Risk," The Review of Financial Studies, Society for Financial Studies, vol. 27(2), pages 373-403.
    20. Ueda, Kenichi & Weder di Mauro, B., 2013. "Quantifying structural subsidy values for systemically important financial institutions," Journal of Banking & Finance, Elsevier, vol. 37(10), pages 3830-3842.
    21. Goodhart, Charles & Avgouleas, Emilios, 2014. "A Critical Evaluation of Bail-in as a Bank Recapitalisation Mechanism," CEPR Discussion Papers 10065, C.E.P.R. Discussion Papers.
    22. Roger Guesnerie, 2005. "Assessing Rational Expectations 2: "Eductive" Stability in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072580, April.
    23. Johnston, Mark, 2009. "Extending the Basel II approach to estimate capital requirements for equity investments," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1177-1185, June.
    24. Mario Tonveronachi, 2013. "De-globalising bank regulation," PSL Quarterly Review, Economia civile, vol. 66(267), pages 371-385.
    25. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    26. Jacek Osinski & Katharine Seal & Mr. Lex Hoogduin, 2013. "Macroprudential and Microprudential Policies: Toward Cohabitation," IMF Staff Discussion Notes 2013/005, International Monetary Fund.
    27. Michel Aglietta & Laurence Scialom, 2010. "A Systemic Approach to Financial Regulation: a European Perspective," International Economics, CEPII research center, issue 123, pages 31-65.
    28. Black, Fischer & Miller, Merton H & Posner, Richard A, 1978. "An Approach to the Regulation of Bank Holding Companies," The Journal of Business, University of Chicago Press, vol. 51(3), pages 379-412, July.
    29. Micossi, Stefano & Bruzzone, Ginevra & Carmassi, Jacopo, 2013. "The New European Framework for Managing Bank Crises," CEPS Papers 8620, Centre for European Policy Studies.
    30. Hyman P. Minsky, 1992. "The Financial Instability Hypothesis," Economics Working Paper Archive wp_74, Levy Economics Institute.
    31. Rainer Masera, 2013. "US Basel III Final Rule on banks' capital requirements: A different-size-fits-all approach," PSL Quarterly Review, Economia civile, vol. 66(267), pages 387-402.
    32. Scazzieri,Roberto & Sen,Amartya & Zamagni,Stefano (ed.), 2009. "Markets, Money and Capital," Cambridge Books, Cambridge University Press, number 9780521873215, January.
    33. Shin, Hyun Song, 2010. "Risk and Liquidity," OUP Catalogue, Oxford University Press, number 9780199546367.
    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. Aikman, David & Haldane, Andrew & Hinterschweiger, Marc & Kapadia, Sujit, 2018. "Rethinking financial stability," Bank of England working papers 712, Bank of England.

    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. Matthieu Darracq Paries, 2018. "Financial frictions and monetary policy conduct," Erudite Ph.D Dissertations, Erudite, number ph18-01 edited by Ferhat Mihoubi.
    2. Claudio Borio, 2011. "Rediscovering the Macroeconomic Roots of Financial Stability Policy: Journey, Challenges, and a Way Forward," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 87-117, December.
    3. Emmanuel Farhi & Jean Tirole, 2021. "Shadow Banking and the Four Pillars of Traditional Financial Intermediation [Securitization without Risk Transfer]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(6), pages 2622-2653.
    4. Timothy C. Irwin, 2016. "Getting the Dog to Bark: Disclosing Fiscal Risks from the Financial Sector," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 1-17, June.
    5. Bouwman, Christa H. S., 2013. "Liquidity: How Banks Create It and How It Should Be Regulated," Working Papers 13-32, University of Pennsylvania, Wharton School, Weiss Center.
    6. Gabriele Galati & Richhild Moessner, 2018. "What Do We Know About the Effects of Macroprudential Policy?," Economica, London School of Economics and Political Science, vol. 85(340), pages 735-770, October.
    7. Eva Lorencic & Mejra Festic, 2021. "Macroprudential Policy Versus Other Economic Policies," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 23(2), pages 33-66, December.
    8. Ebrahim, M. Shahid & Jaafar, Aziz & Omar, Fatma A. & Salleh, Murizah Osman, 2016. "Can Islamic injunctions indemnify the structural flaws of securitized debt?," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 271-286.
    9. Francesco Lamperti & Antoine Mandel & Mauro Napoletano & Alessandro Sapio & Andrea Roventini & Tomas Balint & Igor Khorenzhenko, 2017. "Taming macroeconomic instability," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03399574, HAL.
    10. Ebrahimi Kahou, Mahdi & Lehar, Alfred, 2017. "Macroprudential policy: A review," Journal of Financial Stability, Elsevier, vol. 29(C), pages 92-105.
    11. Jürgen Eichberger & Klaus Rheinberger & Martin Summer, 2014. "Credit risk in general equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 57(2), pages 407-435, October.
    12. Beck, Günter Wilfried & Kotz, Hans-Helmut, 2016. "Euro area shadow banking activities in a low-interest-rate environment: A flow-of-funds perspective," SAFE White Paper Series 37, Leibniz Institute for Financial Research SAFE.
    13. Paul Glasserman & Wanmo Kang, 2014. "OR Forum—Design of Risk Weights," Operations Research, INFORMS, vol. 62(6), pages 1204-1220, December.
    14. Ida-Maria Weirsøe Fallesen, 2015. "The Challenges of the EU Banking Union - will it succeed in dealing with the next financial crisis?," Bruges European Economic Policy Briefings 36, European Economic Studies Department, College of Europe.
    15. Pejman Abedifar & Shahid M. Ebrahim & Philip Molyneux & Amine Tarazi, 2015. "Islamic Banking And Finance: Recent Empirical Literature And Directions For Future Research," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 637-670, September.
    16. He, Zhiguo & Kelly, Bryan & Manela, Asaf, 2017. "Intermediary asset pricing: New evidence from many asset classes," Journal of Financial Economics, Elsevier, vol. 126(1), pages 1-35.
    17. Mirza, Afrasiab & Stephens, Eric, 2022. "Securitization and aggregate investment efficiency," Journal of Financial Intermediation, Elsevier, vol. 52(C).
    18. Mäkinen, Taneli & Sarno, Lucio & Zinna, Gabriele, 2020. "Risky bank guarantees," Journal of Financial Economics, Elsevier, vol. 136(2), pages 490-522.
    19. Yagüe Gurucharri, Miguel & García-Hiernaux, Alfredo & Jerez, Miguel, 1974. "Rethinking Basel III and beyond: a theory model to understand credit allocation and real state bubbles," MPRA Paper 119559, University Library of Munich, Germany, revised 18 Dec 2023.
    20. Aymanns, Christoph & Caccioli, Fabio & Farmer, J. Doyne & Tan, Vincent W.C., 2016. "Taming the Basel leverage cycle," Journal of Financial Stability, Elsevier, vol. 27(C), pages 263-277.

    More about this item

    Keywords

    capital regulation; Basel III; risk; Banking Union; Modigliani-Miller;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    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:psl:pslqrr:2014:42. 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: Carlo D'Ippoliti (email available below). General contact details of provider: http://www.economiacivile.it .

    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.