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Post Crisis Banking Sector Regulation And European Union Economic Growth Nexus

Author

Listed:
  • Ivica Klinac

    (Aspira University College Split, Croatia; University of Applied Sciences Baltazar Zapresic, Croatia)

  • Roberto Ercegovac

    (University of Split, Faculty of Economics, Business and Tourism, Croatia)

  • Mario Pecaric

    (University of Split, Faculty of Economics, Business and Tourism, Croatia; University of Rijeka, Faculty of Economics and Business, Croatia)

Abstract

The objective of this paper is to examine the impact of the new banking regulation on the European Union real economic activity in the period following the global financial crisis using a sample of 22 listed banking groups with high systemic importance, using dynamic panel models with a one-step GMM estimator. Higher regulatory capital and liquidity requirements are the main consequences of the global financial crisis, the pro-cyclical contraction of bank credit, and the advanced adaptive consolidation of the banking sector. The strengthened role of the ECB as lender of last resort and market maker may have had a significant impact on eliminating interbank market dysfunctionality and maintaining overall financial stability. In implementing the Basel III regulatory framework banks significantly increased the quality and consistency of the capital structure. On the other hand, the long-term stability of reduced systemic risks and the stimulation of the credit cycle are at stake. The research results clearly show that the necessary increase in a banking firm's regulatory capital and liquidity position have positive effects on real economic activity and potential sustainable economic growth.

Suggested Citation

  • Ivica Klinac & Roberto Ercegovac & Mario Pecaric, 2021. "Post Crisis Banking Sector Regulation And European Union Economic Growth Nexus," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 19(2), pages 15-26, November.
    • Handle: RePEc:tuz:journl:v:19:y:2021:i:2:p:15-26
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    References listed on IDEAS

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    More about this item

    Keywords

    regulatory requirements; bank capital; bank liquidity; financial system; dynamic panel models;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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