Are stricter capital requirements costly?
Gevolgen Basel III op lange termijn positief ; Overheid kan belangrijke faciliterende rol spelen
We are sorry, unfortunately there is no English translation of this page.
Basel III requires banks to raise their tangible common equity to a minimum of 7% of risk-weighted assets in 2019. At current capital levels, the long-term costs of stricter capital requirements are small relative to the benefits due to a lower probability of a systemic crisis.
Nevertheless, transition costs may be substantial and it is important to reduce those costs. Empirical studies show that a capital shock can have adverse consequences in the short run because banks reduce credit and increase the interest rates on their loans. Policy measures can reduce these transition costs by allowing banks sufficient time to adjust, while at the same time limiting dividend payments, or by forcing banks to issue new equity.
A longer adjustment period will, of course, imply a larger probability of a crisis during that period.
This publication is in Dutch.