Federal Reserve Bank of Philadelphia
THE IMPACTS OF FINANCIAL REGULATIONS: SOLVENCY AND LIQUIDITY IN THE POST-CRISIS PERIOD
This paper discusses the new financial regulations in the post–financial crisis period, focusing on capital and liquidity regulations. Basel III and the capital stress tests introduced new requirements and new definitions while retaining the structure of the pre-2010 requirements. The total number of requirements increased, making it difficult to determine which constraints are binding. We find that the new common equity tier 1 (CET1) and Level 1 high-quality liquid assets (HQLAs) are the binding constraints at large U.S. banks, especially for banks that are active in capital markets activities. Banks have been holding more CET1 and a larger share of Level 1 HQLAs since the financial crisis of 2007 to 2009. We also find that the market pricing of bank debt appears to have responded to changes in liquidity measures, especially at large capital markets banks. The Basel III regulatory capital ratios appear to have little direct influence on spreads.
Cite this item
Colleen Baker & Christine M. Cumming & Julapa Jagtiani, THE IMPACTS OF FINANCIAL REGULATIONS: SOLVENCY AND LIQUIDITY IN THE POST-CRISIS PERIOD, Federal Reserve Bank of Philadelphia, Working Papers 17-10, 24 Apr 2017.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- 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
Keywords: bank capital regulations; bank liquidity; CET1; high-quality liquid assets (HQLAs); Basel III; Dodd–Frank Act; financial stability
This item with handle RePEc:fip:fedpwp:17-10
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