Should the Different Banking Activities Be Regulated Distinctly?

Financial markets play a central role in the financing of banks. Indeed, the evolution in the structure of savings increased the dependency of the banking system upon resources collected from other financial institutions. The 2007/2008 liquidity crisis has underlined the fragility of this setting and the threats of excessive leverage. The current reform of the regulatory framework (Basel III), by seeking to promote the financial system’s stability, imposes new constraints on the transformation function fulfilled by banks. Yet, a bank is an institution which realizes a fragile and complex equilibrium between liquidity production and long term financing of agents who have no alternative to bank financing. This article, after having presented the specificity of production in banking, analyses the potential effects of the ongoing reforms on this equilibrium and the ability of banks to finance the economy.