OCDE : Systemically Important Banks and Capital Regulation Challenges - 12/12/2011

Bank regulation might have contributed to or even reinforced adverse systemic shocks that materialised during the financial crisis. Capital regulation based on risk-weighted assets encourages innovation designed to circumvent regulatory requirements and shifts banks’ focus away from their core economic functions. Tighter capital requirements based on risk-weighted assets may further contribute to these skewed incentives. The estimated macroeconomic costs of redirecting banks’ attention away from such unconventional business practices are low. During a medium-term adjustment period, for each percentage point of bank equity, regulation that is not based on risk-weighted assets would affect annual GDP growth by -0.02 percentage point more than under the risk-weighted assets framework. Refocusing banks’ attention toward their main economic functions is a core requirement for durable financial stability and sustainable economic growth.

http://www.oecd-ilibrary.org/docserver/download/fulltext/5kg0ps8cq8q6.pdf?expires=1324476517&id=id&accname=guest&checksum=4A7A52FDCEB9E30441E0A1EC4C112259