Banks will not necessarily respond to tighter liquidity regulations by cutting their lending to the real economy, according to a working paper published yesterday by the Bank for International Settlements (BIS).
The impact of liquidity regulation on banks represents a collaboration between economists Ryan Banerjee of the BIS and Hitoshi Mio of the Bank of Japan. In this paper they take advantage of a natural experiment that resulted from the UK's (now defunct) Financial Services Authority applyi
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