BIS paper finds liquidity regulation need not harm lending

The BIS tower

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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