Luxembourg paper says banks’ profitability will not suffer at hands of Basel III


Basel III regulations will have a limited impact on banks' profitability, according to a working paper published by the Central Bank of Luxembourg on January 25.

The authors, Gaston Giordana and Ingmar Schumacher, use data on Luxembourg's banks from 2003–11 to estimate the usefulness and effectiveness of the Basel III regulations.

The stricter liquidity coverage ratio "has an insignificant impact on banks' profitability", the paper finds. However, the higher capital-to-asset ratio can lead to a

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