The trade-off between bank regulation and economic growth

Jacques de Larosière

The concepts of financial regulation and growth might seem, at first glance, somewhat unrelated. But history shows they are closely associated. The usual process goes as follows: periods of economic overheating tend to please politicians who do not want to ‘spoil the party’ by restricting lending. This leads to excessive debt accumulation and risk-taking, which eventually end up in a financial crisis. At this point, two things happen simultaneously with pro-cyclical consequences:

● Financial

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