Banks recovering from a credit crunch should be given the latitude to rebuild Basel III capital buffers slowly so that they can maintain lending, a Bank for International Settlements study said.
“When banks are offered a stake in the recovery from a credit crunch — through temporarily less onerous regulation and higher profit margins — then the credit crunch is less severe,” the working paper for the Basel-based group of the world’s central banks said.
The paper, by Bank of Canada economist Josef Schroth, laid the groundwork for this recommendation by saying national regulators should activate countercyclical buffers when times are flush — something the US hasn’t done.
Banks in post-crisis recovery shouldn’t be rushed into rebuilding buffers, BIS study says
26 February 2019 4:44am