An International Monetary Fund paper, published in May, says Basel III rules requiring banks to hold a minimum of 7% equity in risk-weighted assets would raise lending costs and reduce loan growth.

Thomas Cosimano and Dalia Hakura, the paper's authors, investigate the impact of the new capital requirements introduced under the Basel III framework on bank lending rates and loan growth. They argue that higher capital requirements raise banks' marginal cost of funding and lead to higher lending