Regulations have net benefit despite cost to dealers – BoE paper
Working paper finds leverage requirements have raised costs for dealers in normal times
A study of dealers in the corporate bond market by economists at the Bank of England finds post-crisis regulations have imposed costs, but also shows the regulations have improved market functioning in stressed situations.
Yuliya Baranova, Zijun Liu and Tamarah Shakir compare the structure of dealer balance sheets in 2006 with current balance sheets, in the staff working paper, published on July 14. They assume dealers cannot raise new equity in the short run – since running out of balance
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