Capital and liquidity rules work better together, BoE paper finds
Literature review finds having both requirements is better than just one, but “significant gaps exist”
Academic literature on post-crisis regulation tends to find the highest welfare gains can be achieved from using both capital and liquidity requirements in tandem, a study published by the Bank of England finds.
Quynh-Anh Vo conducts a literature review to examine whether there could be unintended consequences from Basel III, which combines capital and liquidity requirements.
In the working paper, she finds that the rules can substitute for one another to some extent, since both reduce the
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