Has the relaxation of capital and liquidity buffers worked in practice?

Abstract:

We analyse the recent policy decisions made by the ECB and the national authorities related to capital, liquidity, and shareholders’ remuneration aimed at promoting credit supply from the banking sector to the coronavirus-afflicted economy. We forecast the impact of the regulatory decisions based on the empirical literature, discuss the factors that reduce the banks’ incentives to expand loan portfolios and develop policy suggestions intended to mitigate the effect of these factors.

Further information:

This document was provided by the Economic Governance Support Unit at the request of the ECON Committee.

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