Abstract / Description of output

We study the impact of the Basel III liquidity coverage ratio (LCR) on bank capital ratio and the interbank rate in a traditional banking model. We find that inappropriate parameters assigned to calculate High-Quality Liquid Assets (HQLAs) and Net Cash Flows (NCOs) would lower the equilibrium capital ratio especially when the required liquidity ratio is strengthened. In addition, these regulatory parameters may have macro-prudential effects to steer the interbank rate.
Original languageEnglish
Article number111853
Pages (from-to)1-12
Number of pages12
JournalEconomics Letters
Early online date6 Jul 2024
DOIs
Publication statusE-pub ahead of print - 6 Jul 2024

Keywords / Materials (for Non-textual outputs)

  • liquidity requirements
  • bank stability
  • Basel Accords
  • bank capital
  • interbank market

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