Hanging over the banks are the impending changes in global bank regulations. The nature of the changes and the implementation date are still to be decided by the Basel Committee on Banking Supervision. These proposed changes are aimed at building up stronger buffers to counteract the build-up of excessive procyclical leverage.
Changes in the regulatory framework are necessary to prevent a recurrence of the recent crisis. However, we do need banks to be in a position to lend, and to be engaged in maturity transformation. A fine line has to be drawn: we cannot admonish the banks for not lending, but at the same time introduce regulations that make it difficult for them to lend.