Empirical evidence on the behaviour of German banks during the crisis suggests that loans subject to internal model capital charges were reduced significantly more than loans under the standardised approach to capital regulation, supporting the view that internal models are relatively more pro-cyclical than the standardised approach.
29 The cited paper shows that, for the German banking system, loans subject to model-based, time-varying capital charges were reduced by 3.5 percent more than loans under the traditional approach to capital regulation, during the financial crisis. Hence, increasing the relative importance of the standardised approach should help to smooth the credit cycle, in particular by making deleveraging episodes less severe.