In the context of financial regulation it is often hypothesized that, financial regulations – particularly higher capital requirements – would increase banks‘ cost of funding. Let me develop on this. Funding costs are priced in the interaction of profitability, asset quality and capitalization. Colleagues from the OeNB2 in an IMF paper have shown new evidence on 1  Monetary policy for financial stability.
Keynote speech by Jaime Caruana at the 52nd SEACEN Governors’ Conference, Nov 2016 (http://www.bis.org/speeches/sp161130a.pdf) Seite 2 von 5  this empirical relationship by using CDS spreads as a proxy for funding costs and analyzing an unbalanced panel of 54 large banks from six countries that cover the period from 2004Q4 to 2013Q4.