Moreover, as banks face a drop in the relatively stable component of funding represented by retail deposits, 3  regulatory requirements in place may force them to cut back on credit or hold a higher proportion of liquid assets, either of which would result in less resources available for lending. Secondly, the stability of the financial system may face important challenges.
Since then, the aim of ensuring the sound and prudent management of banks has mainly been pursued by requiring bank to maintain a minimum ratio of capital to risk-weighted exposures, rather than through direct and discretionary action by the authority. Basel I divided credit exposures into four broad classes, with coefficients increasing as the counterparty’s theoretical riskiness rose.