Regulation has been significantly tightened, but there can be no question of overregulation. The most important regulatory step was the introduction of stricter capital requirements and new liquidity rules under Basel III. The new capital adequacy rules that were implemented into European law by CRD IV and CRR with a transition period until 2019 require banks to hold better and more capital.
According to the Basel Committee’s latest Basel III monitoring exercise, most large internationally active banks already meet the fully implemented capital minimum requirements. Banks’ loss absorbing capacity is much better than it was before the financial crisis. Between mid-2011 and end-2013, the average CET1 ratio of large and internationally active German banks, for example, almost doubled from just 5% to 9.5%.