12 More importantly, the evidence of a negative influence of regulation on productivity growth may appear to be inconsistent with a number of basic facts: a more regulated environment did not prevent the superior European productivity growth performance prior to the mid-1990s; the recent trend in Europe has been towards deregulation; some of the countries which do not register an outstanding productivity performance, such as the UK, have reached a stage of deregulation comparable to that of the United States.
At the time, potential systemic risks in the banking sector required a tightening of risk management guidelines, placing greater emphasis on liquidity considerations in terms of the asset classes in which reserves portfolios are invested. Central banks generally have a large proportion of reserves invested in highly liquid fixed income assets which include short-term bank deposits.