More importantly, the recognition of the role of systemic risk and the importance of financial stability are the major lessons learnt from the crisis. The new regulatory framework, inasmuch as it requires higher quantum of higher quality capital and liquidity buffers leading to reduced leverage, has raised intense debate over the impact they could have on the economic growth and the profitability of banks.
It is argued that the increased capital requirements would impinge on the profitability of banks, forcing them to either increase their lending rates to maintain their margins or cut down on lending to preserve their capital base, both of which may have a large negative impact on economic growth.