Rajan, “Has financial development made the world riskier?”, National Bureau of Economic Research Working Paper Series, No 11728, 2005; G. Jiménez, S. Ongena, J.-L. Peydro and J. Saurina, “Hazardous times for monetary policy: what do 23 million loans say about the impact of monetary policy on credit risk?”, CEPR Discussion Paper, No 6514, 2007; V. Ioannidou, S. Ongena and J.-L. Peydro, “Monetary policy, risk-taking and pricing: evidence from a quasi-natural experiment”, NBER Summer Institute, 2009; A. Maddaloni and J.-L. Peydro, “Bank risk-taking, securitisation, supervision and low interest rates: evidence from lending standards”, ECB Working Paper Series, forthcoming. 32  BIS Review 10/2010  process. I will obviously not go into all of them, given the extent of the work in progress, but I will mention a few initiatives. First of all, the regulation of the banking system must be reviewed, with new rules constraining its assets and balance sheet structure. In December 2009, the Basel Committee on Banking Supervision announced a reform package aiming to strengthen global capital and liquidity regulations. Capital requirements will be more stringent, thanks to the improved quality, consistency and transparency of the regulatory capital base. Proposals include a counter-cyclical capital buffer, and measures to promote provisioning over the cycle and to mitigate the possible excess cyclicality arising from the minimum capital requirements. 12 Measures concerning the role of external ratings and the treatment of securitisation have also been announced. Better risk coverage is also needed, which is capable of capturing major on and off-balance sheet risks and derivative-related exposures.
However, they also reflect supply and demand factors. On the whole, developments in credit appear to have been, up to now, in line with historical regularities, according to which loans to firms typically lag the economic cycle by a couple of quarters. In fact, credit flows remained positive, even during the period of the most severe contraction in economic activity, presumably as a result of the growing use of credit lines and revolving credit facilities. 23 Therefore, lending to firms can be expected to remain subdued even in the early stages of economic recovery, but it cannot be ruled out that supply factors will continue to restrict credit for some months. 24 The flow of loans to households began to grow again at the end of last year. The quarterly survey on bank lending indicates that the degree of tightening adopted by banks for the granting of credit to firms declined over the last few months of 2009, but remain positive (see Figure 1). It is interesting to note that among the factors that affect banks’ restrictive intentions, neither the one concerning the liquidity position of the banks themselves nor the one concerning access to financial markets seems significant any longer. Both factors now contribute in a positive way to the intentions of banks to grant credit. Considerations relating to the prospects for economic growth and those linked to specific sectors of the economy remain restrictive, but the degree of restriction is declining sharply.