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Part VI Leveraging Banking Capacity to Support the Wider Economy, 20 Relief from Prudential Requirements to Support the Capital Markets Union

Bart Joosen, Kitty Lieverse

From: Capital Markets Union in Europe

Edited By: Danny Busch, Emilios Avgouleas, Guido Ferrarini

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 18 April 2024

Banks as a lender — Regulation of banks — Credit risk — Capital markets — Financial regulation

This chapter examines the regulatory impediments to financing by European banks of corporate borrowers and the means to improve the financing capability of banks. In this context, it not only looks at banks, but also considers the position of another type of a highly regulated funder: European insurance companies. The working assumption is that capital requirements, and risk weights for credit risks in particular, have an impact on the capability of banks to lend. Quite simply, a higher risk weight of an exposure increases the capital a bank needs to maintain in connection with such exposure. As a result, increases in capital requirements will potentially constrain the lending capability of a bank.

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