Interactions of capital and liquidity requirements: a review of the literature

28 Pages Posted: 5 May 2021

Multiple version iconThere are 2 versions of this paper

Date Written: April 16, 2021

Abstract

One prominent feature of the regulatory framework put in place after the global financial crisis of 2008 is its reliance on multiple regulatory metrics, which has prompted new research on the interactions between them. This paper reviews the growing literature on the interactions between capital and liquidity requirements – the two primary requirements of the Basel III framework – with the focus on what the literature conveys on the extent to which capital and liquidity requirements are substitutes or complements. The paper also identifies gaps for further research.

Keywords: Capital requirements, liquidity requirements, substitutability, complementarity

JEL Classification: G21, G28

Suggested Citation

Vo, Quynh Anh, Interactions of capital and liquidity requirements: a review of the literature (April 16, 2021). Bank of England Working Paper No. 916, Available at SSRN: https://ssrn.com/abstract=3838688 or http://dx.doi.org/10.2139/ssrn.3838688

Quynh Anh Vo (Contact Author)

Bank of England ( email )

20 Moorgate
London, EC2R 6DA
United Kingdom

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