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2016 | OriginalPaper | Chapter

3. Basel III, Liquidity Risk and Regulatory Arbitrage

Authors : Viktor Elliot, Ted Lindblom

Published in: Liquidity Risk, Efficiency and New Bank Business Models

Publisher: Springer International Publishing

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Abstract

This chapter discusses and analyses the incentives for banks to behave opportunistically in order to bypass liquidity constraints and even benefit from regulatory arbitrage. The chapter specifically focuses on the new liquidity constraints introduced by Basel III and provides a number of examples from both on- and off-balance sheet perspectives of how banks are transferring risk to other parts of the economy that might be less well equipped to handle these risks. The chapter concludes by discussing the potential implications of such behaviours for the role banks will play in a liquidity-constrained economy.

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previous chapter A Note on Regulatory Arbitrage: Bank Risk, Capital Risk, Interest Rate Risk and ALM in European Banking

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Title: Basel III, Liquidity Risk and Regulatory Arbitrage
Authors: Viktor Elliot
Ted Lindblom
Publisher: Springer International Publishing
Book: Liquidity Risk, Efficiency and New Bank Business Models
Print ISBN: 978-3-319-30818-0

Electronic ISBN: 978-3-319-30819-7

Copyright Year: 2016
DOI: https://doi.org/10.1007/978-3-319-30819-7_3