Macroeconomic Consequences of New Prudential Regulation in the Banking Sector

Abstract

This article presents the impact of new prudential regulations for banking sector and their implications for GDP growth rate. Amongst large numbers of new financial regulations that have been created in recent years, the impacts of Basel III and CDR IV/CRR was chosen for analysis. This article was created for reviewing purposing. The aim of the paper is to create a structured section of macroeconomic effects of Basel III (CRD IV/CRR). So far, the results of researching the effects of the changes on the economy and the banking system analyzed by different institutions -have led to different conclusions, which justifies the need to collect and compare these results. However, it must be noted that conducting such studies is difficult due to various assumptions that are implemented. The main objective of paper was to assess the impact of new prudential regulations for banking sector. Furthermore, it discusses the channels through which changes in regulations translate into economic growth and other macroeconomic indicators. Additionally, an analysis of the macroeconomic impact of these changes in relation to the economies of the world and domestic market was conducted. The results obtained lead to conclusions that the consequences of new regulations will lead to slight decline in future growth of economy. Therefore, there are questions which arise regarding the desired degree for regulation, its scope, scale, and time period that the standards should be maintained.