Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/69626 
Year of Publication: 
2013
Series/Report no.: 
Working Paper No. 18/2013
Publisher: 
Hochschule für Wirtschaft und Recht Berlin, Institute for International Political Economy (IPE), Berlin
Abstract: 
This paper analyzes the Capital Requirements Directive IV and the Capital Requirements Regulation, a new legislative package proposed by the European Commission in July 2011 which aims to strengthen the regulation of the banking sector and amend the European Union's rules on capital requirements for banks and investment firms. It is argued that the CRD IV package makes a great contribution towards creating a sounder and safer financial system, however, several aspects are insufficiently addressed and/or not comprehensive enough to produce the anticipated results. It is found that the main fallacies of the CRD IV proposal lay in increased risk-taking, procyclicality, deficient implementation, overreliance on credit rating agencies, and risk weightings. Moreover, the proposal does not touch upon the issues of the shadow banking system, diversification, the problem of 'too-big-to-fail' or the 'Volcker Rule'. It is, hence, concluded that the CRD IV proposal is not ambitious enough to address essential issues of systemic risk, regulatory arbitrage, or the fragility of the financial system.
JEL: 
E25
E44
F4
Document Type: 
Working Paper

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