#banksonbasel: Jens Tolckmitt

What are the side effects of Basel III?

In economic terms, it is not only unavoidable in Europe’s bank-based financing system for real estate loans to be provided through banks and savings banks – it also makes perfect sense. After all, they not only have the necessary stability but are also experienced and efficient in assessing risk. Last but not least, in many respects they are regulated for that very purpose. Regulation should not encourage a migration of lending into financial market segments that are less strictly regulated or are not regulated at all. Yet that is precisely the effect Basel III will have. Such a development would be harmful to financial stability – the same financial stability that regulators claim to be strengthening with the measures they advocate.