Simulated banking system shows pros and cons of Basel III
Stability improves, but higher capital requirements also cut lending in new research
Simulations using software agents capable of learning have found that reforms to the world financial system, such as the Basel III prudential framework and the push towards central clearing of over-the-counter derivative trades, should work as intended to reduce contagion and the risk of another crisis. The cost was a drop in lending.
In research due to be be published in the Journal of Network Theory in Finance in December, Daniel Cajueiro, an economics professor at the University of Brasilia
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