In March 2016, the Bank for International Settlements (BIS) published a paper reviewing the current knowledge and empirical data on the effects of new bank capital and liquidity requirements. This literature review is comprised of three essays surveying the current body of research and empirical studies on liquidity and its interaction with capital and on other supervisory requirements.
Because the study is a literature review, BIS did not perform empirical analysis of its own. Rather, the authors carefully examined the available studies performed, assessed their scope, methodologies, and results, and drew conclusions regarding what has been learned thus far, noting gaps or areas still in development. Overall, the literature review’s authors found that, because new capital requirements have been in place for quite awhile, a great deal of research has already been performed on their costs and benefits, as well as their effects on economic activity. In contrast, liquidity requirements and other supervisory tools like buffers and stress tests have only been implemented since the recent financial crisis. As a result, there has been far less time to study their efficacy or their knock-on effects, leaving gaps in the literature.