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> They don’t constrain the quantity of lending. They only change the price Which country's capital and liquidity requirements are you thinking of? Because Bas
by JumpCrisscross 1mo ago
> They don’t constrain the quantity of lending. They only change the price
Which country's capital and liquidity requirements are you thinking of?
Because Basel III dictates ratios. These are hard limits on lending.
- neilwilson 1mo agoLoans create deposits, deposits are used to buy bank capital issued by banks. There’s no hard limits. They are ratios which are preprepared because a bank knows how big its sales pipeline is and that takes time to complete. Nothing is limited in quantity. Even the silly SLR they have in the US is a pricing limit, not a quantity - as we see every time somebody moans about how much the deficit has gone up.
- JumpCrisscross 1mo ago> There’s no hard limits. They are ratios Ratios are limits! > Nothing is limited in quantity Of course it is. At a certain point, compliance will say you literally cannot issue loans of certain types because of capital or liquidity ratios. If compliance fails to do that, regulators come in and yell at everyone.
- neilwilson 1mo agoI make $100 of loans, that creates $100 of deposits which move around. The capital ratio is 20%. I sell $20 of capital in exchange for $20 of deposits which are deleted. And then I do the same tomorrow. All ratios met. No limit on loans.