Financial Stability News

News about financial stability, central banking and theory of money

The EBA 9% rule and the Eurozone crisis

FT Alphaville cites today Richard Koo from Nomura Research on the ongoing funding crisis among European banks. With reference to Japan, he notes that Japan had a similar situation back in 1997 when Bank of Japan insisted on implementing stricter Basel capital rules in the midst of a prolonged crisis. His conclusion is clear:

EBA’s 9% rule should be scrapped

Indeed, much of the EU’s policy response to the ongoing crisis appears to be directed at preventing the next crisis and has actually aggravated the current situation. Prime examples in this regard are the EBA’s 9% rule and the German government’s insistence on fiscal austerity and the adoption of balanced budget amendments.


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