Can You Have Too Much Regulation?

At Merrill Corporation, we are in the business of compliance. As a result, we sometimes wonder if we aren’t biased when reporting on the latest regulations, compliance issues, and governance requirements in the financial industry. Luckily, IMF Research decided to explore the true cost of compliance, and came back with some surprising numbers.

FierceFinance reports:

The conventional wisdom in the industry -- and perhaps even among regulators -- is that the global push for additional regulations aimed at safety and transparency imposes some significant costs.

Many would agree that these efforts collectively will provide upward pressure on interest rates charged by banks. However, a recent study by the International Monetary Fund has found that the new regulations, specifically Basel III, will not have a significant impact on rates or the global economy. The study says that "in the long term average bank lending rates are likely to increase by 28 basis points in the U.S., by 17 basis points in Europe and by 8 basis points in Japan."

This translates to say that the world’s financial institutions are more than capable of handling compliance changes in stride. Changing regulations do not appear to have any clear detriment on the global economy.

Institutional Investor’s Neil Sen explains further, “Financial regulations such as Basel III are unlikely to have a significant impact on bank lending rates or the global economy.”

You can read FierceFinance’s coverage of the report here.

The full report is available here, but a subscription is required.

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