The More the Merrier? Evidence from the Global Financial Crisis on the Value of Multiple Requirements in Bank Regulation

This paper assesses the value of multiple requirements in bank regulation using a novel empirical rule‑based methodology. Exploiting dataset capital and liquidity ratios for sample global banks 2005 2006, we apply simple threshold-based rules to assess how different regulations individually combination might have identified that subsequently failed during financial crisis. Our results generally support case small portfolio regulatory metrics. Under objective correctly identifying high proportion which failed, find leverage ratio, risk-weighted net stable funding ratio yields fewer false alarms than any these metrics – at less stringent calibrations each individual metric. We also discuss robustness exercises, including out-of-sample evaluations. Finally, consider potential role market-based measures capitalisation, showing they provide complementary their accounting-based counterparts.