Model-Based Regulation and Lending: Micro-and Macro-Prudential Supervision

Model-Based Regulation and Lending: Micro-and Macro-Prudential Supervision

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Model-Based Regulation and Lending: Micro-and Macro-Prudential Supervision

Model-based regulation allows banks to utilize their own models and is designed to adapt to changes in underlying risks. During crises, banks employing their own models must swiftly raise regulatory capital, which may force them to sharply reduce lending.

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