Swiss Journal of Economics and Statistics

, Volume 149, Issue 3, pp 313–356 | Cite as

Quantifying the impact of higher capital requirements on the Swiss economy

Open Access


So far the discussion in Switzerland about the social costs and benefits of higher capital requirements resulting from the new Basel III Accord and the Swiss Too Big To Fail legislation has been heavily qualitative. This paper provides a quantitative view and estimates the long-run costs and benefits of substantially higher capital requirements using empirical evidence on Swiss banks to assess both benefits and costs. The analysis yields two main conclusions. The long-run economic benefits of higher capital requirements are substantial for the Swiss economy leading to a significantly lower probability of banking crises and associated expected losses. In contrast the costs of higher capital requirements as reflected in increased lending spreads and potential output reductions are literally non-existent.


G21 G28 


Capital regulation banks cost of equity banking crisis economic growth Modigliani-Miller 


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Copyright information

© Swiss Society of Economics and Statistics 2013

Authors and Affiliations

  1. 1.FINMAGeorg Junge works with the Swiss Financial Market Supervisory AuthorityBernSwitzerland
  2. 2.Faculty of Business and EconomicsUniversity of BaselBaselSwitzerland

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