10/7/2011

Global authorities reacted to the financial crisis by quickly agreeing to Basel III capital and liquidity rules for banks. However, those rules could ultimately thwart the economic recovery. "[W]ith the economy now slowing, regulators may have trapped the world financial system in a highly deflationary doom-loop, in which banks are forced to shrink their balance sheets in a futile effort to meet ever-retreating capital-ratio targets," according to an analysis by Simon Nixon.

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