CRD IV : a post-financial crisis reaction to banking regulation : does more regulation make banks safer?

Abstract

The recent global financial crisis of 2007/2008 had left the financial world in shock and no legislative framework was prepared for it. However, there have been efforts to improve the banking regulatory structure in order to reduce the likelihood of another financial crisis. Accordingly, the European Commission in the year 2011 proposed a legislative package to further strengthen the banking sector and in 2013 the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR), collectively known as the CRD IV package, came into force. The aim of this research project is to ultimately examine whether the two important prudential regulatory pillars, which are the capital and liquidity requirements regulated under the CRR (EU) No 575/2013, are addressing the issues that they intended to address. Furthermore, this study will also assess the Maltese regulatory development with regards to capital and liquidity, which credit institutions licensed under the Banking Act of 1994 need to adhere to. From a legal point of view, the CRR will have a positive impact on banking regulation both in Europe as well as in Malta, since capital and liquidity requirements can mitigate the risks of the collapse of the system. Furthermore, the CRR is a vital player for Malta since it will enhance its robust legislation in financial services and retain its status as a credible and reputable financial hub.