From micro to macro: Basel III tools eyed as systemic risk controls

Systemic regulators want to use Basel III’s micro-prudential tools to steer the wider economy, but no-one knows how these controls work – and bank supervisors may not be happy to take a back seat. By Michael Watt

A list is circulating among Europe’s financial policy-makers that would chill most bankers to the bone. Said to have been drawn up by the European Systemic Risk Board, it is a menu of 42 tools that could be used by national authorities to control economic growth and manage asset bubbles, according to two senior regulators who have seen it – from the liquidity ratios and risk-weighting regime laid out in Basel III, to margins on cleared and uncleared derivatives trades, and more traditional