Rules that make banks safer also make their borrowing cheaper

A new study finds that rules forcing banks to hold more liquid assets actually make it cheaper for them to borrow money. This goes against the common idea that bank regulations always increase costs for financial firms.

Banks often complain that financial rules make their operations more expensive. This paper shows that one major rule, which forces banks to keep more liquid assets on hand, actually cuts how much banks pay to borrow money. It also pushes banks to borrow for longer periods, making their funding more stable.