See: Consultation Paper 5/12 ‘Implementation of Basel standards’; Dahl, D, Meyer, A, and Neeley, M (2016), ‘Bank size, compliance costs and compliance performance in community banking’, Mimeo; Dolar, B and Dale, B (2020), ‘The Dodd-Frank Act’s non-uniform regulatory impact on the banking industry’, Journal of Banking Regulation, Vol.21, pages 188-95; Elliehausen (1998), ‘The cost of banking regulation: a review of the evidence’, Federal Reserve System Studies No.171, pages 1-35; Feldman, R J, Schmidt, J, and Heinecke, K (2013), ‘Quantifying the costs of additional regulation on community banking’, Federal Reserve Bank of Minneapolis Economic Policy Paper 13-3. 8 Austen Saunders and Matthew Willison, ‘Measure for measure: Evidence on the relative performance of regulatory requirements for small and large banks’ (forthcoming). 7  6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  contribution to the safety and soundness of small firms, a simpler regime will put in their place simplified or scaled back requirements. These will be less costly, but won’t make the firms they’re applied to less resilient. It’s worth saying here that a simpler regime will need to be assessed in the round. There are few, if any, requirements which make absolutely no contribution to small firms’ safety and soundness. That means that we may need to tighten some requirements a little when we simplify others in order to keep the overall level of resilience the same. But our expectation is that the resulting package will be less costly overall whilst delivering the same level of safety and soundness.

Antonio Afonso, Ludger Schuknecht and Vito Tanzi, Public Sector Efficiency: Evidence for New EU Member Sates and Emerging Markets. ECB Working Paper No 581 (2006). 2  BIS Review 113/2006  result, the 6% of GDP allocated to capital spending had to be funded almost entirely by additional borrowing, which gives rise to further debt-servicing costs. Repeated year after year, this pattern pushed the debt/GDP ratio steadily upwards to a peak of 75% in 2004. This tendency for recurrent revenue to be matched by recurrent expenditure in the context of fiscal retrenchment has had a crowding-out effect on investment, and partly explains why the country’s investment/GDP ratio has been static at best in recent years. A more telling indicator of the relatively small investment in productivity-enhancing activities is the share of GDP devoted to R&D, 0.6% in 2004, compared with an average EU ratio of about 2%. It is doubtful whether the existing pattern of resource allocation is conducive to the desired improvement in Malta’s international competitiveness. The latter can only be achieved by increasing the size, flexibility and skill level of the labour force, while simultaneously creating an institutional and physical infrastructure more likely to attract high value-added foreign direct investment. And since the State must play a leading role in this effort, the question of financing arises spontaneously. Now in the context of a fiscal consolidation process that has not yet run its full course, increasing recurrent spending beyond the natural creep caused by existing commitments such as pensions is clearly not an option.