International Banking and Cross-Border Effects of Regulation: Lessons from Canada

Evren Damar and Adi Mordel

Staff Working Papers from Bank of Canada

Abstract: We study how changes in prudential requirements affect cross-border lending of Canadian banks by utilizing an index that aggregates adjustments in key regulatory instruments across jurisdictions. We show that when a destination country tightens local prudential measures, Canadian banks lend more to that jurisdiction, and the effect is particularly significant when capital requirements are tightened and weaker if banks lend mainly via affiliates. Our evidence also suggests that Canadian banks adjust foreign lending in response to domestic regulatory changes. The results confirm the presence of heterogeneous spillover effects of foreign prudential requirements.

Keywords: Financial Institutions; Financial stability; Financial system regulation and policies (search for similar items in EconPapers)
JEL-codes: F34 G01 G21 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2016
New Economics Papers: this item is included in nep-ban, nep-cse and nep-ifn
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Citations: View citations in EconPapers (16)

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Journal Article: International Banking and Cross-Border Effects of Regulation: Lessons from Canada (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:16-34

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