Cross-border effects of prudential regulation: evidence from the euro area

Dawid Żochowski, Fabio Franch and Luca Nocciola

No 2285, Working Paper Series from European Central Bank

Abstract: We analyse the cross-border propagation of prudential regulation in the euro area. Using the Prudential Instruments Database (Cerutti et al., 2017b) and a unique confidential database on balance sheets items of euro-area financial institutions we estimate panel models for 248 banks from 16 euro-area countries. We find that domestic banks reduce lending after the tightening of capital requirements in other countries, while they increase lending when loan-to-value (LTV) limits or reserve requirements are tightened abroad. We also find that foreign affiliates increase lending following the tightening of sector-specific capital buffers in the countries where their parent banks reside and that bank size and liquidity play a role in determining the magnitude of cross-border spillovers. JEL Classification: G21, F34, F36

Keywords: cross-border spillovers; international banking; prudential policy (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-ifn
Note: 2152671
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Cross-border effects of prudential regulation: Evidence from the euro area (2021)
Chapter: Cross-border spillovers from macroprudential policy in the euro area (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20192285

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