Prudential policy spillovers: How do international bank flows react to French policies?

Stephane Dees and Julio Ramos-Tallada

International Economics, 2022, vol. 172, issue C, 414-430

Abstract: Most of prudential regulations apply to national institutions while, in practice, banks operate at the global level, generating international banking flows which are not comprehensively captured by policies with a domestic remit. This may give rise to spillovers, i.e., effects not considered ex ante in the objectives and/or constraints of authorities in charge of prudential policy, the effectiveness of which may be harmed. Using BIS data on foreign bank lending over a large sample of countries, we investigate international spillovers from French prudential policies. Overall, we show that French prudential policies entail a reduction in foreign banks' lending to French residents. Yet some measures may lead to undesired leakages that potentially undermine authorities' goals: foreign bank affiliates’ exposure to France rose by 1.1% (1.9 Bn USD) on average over 2011–17 owing to the implementation of Basel capital requirements.

Keywords: International banking; Prudential regulation; International spillovers (search for similar items in EconPapers)
JEL-codes: F30 G21 G28 (search for similar items in EconPapers)
Date: 2022
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Journal Article: Prudential policy spillovers: How do international bank flows react to French policies? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:172:y:2022:i:c:p:414-430

DOI: 10.1016/j.inteco.2021.09.001

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