“When the cat's away the mice will play”: Does regulation at home affect bank risk-taking abroad?

Steven Ongena, Alexander Popov and Gregory Udell ()

Journal of Financial Economics, 2013, vol. 108, issue 3, 727-750

Abstract: This paper provides the first empirical evidence that bank regulation is associated with cross-border spillover effects through the lending activities of large multinational banks. We analyze business lending by 155 banks to 9,613 firms in 1,976 different localities across 16 countries. We find that lower barriers to entry, tighter restrictions on bank activities, and to a lesser degree higher minimum capital requirements in domestic markets are associated with lower bank lending standards abroad. The effects are stronger when banks are less efficiently supervised at home, and are observed to exist independently from the impact of host-country regulation.

Keywords: Bank regulation; Cross-border financial institutions; Lending standards; Financial risk (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (209)

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Working Paper: When the cat's away the mice will play: does regulation at home affect bank risk taking abroad? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:108:y:2013:i:3:p:727-750

DOI: 10.1016/j.jfineco.2013.01.006

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