Basel II and Bank Lending to Emerging Markets: Micro Evidence from German Banks

Thilo Liebig (), Beatrice Weder di Mauro, Daniel Porath and Michael Wedow

No 5163, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper investigates whether the new Basel Accord will induce a change in bank lending to emerging markets using a new loan level data set on German banks' foreign exposure. We test two interlinked hypotheses on the conditions under which the change in the regulatory capital would leave lending flows unaffected. This would be the case if (i) the new regulatory capital requirement remains below the economic capital, and (ii) banks' economic capital to emerging markets already adequately reflects risk. On both accounts the evidence indicates that the new Basel Accord should have a limited effect on lending to emerging markets.

Keywords: Basel accord; Banking regulation; International lending (search for similar items in EconPapers)
JEL-codes: F33 F34 G28 (search for similar items in EconPapers)
Date: 2005-08
New Economics Papers: this item is included in nep-cfn, nep-fin, nep-fmk and nep-reg
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