Working Paper: NBER ID: w22645
Authors: Jose Berrospide; Ricardo Correa; Linda Goldberg; Friederike Niepmann
Abstract: Domestic prudential regulation can have unintended effects across borders and may be less effective in an environment where banks operate globally. Using U.S. micro-banking data for the first quarter of 2000 through the third quarter of 2013, this study shows that some regulatory changes indeed spill over. First, a foreign country’s tightening of limits on loan-to-value ratios and local currency reserve requirements increase lending growth in the United States through the U.S. branches and subsidiaries of foreign banks. Second, a foreign tightening of capital requirements shifts lending by U.S. global banks away from the country where the tightening occurs to the United States and to other countries. Third, tighter U.S. capital regulation reduces lending by large U.S. global banks to foreign residents.
Keywords: No keywords provided
JEL Codes: F3; F4; G15; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tightening foreign capital requirements (F32) | Increased lending by US global banks (F65) |
| Tightening foreign capital requirements (F32) | Increased lending by US subsidiaries of foreign banks (F65) |
| Higher local currency reserve requirements (F31) | Increased lending by US subsidiaries (F65) |
| Limits on loan-to-value ratios (G21) | Increased lending by US branches of foreign banks (F65) |
| Limits on loan-to-value ratios (G21) | Increased lending by US subsidiaries of foreign banks (F65) |