When the Cat's Away the Mice will Play: Does Regulation at Home Affect Bank Risk Taking Abroad?

By Steven R. G. Ongena, Alexander A. Popov, Greg Udell. Social Science Research Network, 2013

282 citations recorded by the source corpus.

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.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/c790ec9429cad0cbbfa416c855e53c2eab40797f

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Citations in the corpus

Regulatory arbitrage in action: evidence from banking flows and macroprudential policy (2015, background): “Ongena, Popov, and Udell (2013) analyse the effect of bank regulation in domestic (i.e., home-country) markets on multinational banks’ lending standards in foreign (i.e., hostcountry) markets.”
Multinational banks and the global financial crisis: Weathering the perfect storm? (2014, background): “See Ongena, Popov, and Udell (2013), Barth, Caprio, and Levine (2006), and Acharya, Wachtel, and Walter (2009).”
Contagion and Banking Crisis - International Evidence for 2007-2009 (2015, background): “…can play a significant offsetting role in reducing banking crises, although there may be a potential cost through the changing nature of banks’ behavior in international markets and/or reducing international banking relationships; see for example Aiyar et al. (2014) and Ongena et al. (2013).”
Institutional development and bank stability: Evidence from transition countries (2014, background): “Another reason could be that foreign banks tend to lower lending standards when going abroad to countries with less restrictive banking regulations (Ongena et al., 2013).”