Abstract

http://ssrn.com/abstract=1793982
 


 



Bank Risk-Taking Abroad: Does Home-Country Regulation and Supervision Matter?


Steven Ongena


University of Zurich and SFI

Alexander A. Popov


European Central Bank (ECB)

Gregory F. Udell


Indiana University - Kelley School of Business - Department of Finance

February 24, 2011

European Banking Center Discussion Paper No. 2011-007
Tilburg University CentER Discussion Paper No. 2011-032

Abstract:     
This paper provides the first empirical evidence on how home-country regulation and supervision affects bank risk-taking in host-country markets. We analyze lending by 136 banks to 8,253 firms in 1,513 different localities across 13 countries. We find strong evidence that laxer regulatory restrictions in the home country are associated with higher loan rejection rates by banks in host-country markets, but that the resulting loans are mostly to small, unaudited, nonexporting, and innovative firms. The results are stronger when banks are less efficiently supervised at home, and they are observed independently from the effect that bank balance sheets have on lending. These findings imply that loose home-country regulation and supervision are associated with important negative externalities for the host-country in terms of more risk-taking by cross-border banks.

Number of Pages in PDF File: 50

Keywords: bank regulation, cross-border …nancial institutions, …financial risk

JEL Classification: G21, G28, G32

working papers series





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Date posted: March 26, 2011  

Suggested Citation

Ongena, Steven and Popov, Alexander A. and Udell, Gregory F., Bank Risk-Taking Abroad: Does Home-Country Regulation and Supervision Matter? (February 24, 2011). European Banking Center Discussion Paper No. 2011-007. Available at SSRN: http://ssrn.com/abstract=1793982 or http://dx.doi.org/10.2139/ssrn.1793982

Contact Information

Steven R. G. Ongena
University of Zurich and SFI ( email )
Plattenstrasse 14
Zürich, 8032
Switzerland
Alexander A. Popov (Contact Author)
European Central Bank (ECB) ( email )
Kaiserstrasse 29
Frankfurt am Main, D-60311
Germany
Gregory F. Udell
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States

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